Section 2(y) of the Code on Wages defines "wages" as all pay. It includes basic pay, dearness allowance and retaining allowance. It excludes some items, such as:
- HRA, conveyance and travel concession;
- statutory bonus, overtime and commission;
- the employer's PF and pension contribution;
- gratuity, retrenchment compensation and other termination dues.
The 50% proviso
If the excluded items (other than a few, such as gratuity and retrenchment compensation) are more than 50% of the total remuneration, the amount above 50% is treated as wages.
Example: total pay is ₹40,000 and basic plus DA is ₹16,000. The exclusions are ₹24,000, and 50% of the total is ₹20,000. So ₹4,000 is added back, and wages for the Codes become ₹20,000.
Where it matters
- PF and EPS contributions (subject to the wage ceiling);
- ESIC contribution base;
- gratuity, bonus and retrenchment compensation;
- leave encashment and overtime base.
Use the free PF calculator or the HR desk. They show the added-back amount for each employee.
Last reviewed 17-10-2026. General information, not legal advice for a specific case. Check the latest Act, Rules and notifications of the appropriate government before acting.