What counts as wages under the new law?
- Wages include basic pay, dearness allowance and any retaining allowance s. 2(y).
- Some payments are left out, such as house rent allowance, conveyance allowance, overtime allowance and commission s. 2(y).
- If those left-out payments together come to more than half of your total pay, the excess is added to wages s. 2(y), first proviso.
- For equal pay and for paying wages, house rent allowance, conveyance allowance and overtime allowance are counted as wages anyway s. 2(y), second proviso.
What counts as wages guide50% rule calculator
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
- “Performance based incentives, Employee Stock Option Plans (ESOPs), variable part of the component or reimbursement-based payments to the employee shall not be part of the wages.” FAQ 3, FAQs on Labour Codes, 30 Dec 2025: official copy · our copy
- “Annual performance-based incentives do not form a part of “wages” for computation under the Labour Codes.” FAQ 4, Additional FAQs, 16 Mar 2026: official copy · our copy
- “This single definition of wages applies across all four Labour Codes” FAQ 6, FAQs on Labour Codes, 30 Dec 2025: official copy · our copy
This is the Ministry's explanation, not the law. Its FAQs and Handbook say the Codes prevail.