What is the 50% rule for wages?
- If the payments left out of wages are more than half of your total pay, the part above half is added to wages s. 2(y), first proviso.
- Gratuity and payments when your job ends are not part of this test s. 2(y), first proviso.
- The Code on Social Security has the same rule for its own definition of wages s. 2(88).
50% rule calculatorWhat counts as wages guide
Last checked 1 Nov 2026 · written from the official text · not reviewed by a lawyer. This explains the law in general and does not decide your case.
What the Labour Ministry says
- “Only statutory components such as employer PF and pension contributions and statutory bonus are included for arriving at 50% of wages to form part of remuneration. Gratuity, ESI and other retirement benefits are not included.” FAQ 1, Additional FAQs, 16 Mar 2026: official copy · our copy
The Ministry's earlier worked example (FAQ 7 of 30 December 2025) counted gratuity and retrenchment compensation in total remuneration. This later reply does not, and the calculator follows it.
- “Overtime allowance payment forms a part of the 50 percent wage calculation.” FAQ 1, Additional FAQs, 16 Mar 2026: official copy · our copy
This is the Ministry's explanation, not the law. Its FAQs and Handbook say the Codes prevail.