These Codes are important for businesses because they affect wage
calculations, minimum wages, social security, gratuity, overtime
and employee-related records.
A payroll service provider must understand how these changes affect
monthly salary calculations and statutory payroll administration.
01
Code on Wages, 2019 – Revised Definition of Wages
One of the important changes under the Code on Wages, 2019
is the common definition of wages for statutory purposes.
The definition generally includes basic pay, dearness allowance
and retaining allowance, if any, along with the treatment of
specified components under the Code.
Understanding the 50% Wage Rule
50%
Under the revised wage definition, where specified excluded
allowances and benefits exceed 50% of the total remuneration,
the excess amount is added back to wages for statutory
calculations, subject to the exclusions and conditions
provided under the law.
Example of the 50% Wage Rule
An employee receives total monthly remuneration of ₹60,000.
If the relevant excluded allowances exceed ₹30,000, the amount
exceeding the 50% limit is added back to wages for applicable
statutory calculations.
Important clarification: This does not mean
that every employee must have exactly 50% of CTC as basic
salary. The calculation must be made using the statutory
definition of wages and the applicable components.
The Maharashtra Labour Department has clarified that overtime
allowance forms part of the 50% wage calculation. Its FAQs also
clarify the treatment of employer PF and pension contributions,
statutory bonus, gratuity and ESI for this calculation.
What should employers review?
- Existing salary structures and allowance components.
- Basic salary and dearness allowance.
- Employer PF and pension contribution components.
- Overtime and variable salary components.
- Statutory wage calculations for PF, gratuity and other applicable benefits.
- Salary structures that may require revision.
A review of salary structures can help businesses identify
possible differences between their earlier payroll calculations
and the revised statutory wage definition.
02
Revised EPF Wage Ceiling: ₹25,000 from 17 September 2026
EPF UPDATE – SEPTEMBER 2026
The Central Government increased the wage ceiling for mandatory
EPF coverage from ₹15,000 to ₹25,000 per month with effect from
17 September 2026.
The change was notified under the Code on Social Security, 2020
through Gazette Notification S.O. 5109(E).
Earlier ceiling
₹15,000
→
Revised ceiling
₹25,000
This is an important update for employers because employees
who were previously outside mandatory EPF coverage solely
because their wages exceeded ₹15,000 may now become eligible
for coverage if their wages do not exceed ₹25,000 and they meet
the other applicable eligibility conditions.
What employers should do:
- Review employee records and existing PF membership.
- Identify employees who were previously excluded because their wages exceeded ₹15,000.
- Recheck eligibility under the revised ₹25,000 wage ceiling.
- Review employee and employer contribution calculations.
- Update payroll software and contribution records.
- Ensure that the applicable PF filing and payment process reflects the revised provisions.
Important: The revised ceiling does not
remove the need to check membership conditions, the statutory
definition of wages and the applicable PF scheme provisions.
Employers should not assume that every employee earning
below ₹25,000 has identical contribution treatment.
03
ESIC Wage Ceiling and Payroll Calculations
The Code on Social Security, 2020 contains provisions relating
to employee social security, including ESIC.
Current Notified ESIC Wage Limit
₹21,000
According to the Maharashtra Labour Department's current
Labour Code FAQs, the notified ESIC coverage wage limit
is ₹21,000 per month.
With the revised definition of wages effective from
21 November 2025, businesses should review employee eligibility
using the applicable statutory wage calculation rather than
relying only on an old salary structure.
Employers should review:
- Employee wage components.
- ESIC eligibility.
- Applicable contribution calculations.
- Employee insurance details.
- Monthly payroll and ESIC records.
The applicable coverage limit and contribution requirements
should always be checked against the latest notifications
and rules.
04
Gratuity Calculation Under the Code on Social Security, 2020
The Code on Social Security, 2020 includes provisions relating
to gratuity and other social security benefits.
The revised definition of wages applies to gratuity calculations
from 21 November 2025, as clarified by the Maharashtra Labour
Department.
Fixed-term employees: The Maharashtra Labour
Department has clarified that a fixed-term employee becomes
eligible for gratuity on completion of one year of service
under the employment contract, subject to the applicable
statutory conditions.
For other employees, the usual qualifying-service requirements
and statutory exceptions must be considered.
Payroll administration should therefore consider:
- Last drawn wages.
- Applicable wage components.
- Employee service period.
- Type of employment.
- Gratuity eligibility.
- Full and final settlement calculations.
Employers should review gratuity provisions and financial
estimates with the revised wage definition in mind.
05
Occupational Safety, Health and Working Conditions Code, 2020
The Occupational Safety, Health and Working Conditions Code,
2020 deals with working conditions, employee welfare and related
employment provisions.
Although it is not a payroll calculation law alone, it has an
important connection with attendance and wage administration.
Employers should maintain and review relevant information such as:
- Employee attendance.
- Working hours.
- Overtime details.
- Weekly rest and leave records.
- Employee employment details.
- Applicable contractor and contract-labour records.
This information may be required for wage calculations,
overtime payments and statutory records.
06
Industrial Relations Code, 2020
The Industrial Relations Code, 2020 deals with industrial
relations, trade unions, conditions of employment and the
resolution of industrial disputes.
Its relevance to payroll and HR administration includes:
- Employee separation.
- Retrenchment-related payments.
- Employment records.
- Other applicable financial settlements.
Payroll calculations relating to employee separation should
be aligned with the relevant employment terms and statutory
requirements.