The Four Labour Codes has been implemented or enforced from 21 November 2025. The Code of Wages 2019, The Industrial Relation Code 2020, The code on Social Security 2020 & The Occupational Safety, Health & Working condition Code 2020, Now the 29 Existing labour Laws subsumed in this four labour code.
The applicability of section list from 21st November 2025 mentioned in gazette notification of central government published in same date. Although, the Schemes, Rules & Regulation and section of certain still remain impliment. This means employers must act now to ensure compliance with the new framework of sections applicable or enforced from 21st November 2025.
"Wages" means all remuneration, whether by way of salary, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,—
Explanation.—Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee;
1. The scope of the definition of wages has been widened, with a detailed list of exclusions such as
house rent allowance, conveyance allowance, overtime allowance, contributions paid towards
provident fund etc.
2. Any components of total remuneration not in the exclusions list will likely be counted as “wages”
if such component falls within the initial operative part of the definition.
3. Additionally, if the aggregate amount of exclusions exceeds 50% of the total remuneration, the
amount in excess of 50%, will be deemed as remuneration and be added to wages.
4. Further, if any part of remuneration ( Where an employee is given in lieu of the whole or part of
the wages) in kind is being provided, then the value of such remuneration in kind up to 15% of the
total remuneration, will also form part of wages.
Basic Pay + Dearness Allowance + Retaining Allowance ≥ 50% of Total Remuneration. If excluded allowances exceed 50%, the excess is statutorily deemed as “wages” This rule is mandatory and automatic.
Inclusions (Always Count as Wages)1.House Rent Allowance (HRA)
2. Conveyance Allowance
3. Defray Allowance (Related to Unique Nature of Work)
4. Washing / Field Allowance
5. Special Allowance • Statutory Bonus/Performance Bonus
6. Commission / Incentives
7. Overtime Wages
8. Employer Share of Provident Fund & Interest
9. Gratuity ( Gratuity is not calculated in term of wage Calculation it is separate )
10. Retrenchment Compensation / Ex-Gratia ( not calculated in term of wage Calculation it is separate)
Basic Pay + Dearness Allowance ≥ 50% of Total Remuneration, If excluded allowances exceed 50%, excess becomes “wages” by law.
Example 1: Compliant Salary Structure (No add-back required)
An employee, Mr. A, has a total monthly remuneration of ₹20,000, which is below the ₹21,000
threshold.
Salary Component Amount Included/Excluded for Wages
Basic Pay + DA + RA ₹12,000 Included (60% of TR)
Allowances (HRA, Conveyance, etc.) ₹8, 000 Excluded (40% of TR)
Total Remuneration (CTC) ₹20,000
50% of TR limit for exclusions ₹10,000
Actual Exclusions ₹8,000
In this case, the actual exclusions (₹8,000) are less than the 50% limit ₹10,000). The ESI "wages"
for calculation are the actual included components:
Example 2 : Non-Compliant Salary Structure (Add-back required)
An employee, Ms. B, has a total monthly remuneration (TR) of ₹20,000. Her salary is
structured differently.
Salary Component Amount Included/Excluded for
Wages
Basic Pay + DA+ RA ₹8,000 Included (40% of TR)
Allowances (HRA, ₹12,000 Excluded (60% of TR)
Conveyance, etc.)
Total Remuneration (TR) ₹20,000
50% of TR limit for ₹10,000
exclusions
Excess Exclusions ₹12,000-10,000= ₹2,000
Here, the actual exclusions (₹12,000) exceed the 50% limit (₹10,000) by ₹2,000. This excess
amount must be added back to the "wages":
The Social Security Code, 2020 aims to standardize the wage base to ensure fair and consistent calculation of social security benefits, including ESI
Example 3 : High Allowances, within ESI Limit
Ms. C earns a total monthly remuneration (TR) of ₹20,000. Her structure has high allowances
Basic Pay + DA + RA ₹9,000 Included
Allowances (HRA, Conveyance, etc.) ₹11,000 Excluded components
Total Remuneration (TR) ₹20,000 50% of TR limit for Exclusions ₹10,000
Excess Exclusions (added back to wages) ₹11,000 (actual) - ₹10,000 (limit) = ₹1,000
Total ESI Wages: ₹9,000 (Basic + DA+RA) + ₹1,000 (Add-back) = ₹10,000
Even though her actual Basic Pay is low, the 50% rule ensures her statutory ESI wage base is higher, leading to increased contributions compared to the pre-Code era
Total All Remuneration CTC: ₹61,800 (Basic + DA = ₹20,000, Allowances (Inclusive and Exclusive (a) to (i) ) = ₹40,000) + EPF Employer Contribution = 1800/-
| Components | Before Codes | After Codes |
|---|---|---|
|
Wage (used for calculation of statutory deduction) Inclusive Part |
₹20,000 |
₹20,000 + ₹10,900 (As total allowances - inclusive & exclusive) are more than 50% of the total all remuneration hence the component more than 50% is added back to wages for statutory calculations) |
| All Allowances (Exclusive Part) | ₹40,000 | ₹40,000 |
| PF contribution Employer @ 12% on wage ceiling i.e. ₹15000* | ₹1800 | ₹1800 |
| Total Remuneration (CTC) | ₹61800 | ₹61800 |
| PF contribution Employee @ 12% on wage ceiling i.e. ₹15000* | ₹1800 | ₹1800 |
*₹15000 is the Present EPF wage ceiling which implies that only contributions upto a wage ceiling of ₹15000 is mandatory.
1) There is no change in take‑home pay if PF deduction is on statutory wage ceiling.
2) In case the employee and employer agree they can voluntarily contribute on wages more
than the statutory limit of ₹15000. There is no legal requirement for the same.