The Code on Wages, 2019 consolidates and modernizes wage-related laws in India, replacing legacy statutes such as the Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act, and Equal Remuneration Act. For employers, the Code introduces a graded penalty framework, enhanced enforcement through Inspector-cum-Facilitators, and provisions for compounding offences. Non-compliance now carries significant financial and reputational risks.
Statutory Penalties (Section 53)
1. Payment Below Minimum Wage
- First Offence: Fine up to ₹50,000.
- Repeat Offence (within 5 years): Imprisonment up to 3 months and/or fine up to ₹1,00,000.
2. General Non-Compliance (Rules/Procedural Violations)
- First Offence: Fine up to ₹20,000.
- Repeat Offence (within 5 years): Imprisonment up to 1 month and/or fine up to ₹40,000.
3. Record-Keeping Failures
- Failure to maintain prescribed registers/records: Fine up to ₹10,000.
Enforcement Mechanism (Sections 51–52)
- Introduction of Inspector-cum-Facilitators under a Web-based Inspection Scheme.
- Facilitators are mandated to provide an opportunity to rectify non-compliance before prosecution, except in cases of repeat offences.
Compounding of Offences (Section 56)
- Certain offences (not punishable by imprisonment only) may be compounded before a Gazetted Officer.
- Settlement amount: 50% of the maximum fine.
- Restriction: The same offence cannot be compounded twice within 5 years.
Key Compliance Challenges
1. Settlement of Dues (Section 17)
- All dues to be paid within two working days of termination/resignation.
2. Wage Definition (Section 2(88))
- Allowances exceeding 50% of total remuneration are treated as wages, impacting PF, ESI, and gratuity calculations.
3. Deductions (Section 18)
- Unauthorized deductions prohibited.
- Total deductions capped at 50% of monthly wages.
Exclusive Compliance Checklist
✔ Ensure minimum wages are paid as per state notifications.
✔ Maintain statutory registers in prescribed formats (digital/physical).
✔ Align payroll cycles to meet the 2-day settlement rule.
✔ Review salary structures to comply with the 50% wage cap.
✔ Implement show-cause procedures before effecting any deductions.
✔ Train HR and payroll teams on compounding provisions and rectification opportunities.
Advisory Note
While the Code on Wages, 2019 provides clarity and uniformity, state-specific rules and notifications govern its practical implementation. Employers should regularly monitor updates from the Ministry of Labour & Employment and respective State Labour Departments.
Legal Disclaimer
This advisory is intended for informational purposes only and does not constitute legal advice. The interpretation and enforcement of the Code on Wages, 2019 may vary across states and evolve through judicial pronouncements. Employers are advised to consult certified Labour Law Counsel before making structural changes to payroll or HR policies.