Under the Code on Wages, 2019, if an employee's total remuneration includes a high HRA, special allowance, and bonuses, exceeding 60% of the total pay, how would the employer determine the employee's "wages" for statutory benefits?

​If the excluded components like HRA, special allowance, and bonuses exceed 50% of the total remuneration, the excess amount beyond 50% must be added back to the "wages" for statutory calculations.

Reducing the basic pay to less than 50% of the total remuneration is not compliant with the law. The Code on Wages, 2019 mandates that wages must constitute at least 50% of the total remuneration to ensure fair calculation of statutory benefits.

Example: An employee's total monthly pay is ₹1,00,000, divided as follows:

• Basic Pay: ₹40,000
• HRA + Special Allowance + Bonus: ₹60,000

Here, the excluded components (₹60,000) are 60% of the total pay, which is more than 50%.

Since the excess 10% (₹10,000) crosses the 50% limit, it will be added back to the basic pay.
​
So, the "wages" for statutory purposes become:
₹40,000 (Basic Pay) + ₹10,000 (Excess) = ₹50,000
​
Reducing the basic pay to less than ₹50,000 would be against the law.

---

Shekar Ganagaluru's Books

---

---

K. VITTALA RAO's HR Books