Explore Code on Wages 2019 Changes with greytHR
Updated in December - 2025 | Subscribe to watch greytHR how-to video
The Code on Wages, 2019 is one of the four major labour codes introduced by the Government of India to simplify, modernize, and standardize labour regulations across the country. It consolidates four existing laws:
Payment of Wages Act
Minimum Wages Act
Payment of Bonus Act
Equal Remuneration Act
By combining these into one unified Code, the government aims to:
Bring uniformity to wage definitions
Ensure timely and fair wage payments
Expand coverage to all categories of employees
Simplify compliance for employers
The Code becomes effective from 21 November 2025, giving organisations a clear timeline to adopt the required structural and process changes.
Key highlights of the Code
The Code fundamentally reshapes how employers define wages, structure salaries, compute statutory contributions, manage employment lifecycles, and maintain compliance.
It introduces foundational changes that directly impact:
Salary structures
Payroll processing
Statutory contributions
Minimum wage obligations
Full & Final settlement timelines
Gratuity eligibility
Overtime calculations
Together, these require both policy-level decisions and system-level configurations to stay compliant.
Major changes as per the Code
Redefined Wage Structure (The 50% Rule)
Under the new law, Basic Pay + Dearness Allowance (DA) + Retaining Allowance must form at least 50% of total remuneration.
Why this matters
Previously, organizations often kept Basic Pay at lower percentages and structured the rest as allowances. This helped manage PF/ESI contributions and Gratuity liability while optimizing employee take-home pay.
With the new rule:
Employers must restructure salary components
If allowances exceed 50%, the excess is added back to Wages
This leads to higher statutory obligations like PF and Gratuity
Universal Minimum Wage
The Code introduces a “Floor Wage” that acts as a baseline for states. No state can set minimum wages below this amount.
What changes for employers
Minimum wage compliance now applies to all employees, not just those in scheduled industries.
Organizations with diverse job profiles must re-evaluate wage alignment across roles and locations.
Overtime (OT) at 2× the Wage Rate
Overtime must now be calculated at twice the employee’s normal wage rate, and importantly, must use the new wage definition rather than the existing Basic Pay.
Implications
OT will become more expensive for employers
Policies and system formulas must be updated
Organisations must clarify OT eligibility across employee classes
Full & Final Settlement within 2 working days
One of the most operationally significant changes is the mandatory completion of Full and Final (FnF) settlement within 2 working days.
Challenges
Current FnF cycles often span 15–45 days.
Asset return, department clearance, pending loan recoveries, and payroll closures all need acceleration.
Manual processes will not meet the deadline.
How greytHR supports this
Automated resignation workflows
Department-wise clearance
Exit dashboard for HR visibility
Integrated FnF computation
Gratuity eligibility for Fixed-Term Employees
Under the new rule, Fixed-Term Employees (FTEs) become eligible for Gratuity after 1 year of continuous service, instead of the earlier 5-year rule applicable to permanent employees.
Impact
Organisations employing FTEs must budget for earlier gratuity payouts.
HRMS must support classification-based Gratuity rules.
greytHR allows configuration for FTE-specific eligibility.
Additional context from the other Labour Codes
While the Wage Code focuses on wage definitions, salary structure, and payment timelines, it is part of a broader labour reform framework. The remaining three Codes—the Social Security Code, Industrial Relations Code, and Occupational Safety & Health Code—work alongside the Wage Code to redefine compliance expectations for employers.
Social Security Code – consolidation & expanded protection
The Social Security Code consolidates several benefit-related legislations, including PF, ESI, Maternity Benefit, and Gratuity Acts.
What employers need to know
Unified compliance: Managing PF, ESI, Gratuity, and maternity benefits becomes more structured under one framework.
Broader workforce categories: Gig and platform workers now fall under social security protections.
Faster Gratuity Eligibility for Fixed-Term Employees: Fixed-Term Employees (FTEs) become eligible for Gratuity after completing 1 year of continuous service, instead of the earlier requirement of 5 years that applied to permanent employees.
Industrial Relations (IR) Code – strengthening workforce stability
The Industrial Relations Code focuses on maintaining stability, fairness, and transparency in employer–employee relations.
Key areas
Reskilling Fund for retrenched employees
Mandatory 14-day notice for strikes and lockouts
Recognition of fixed-term employment as a formal category
Why this matters
HR teams need structured processes for contract management, especially around FTEs.
Workforce planning and risk management become more predictable.
Retrenchment processes now involve additional financial and compliance steps.
OSH (Occupational Safety, Health and Working Conditions) Code – workplace safety & welfare
The Occupational Safety & Health Code modernizes workplace safety standards, welfare requirements, and work conditions across industries.
Key Provisions
Single licence/registration/return across multiple compliance areas.
Free annual health check-ups for employees.
Night-shift permission for women with adequate safety measures.
Employer impact
Facilities and operations teams must ensure compliance with updated safety norms.
Policies for night-shift work and workplace welfare must be updated.
HR and Admin teams must collaborate on safety audits and compliance documentation.
How does greytHR support you to be compliant?
As the labour codes introduce new compliance requirements, greytHR provides configuration-driven tools that help organisations adapt without relying on manual processes.
Key compliance support features
Lock past payrolls: Protect previous salary data from changes once restructuring begins, ensuring audit integrity.
Snapshot payroll data before updates: Maintain a clean reference point for comparisons, reconciliations, and audit trails.
Automatic 2-day FnF alerts: Send timely notifications to ensure exit processes move quickly enough to meet statutory deadlines.
Configurability for Basic = 50% rule: Adjust salary structures using flexible component definitions that match the organization’s policies.
Gratuity eligibility setup for FTEs: Configure 1-year eligibility rules for Fixed-Term Employees as per the new Code.
Overtime formula updates: Modify OT calculations to use the updated wage definition and 2× rate.
These features help organizations maintain accuracy, avoid compliance errors, and stay prepared for inspections or audits.
Why greytHR doesn't auto-implement wage structure changes?
It is important to understand that while greytHR supports all statutory requirements, the platform does not automatically enforce wage restructuring. This is because wage policies differ widely across organisations, and salary changes require financial and business decisions that only employers can make.
Why employer’s input is necessary?
Basic percentage varies across organisations; some use 30%, others 40% or more.
Allowance structures differ based on role, location, or internal policies.
Cost management decisions (such as adjusting CTC vs. absorbing costs) must be taken by the employer.
Employee classifications (Permanent, FTE, Contract) have different eligibility rules.
OT policies vary significantly depending on industry and operational requirements.
State-level minimum wage rules differ, requiring employer-defined configurations.
greytHR therefore offers powerful configuration options, giving employers full control to implement wage rule changes in a manner best suited to their business needs.