The Codes' definition of wages, what it leaves out, and the 50% rule that adds excluded pay back.
Written from the official text · not reviewed by a lawyer · follows the Central Rules
Key points
“Wages” means all remuneration, whether as salaries, allowances or otherwise, payable to a person in respect of their employment, and includes basic pay, dearness allowance and retaining allowance s. 2(y).
It leaves out, among other things, statutory bonus that is not part of the terms of employment, house accommodation and amenities, the employer’s pension or provident fund contributions, conveyance allowance, special expenses, house rent allowance, overtime allowance, commission, gratuity and retrenchment compensation s. 2(y)(a)–(k).
The 50% rule: if the excluded payments in clauses (a) to (i) are more than one-half of all remuneration, the amount above one-half is treated as remuneration and added to wages s. 2(y), first proviso.
For equal pay and for paying wages, conveyance allowance, house rent allowance, remuneration under an award or settlement, and overtime allowance are counted as wages s. 2(y), second proviso.
Remuneration in kind counts as wages up to fifteen per cent of the total wages s. 2(y), Explanation.
The Code on Social Security defines wages in the same way, with the same rule on excluded payments above one-half s. 2(88).
Gratuity, for example, is worked out on the rate of wages last drawn s. 53(2).
If you are an employer
Check each pay component against the list of what wages include and leave out, and add back any excluded payments above one-half of total remuneration s. 2(y).
If you are a worker
Allowances that make up most of your pay cannot all be left out of your wages: the part of the excluded payments above one-half of your remuneration counts as wages s. 2(y), first proviso.
Try it
An employee is paid ₹20,000 a month as basic pay and dearness allowance, and ₹30,000 a month in allowances the definition leaves out, such as house rent allowance and conveyance allowance.
If the excluded payments in clauses (a) to (i) exceed one-half of all remuneration, the amount above one-half is added to wages s. 2(y), first proviso.
if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent. so notified, shall be deemed as remuneration and shall be accordingly added in wages
Remuneration in kind that does not exceed fifteen per cent of the total wages counts as part of the wages s. 2(y), Explanation.
the value of such remuneration in kind which does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee
Answer: Equal wages for all genders and payment of wages
For equal wages to all genders and for payment of wages, conveyance allowance, house rent allowance, award remuneration and overtime allowance are taken into account s. 2(y), second proviso.
for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) shall be taken for computation of wage
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.