Minimum rates of wages were notified by the Government of Punjab vide notification dated 1st May, 2026. What stood out in the notification was, first, that minimum wages were fixed/revised under the Code on Wages, 2019 (“CoW”, hereinafter) and second, that what was notified was the “basic minimum rates of wages”. As per the notification itself, the minimum rates of wages notified therein are “basic rates of minimum wages” which are not permitted to be segregated into components in the form of allowances by the employer. Interestingly, neither the CoW nor any other statute permits the appropriate Governments to fix/revise minimum rates of wages such that they cannot be split into wage components other than the basic component.
As per Section 7 of the CoW, the appropriate Government can fix/revise minimum wages in three ways:
- As basic rates of wages and special allowance at a rate to be adjusted at such intervals in such manner as the appropriate Government may direct to accord as nearly as practicable with a variation in the cost of living index number applicable to such workers.
- Alternatively, it permits the fixation of basic rate of wages with or without the cost of living allowance and the cash value of the concessions in respect of supplies of essential commodities at concessional rates where so authorised.
- Or, it permits an all-inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of concessions, if any.
It would be profitable to refer to the judgment of the Supreme Court in Airfreight Ltd. v. State of Karnataka and Others (1999 LLR 1008 SC). In this judgment, the Court emphasised that once rates of minimum wages are prescribed, whether as all-inclusive or by combining basic plus dearness allowance, they are not amenable to split up. It is one pay package. It was further held that in cases where the employer is paying a total sum which is higher than the minimum rates of wages fixed including the cost of living index (VDA), he is not required to pay VDA separately. However, those higher wages should be calculated as per the definition of “wages”. Even though this judgment was rendered in the context of the Minimum Wages Act, 1948, its impute still stands tall with respect to the CoW as well.
Therefore, while the Government of Punjab might have not fixed minimum rates of wages as an all-inclusive rate, employers cannot be forced to keep the basic component equivalent to or more than the minimum wage amounts. So long as “wages”, as defined under Section 2(y) of the CoW are equivalent to or more than the minimum rates of wages notified by the appropriate Government, there would be no illegality.
Reference is also invited to the judgment of the Supreme Court in Assistant Provident Fund Commissioner v. M/s G4S Security Services (India) Ltd. & Anr. (2023 LLR 1138 SC). It was held in this case that whatever payments are to be made under social security legislations should be made as per the definition of “wages” contained therein.
While following the said judgment, the Delhi High Court in Group 4 Securities Guarding Ltd. v. Secy. Labour, Govt. of NCT of Delhi (2024 LLR WEB 210 Del. HC), held that if the definition of “wages” in a particular statute regards certain components as inclusions, then wages can be split into those components for the purposes of the payment. Under the CoW, Section 5 specifies that the employer cannot pay to any employee “wages” less than the minimum rate of wages notified by the appropriate Government. Similarly, other benefits such as PF, ESI, statutory bonus, maternity benefits etc., are also to be paid as per the definition of “wages”.
If one were to ignore those components which are expressly excluded from the ambit of “wages”, such as HRA and conveyance allowance, various components apart from basic pay, dearness allowance and retaining allowance would also form part of “wages”, so long as those payments are “remuneration payable under terms of employment”.
Judicial interpretations (Nutan Mills, Braithwaite & Co., Laxmi Vishnu Textile Mills, New Asarwa Manufacturing Co.) clarify that remuneration includes:
- Payments provided under terms of employment (appointment letter/service conditions).
- Payments not explicitly mentioned but paid consistently over time (implied term of employment).
- Payments under voluntary schemes (like incentives) that can be withdrawn anytime are not remuneration.
Thus, if the employer is paying “special allowances”, “other allowances” or similarly worded allowances monthly, and the philosophy behind their payment is not linked to exclusions, such payments would form part of “wages”.
Can wages be bifurcated/split into the exclusions for the purposes of payment of minimum wages?
Certain components, including conveyance allowance/travelling concession, HRA, remuneration payable under any award/settlement/court order, and overtime allowance are excluded from the definition of “wages”. But, the second proviso to the definition states that these components will be taken for computation of wages for the purpose of equal wages to all genders and for the purposes of payment of wages.
Since these payments are “inclusions” for the purposes of “payment of wages”, they would also be inclusions for the purposes of payment of “minimum wages”. Therefore, minimum wages may split into HRA and conveyance allowance, apart from other included components.
Conspectus of the discussion:
- Employers cannot be forced to keep the basic component equivalent to or more than the minimum wage amounts.
- So long as “wages”, as defined under the Codes, are equivalent or more than the minimum rates of wages notified by the appropriate Government, there would be no illegality.
- If the employer is paying “special allowances”, “other allowances” or similarly worded allowances monthly, and the philosophy behind their payment is not linked to exclusions, such payments would form part of “wages”.
- If the second proviso to the definition of “wages” is interpreted literally, minimum wages may split into HRA and conveyance allowance, apart from other included components.
Yajat Kumar
Advocate, Supreme Court of India
