Variable pay impact as per wage code


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.

Bhuvana Anand

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