The four Labour Codes "are being made effective from 21st November 2025", the Ministry of Labour & Employment said in its release on that date, and the shared wage definition has applied from the same day. Employers and employees are now reading this as the new salary structure 2026 and many families are checking what it means for their payslips.
Section 2(y) of the Code on Wages sets the rule. According to it, basic pay plus dearness allowance (DA) has to be at least 50% of total remuneration. This acts as a floor for the base pay, not an exact 50% requirement.
The Code on Wages covers every establishment and employee, with no wage ceiling or size threshold for the place of work. Fixed‑term staff are treated the same way as all other employees.
What counts as wages and what gets added back
Certain payments are kept outside the wage definition. These include house rent allowance (HRA), conveyance, overtime, bonus, commission and the employer's PF contribution, along with a few others.
Employer contributions to PF, the National Pension System (NPS) and the Employees' State Insurance Corporation (ESIC) are added to the total remuneration, but they are not considered as wages.
When the items that are excluded are more than 50% of the total pay, the surplus is added again and treated as wages for PF, gratuity and bonus calculations. Hence, employers must now work out these three amounts on a higher wage base than earlier.
PF is calculated at 12% of wages, so the added back amount will also reach the PF contribution of the employee.
Rules and timing
The final central rules under the codes were notified on 8 May 2026 which was a separate and later step from the date on which the codes took effect. Some state rules are still arriving on their own timelines through 2026, so employers in different states are working with different levels of clarity.
The Code on Wages sets a cap on deductions that can be taken from wages at 50%; previously a 75% limit had applied to deductions under cooperatives.
