Variable pay impact as per wage code

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Hi,

In our organization variable pay added time to time, So as per wage code, does it impact in terms of gross salary and we have to take 50% of basic or not ?

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Hi Gowri,

Though the query is not very clear, here is a quick clarification to understand what constitutes wages as per the Code on Wages.

Wages will include only -

  • Basic pay, - Dearness allowance and Retainer allowance if any.

Wages do not include -

  • any bonus payable under any law for the time being in force, which does not form part of
    the remuneration payable under the terms of employment;
  • the value of any house accommodation, or of the supply of light, water, medical attendance,
    or other amenity or of any service excluded from the computation of wages by a general or
    special order of the appropriate Government;
  • any contribution paid by the employer to any pension or provident fund, and the interest
    which may have accrued thereon;
  • any conveyance allowance or the value of any traveling concession;
  • any sum paid to the employed person to defray special expenses entailed on him by the
    nature of his employment;
  • house rent allowance;
  • remuneration payable under any award or settlement between the parties or order of a court
    or Tribunal;
  • any overtime allowance;
  • any commission payable to the employee;
  • any gratuity payable on the termination of employment;
  • any retrenchment compensation or other retirement benefit payable to the employee or any
    ex gratia payment made to him on the termination of employment.

The Code has not mandated 50% of CTC as basic pay. It states that the other remunerations that are listed as exclusions from the term wages (except gratuity, retrenchment compensation, retirement benefit, ex gratia) if exceeds one half / 50% of all the remuneration, then the amount that exceeds 50% shall be added to the wages.

If the employer is providing the employee any remuneration in kind, which does not exceed 15% of the total wages payable, shall be deemed to be a part of the wages.

Regards,
Bhuvana Anand

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Hi Bhuvana

Thanks for detailed note on this.

How about other allowance those are part of monthly fixed salary but not in exclusion list such as Special Allowance, Medical, LTA etc. Whether theses will be considered as part of ‘Wages’

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Hi Sneham,

The medical, special allowances, LTA, etc., are covered under the exclusions.

When we read the definition of wages, you will find the clauses (b), (d), (e) cover them.

A partial extract of those clauses is shared here below:

…(b) the value of any house accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;(d) any conveyance allowance or the value of any travelling concession; (e) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; …

Principally wages include the basic pay, daily allowance and retainer allowance. Other than the wages as mentioned above, the sum total of the remuneration paid in the form of allowances (except gratuity, retrenchment compensation, retirement benefits, ex-gratia) if exceeds one-half (50%) of the overall remuneration (wages + other allowances), the differential amount has to be added as a part of the wages.

Any remuneration paid in kind that does not exceed 15% of the total wages payable shall be treated as a part of the wages.

You may refer to this as well - A Simple Guide to the Code on Wages, 2019 (greythr.com).

Regards,
Bhuvana Anand

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Thanks a lot for your revert.

Wising you Happy Diwali!!

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Thanks a lot, @sneham95!

Wish you, your team, and all the Greytribers a very happy and safe Diwali! :grinning_face_with_smiling_eyes:

Regards,
Bhuvana Anand

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