The Code on Wages, 2019 was enacted to consolidate and rationalize India’s wage-related labour laws by subsuming the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act and Equal Remuneration Act into a single unified framework, with the objective of ensuring uniform wage standards, timely payment of wages and elimination of wage discrimination. In line with the central legislation, the Government of Gujarat notified the Code on Wages (Gujarat) Rules, 2021, which lay down the procedural and administrative mechanisms for implementing the Code within the state, replacing earlier wage-related rules and streamlining employer compliance.
Applicability
Compliance Requirements under the Rules in Accordance with the Code
1. Payment of Bonus to employees in Gujarat (Code on Wages (Central) Rules, 2020 – Section 26, 39, Rule 21-27)
Bonus shall be paid to the employee within 8 months from the end of FY as per the provision of Code on Wages.
The Code on Wages, 2019 consolidates and simplifies four central labour laws relating to wages and remuneration. It subsumes the Payment of Wages Act, 1936 (ensuring timely and full payment of wages without unauthorized deductions), the Minimum Wages Act, 1948 (providing for fixation of minimum wages across all employments, now extended universally), the Payment of Bonus Act, 1965 (relating to statutory bonus payable to eligible employees based on profits and productivity, though its provisions continue separately until notified under the Code), and the Equal Remuneration Act, 1976 (ensuring equal pay and non-discrimination for men and women workers). Together, the Code seeks to establish a uniform definition of wages, streamline compliance, and provide a single framework for wage-related matters across sectors and establishments.
2. Payment of Minimum Bonus as specified in Gujarat (Code on Wages (Central) Rules, 2020 – Section 26, Rule 21-27)
Employers shall be required to pay a minimum bonus of 8.33% of wages or Rs. 100, whichever is higher, regardless of profit or loss. If the company has a surplus, the bonus can go up to a maximum of 20% of wages.
Any additional bonus demands based on production or productivity shall be agreed between the employer and employees, and the total bonus cannot exceed 20% of annual wages.
Bonus for New Establishments: For the first 5 years, bonus is only payable if the establishment makes a profit, calculated without section 36. In the 6th and 7th year, specific modifications to section 36 apply. From the 8th year, section 36 applies as usual.
Please refer Chapter IV of the Code On Wages, 2019 and Chapter V of Code on Wages (Central) Rules, 2020 for more details.
3. Proportionate reduction in bonus if employee has not worked on all working days in Gujarat (Code On Wages, 2019 – Section 27)
Where an employee has not worked all working days in an accounting year, the minimum bonus under Sec. 26(1), if higher than 8.33% of wages for days actually worked, shall be reduced proportionately to reflect only the days worked.
Applicable in the case where an employee has not worked for all days in an accounting year
4. Payment of bonus out of allocable surplus in Gujarat (Code On Wages, 2019 – Section 31(1))
The bonus shall be paid out of allocable surplus:
60% in case of banking company
67% in case of other establishment of the available surplus
Maximum limit of bonus :- 20% of the salary or wages
Penalty & Punishment
U/s 54: Contravenes any other provision of this Code or any rule made or order made or issued thereunder shall be punishable with fine which may extend to Rs.20000.
If again found guilty of similar offence under this clause, within 5 years from the date of the commission of the first or subsequent offence, he shall, on the second and the subsequent commission of the offence under this clause, be punishable with imprisonment for a term which may extend to one month or with fine which may extend to Rs.40000/-, or with both.
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