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What counts as wages (50% rule)
Under the Code on Wages, if excluded items such as house rent allowance, conveyance or overtime are more than half of total pay, the excess counts as wages.
Read the What counts as wages guide →
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The Labour Ministry's FAQs differ on one point. The worked example in its first FAQs (FAQ 7) counts gratuity and retrenchment compensation in total remuneration. Its later FAQs of 16 March 2026 (FAQ 1) say gratuity, ESI and other retirement benefits are not included, and this calculator follows those. FAQs are the Ministry's explanation, not the law.
Gratuity, retrenchment compensation and other retirement benefits (clauses (j) and (k)) are also excluded from wages, but they are not part of this calculation. The same rule appears in the Social Security Code, s.2(88).
Central sphere. Official text reproduced from the Gazette of India, India Code and State Government sources. This is not legal advice; check the source PDF before relying on any provision.