New wage code is a consolidation of 29 labour laws into four labour codes:

  • The code on wage, 2019 consolidates four labour legislations
  • The Industrial Relations, 2020 consolidates three labour legislations
  • The code on security, 2020 consolidates nine labour laws
  • The occupational safety, hazard and working conditions code, 2020 consolidates thirteen labour laws

As per the Code of Wages, 2019, Wage has to be made of at least 50% of the entire salary that the employee is getting currently.

This law is likely to get implemented from this October 2021 and this will bring in some prominent changes to the lives of those working in government companies. Earlier, the new Wage Code was anticipated be implemented from April 1, but due to non-receipt of draft rules from the state governments, it was postponed.

Once it is implemented, Indian companies and employees will see a few changes in such components of compensation as take-home salary, provident fund and gratuity, pay slips, etc.

Under those circumstances, the balance sheets of Indian  government and corporate sector might also affected. The Wage Code deals with both government jobs as well as private sector jobs.

The new rules will surely increase the cost borne by the companies by an average 10%, according to an HR expert, because higher payroll costs will inflate the wage bill for most employers.

There will also be a plethora of positives emerging from these new rules. One of them is that employers will find it effortless to be more in acquiescence and employees will have more social reliability.


The implementation would result in significant changes:

  • Working hours and weekly offs
  • The New Wage Code will increase employee working hours from 9 to 12. There will be only 48 hours a week of work, if someone works 8 hours a day, he will have to work 6 days a week and get a day off. If someone works 12 hours a day, he will get a three-day leave. This might result to be a boon or a bane. It may affect the work life balance of the employees at the same time help women to make use of a three- day leave pattern to manage their personal life.

  • Increase in year holidays
  • Employees earned leave could increase from 240 to 300. Therefore the employers should plan accordingly so that it does not affect the quality/productivity of work.

  • Minimum wages for workers
  • For the first time, all types of workers in the country will get minimum wages i.e. minimum salary. The minimum wage should provide enough income to afford a living wage. That is the amount needed to provide enough food, clothing, and shelter

  • PF, gratuity to increase
  • There will be a consequent rise in gratuity and PF contribution of the employee. Hence, while the take home pay of the employees may be reduced, the Gratuity and PF component may rise.

  • Change in salary structure
  • As per the new definition, wage has to comprise at least 50% of total salary that the employee is getting. This may result in a change in the basic pay.

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