FAQS

  • FAQs on Labour Codes dated 16-03-2026

Does overtime payment form part of the 50 percent wage calculation rule?

Overtime allowance payment forms a part of the 50 percent wage calculation.

1. Is actual gratuity paid included? 2. Is gratuity included where shown as part of CTC? 3. Are employer contributions to PF and other social security benefits included?

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.

whether statutory components such as employer/employee PF contribution, statutory bonus, ESI, or other retirement benefits are included within “Other Allowances” or whether the illustration is based only on gross monthly salary excluding statutory contributions.

No. Statutory components such as employer share of PF/Pension contribution, are prescribed under Section 2(y)(c) of the Code on Wages and difference amount of total of (a) to (i) of Section 2(y) of the Code will be added back to the wages/remuneration in case it exceeds 50% of remuneration/wages (First proviso to the Section 2(y) of the Code on Wages).

Are there any specific legal provisions in place for the wage protection of white-collar employees?

The Code on Wages, 2019 has provisions for timely payment of wages. These provisions are applicable to all employees.

Can wages and minimum wages be treated as the same?

No, minimum wages are the statutory wages fixed by the appropriate government. An employer is legally prohibited from paying an employee less than the prescribed minimum wage.
The Wages are defined in Section 2(y) of the Code on Wages, 2019 and can also be referred to in FAQ No- 2, 3 and 4 dated 30.12.2026 available on MoLE website.

Who is eligible for overtime wages—only workers or it is applicable for Employees also? If so does the entitlement also extend to supervisory and managerial staff?

Yes.
Employee, including worker, whose minimum rate of wages is fixed under the Code on Wages, 2019 is eligible for overtime.

Is the revised definition of “wages” under the Code on Wages, 2019 applicable for gratuity calculation from the date of enforcement of the Code, i.e., 21.11. 2025?

Yes.
Gratuity, based on revised definition of wages will be applicable w.e.f. 21.11.2025 i.e. date of implementation of the Codes.

From which date does the definition of “wages” under the Labour Codes come into effect?

The definition of “wages” has come into effect from 21.11.2025.

Whether variable components of wages such as overtime (OT) allowance are included while calculating the “wages” under the Codes?

Yes.
Overtime allowance payment forms a part of components Section 2(a) to 2(i). If such allowance, exceed 50 percent of remuneration then excess over 50 percent is added to the wage calculation.

What is the distinction between “minimum wages” and “wages” under the Labour Codes?

Minimum wages are fixed by the Appropriate Government for the employees, whereas wages are fixed as per Terms of Employment between employee and employer, employed in any establishment as per the definition of Wages as mentioned in Section 2(y) on the Code of Wages, 2019

Does fixed-term employment cover contract labour engaged through contractors, or only direct employees of the principal employer?

Fixed Term Employment covers employees directly engaged by the employer.

Whether Gratuity calculation will be applicable prospectively or retrospectively?

Gratuity calculation will be applicable w.e.f. 21.11.2025 i.e. date of implementation of the Codes.
Please refer to Sl. No. 8 of FAQ dated 30.12.2025 available on MoLE website.
Weblink: de4758d5bfeffc456d7de97a801891b0.pdf

How will the ESI coverage be governed until the finalization of Rules?

With effect from 21.11.2025, the definition of wages under the CoSS, 2020 shall apply. At present, Rs 21,000 per month wages notified for ESI coverage will be applicable.

For the calculation of gratuity, will wage components other than those specified under clauses (a) to (c) of included part and (a) to (k) of excluded part of Section 2(88) of the Code on Social Security, 2020, be included?

Any payment made to employee which is not part of components mentioned under section 2(88) of the Code on Social Security, 2020 shall not be considered for calculation of gratuity.

For Fixed Term Employees (FTE), is gratuity payable on completion of exactly one year of service or more than one year of service is required for calculation of gratuity under the Labour Codes?

Fixed Term Employee (FTE) will be eligible for gratuity if he/she renders service under the contract for a period of one year (from start of contract).

Whether States can levy cess on gig and platform workers, and if so, this will results in a dual financial burden on aggregators?

As per section 114(4) of the Code on Social Security, 2020, the contribution to be paid by the aggregators for the funding Schemes for gig workers and platform workers will be notified by the Central Government.
The said contribution will be credited to Social Security Fund set up by the Central Government for social security and welfare of the gig workers and platform workers.

In case of contract labour, whether gratuity liability is to be borne by the Principal Employer or the Contractor?

As per the section 53 of the Code on Social Security, 2020, the employer (i.e. Contractor) will pay gratuity on rendering of five years continuous service at the rate of 15 days wages for each completed year of service based on the last drawn wages.

Whether gratuity for service rendered prior to 21 November 2025 will be calculated under the Payment of Gratuity Act, 1972, and service on or after that date under the Labour Codes?

The employee will be paid gratuity based on the rate of wages last drawn by the employee at the time of superannuation or retirement or resignation or death etc, on and after 21.11.2025 as per the provisions of Code on Social Security, 2020.

What types of benefits or facilities will be considered as “remuneration in kind” under the definition of wages? Please provide illustrative examples?

Benefits under the terms of employment such as food coupons, ration items, mobile recharge etc. would constitute remuneration in kind.