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India’s new wage code could raise pay without hurting jobs. Here’s how

The Code on Wages, 2019 represents a structural reform aimed at strengthening wage regulation, with potential implications for labour market outcomes.

Only about 23.6% of workers in India are in regular wage or salaried employment, while the majority remain in self-employment or casual work (Periodic Labour Force Survey (PLFS), 2025). As a result, much of the workforce operates outside effective wage regulation. Real earnings have shown limited improvement as casual wages have stagnated, regular wages remain flat, and self-employment earnings have declined (PLFS, various years). This weak earnings growth reflects broader productivity challenges as about 43% of the workforce remains concentrated in agriculture but the sector contributes only about 15.3% to the GVA (gross value added) (PLFS, 2025). Economic growth has therefore not translated into broad-based improvements in wage regulation and worker incomes.

It is against this backdrop that the Code on Wages, 2019, emerges as a key institutional reform aimed at strengthening wage regulation, improving employment quality, and supporting labour productivity. The Code on Wages, 2019, consolidates four existing labour laws: the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976, into a single unified code (Government of India, 2019).

Key legislative changes under the Code on Wages

First, it harmonises definitions across wage-related provisions, introducing a uniform definition of “wages” with a 50% cap on exclusions of total remuneration, thereby preventing the artificial suppression of the base (pre-tax) wages. The cap on in-kind remuneration at 15% further standardises the composition of wages.

Second, it universalises minimum wage coverage by establishing a statutory right to minimum wages for all employees across organised and unorganised sectors, removing the earlier restriction to scheduled employments, covering roughly 30% of the workforce.

Third, while the core components of minimum wages (basic wages, variable dearness allowance, and the cash value of concessional supplies) remain unchanged, the Code strengthens the wage-setting framework by introducing consumption-based criteria based on a standard working-class family, including norms for food, clothing, housing, and other essential expenditures. It also introduces a statutory national floor wage to limit excessive variation across states and sectors.

Beyond these, the Code standardises wage fixation across time and piece-rate work through uniform conversion factors, ensuring consistency across states, sectors, and forms of employment. It also rationalises wage-related working........

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