Code on Wages
(Central) Rules, 2026 — The Deep Dive

Rule 3 finally codifies the formula every payroll team has been using anyway — but now it is a binding rule, not industry custom. Daily basis is the anchor. Minimum wages are fixed per day, against criteria the Central Government will separately specify by general or special order. Central Government employees are explicitly outside the scope.

The 26-day month, statutory at last. To convert: hourly rate = daily rate ÷ 8. Monthly rate = daily rate × 26. Halves and above round up to the next whole number; less than half is dropped (Rule 3(2)). If your week is shorter than six days, the per-hour rate derived above is what you use to compute the daily minimum (Rule 3(3)).

Variable Dearness Allowance: twice a year, fixed dates. The cost of living allowance and the cash value of essential commodities concession are computed once before 1 April and again before 1 October every year, against the Average Consumer Price Index for Industrial Workers published by the Labour Bureau (Rule 4). The longer wage period under Section 14 is monthly (Rule 9).

For years, Indian payroll teams running 5-day work weeks interpreted old Factories Act and Minimum Wages Act provisions against modern IT/BFSI/MNC work patterns. Rule 6 settles it.

In a six-day working week, the rest day is ordinarily Sunday. In a less-than-six-day working week, the rest day shall include both Saturday and Sunday. The first proviso adds: in either case, the remaining days of the week are paid rest days for those employees.

Eligibility threshold: the employee must have worked under the same employer for at least six continuous days (six-day week) or the stipulated number of days in less-than-six-day weeks. Days of lay-off with compensation under the IR Code, attendance allowance without work, and leave granted by the employer immediately preceding the rest days all count toward continuity.

If you require an employee to work on the rest day, you must give a substituted rest day on a working day immediately before or after. The employee receives wages for the rest day they actually worked at the overtime rate (not less than twice the normal rate), and wages for the substituted rest day at the rate applicable to the previous working day.

The 26-divisor proviso (six-day week): where the notified minimum monthly wage has already been derived by dividing by 26, and the employee's actual daily rate is also derived from monthly ÷ 26 and is not less than the notified daily minimum — no separate rest-day wages are payable, because the 26-divisor already accounts for it. But if the employee works on the rest day, that day is paid at twice the normal rate.

Maximum consecutive days without rest: ten. No substitution arrangement can ever produce a stretch longer than that.

Disputes on daily-rate computation under this proviso are decided by the Chief Labour Commissioner (Central) or Deputy CLC (Central) with jurisdiction, after written representations from both parties.

Rule 5: normal working day for daily-wage employees is eight hours, with rest intervals per the OSH Code notification. For employees on any other wage period, the cap is fixed so the weekly total does not exceed forty-eight hours.

Rule 7 (night shifts): where an employee works on a shift extending past midnight, the rest day begins from when the shift ends and runs for 24 consecutive hours. Hours after midnight are counted in the previous day's tally. This prevents night-shift workers from losing a rest day because their shift technically crossed into the next calendar day.

Rule 8: categories of employees specified under Section 13(2) of the Code may exceed normal working hours — but their overtime is governed by Section 14, which carries the double-the-normal-rate principle.

The procedural framework for every kind of wage deduction now follows a single template — show-cause, decision, intimation. The numbers are tight:

• The 50% cap (Rule 13): total authorised deductions cannot exceed 50% of wages in any wage period. Excess carries forward but the recovery in any subsequent month also cannot push past 50%. Hard ceiling, every month.
• Approving authority for fines (Rule 14): the Deputy Chief Labour Commissioner (Central) having jurisdiction.
• Notice of fineable acts (Rule 15): displayed physically or electronically in Hindi, English and the local language at a conspicuous place. Copy goes to the Inspector-cum-Facilitator.
• The 7+15 day cycle (Rules 16–18): for fines, absence deductions, and damage/loss deductions — the employer issues an intimation seeking a reply within seven days. On establishment of charges, the deduction is made. If no reply within seven days, the deduction proceeds and the employee is intimated within fifteen days.
• Advances (Rule 19): recoveries in instalments, so any single or combined instalments in a wage period do not exceed 50%.
• Loans (Rule 20): deductions for loan recovery follow extant Central Government instructions on amount and interest rate.

The bonus computation framework retains the architecture of the Payment of Bonus Rules, 1975 — but Appendix A walks through a complete ten-year illustrative set-on / set-off cycle with rupee figures, which is genuinely useful reference material.

• Bonus to contractual employees (Rule 21): if the contractor fails to pay statutory bonus under Section 26, the principal employer pays the minimum bonus on written information of the failure from the employees or their registered trade union.
• Sixth and seventh year computation (Rules 22–23): set-on/set-off illustrated in Appendix A with cross-year carryforward mechanics.
• Gross profit computation: banking companies follow Appendix B; all others follow Appendix C (Rules 24–25).
• Prior charges (Rule 26): further sums deductible from gross profit are specified in Appendix D — categorised by employer type (banking, non-banking, corporation, cooperative, foreign company under Companies Act 2013 Section 2(42)).
• Carry-forward limits (Rules 27–28): excess allocable surplus capped at 20% of total wages in the accounting year, available for set-on up to the fourth succeeding year. Shortfall carried forward as set-off, same four-year limit.

Appendix A's illustrative example assumes total annual wages giving a minimum bonus (8.33%) of £1,04,167 and a maximum bonus (20%) of £2,50,000. Across a ten-year run, it shows surplus years generating set-on, which then gets consumed in subsequent years, with any un-set-on balance lapsing after four years. This is the single best teaching aid in the entire gazette for non-finance HR staff to understand how bonus accounting works.

Two procedural changes that materially affect litigation strategy:

• Single application for many employees (Rule 49): a single application on behalf of any number of employees in the same establishment, where claims relate to the same wage period or any incident of discrimination, may be filed in Form-II — manually or electronically. This is class-action-adjacent functionality. Trade unions will use this aggressively.
• Ex-parte adjudication permitted: if the employer fails to appear, the authority may hear and determine ex-parte. If the applicant fails to appear without advance reason, the application is dismissible.
• Appeal procedure (Rule 50): any aggrieved person prefers an appeal in Form-III. Critical: an employer's appeal is not admitted unless the full claim amount is deposited with the appellate authority at the time of filing.

The single biggest "ease of compliance" change is buried in Chapter VIII.

• Returns (Rule 48): filed electronically in the forms prescribed under the OSH Code rules. One unified electronic return covers all four Codes.
• Three mandatory registers (Rule 51): Form 1 (Employee Register — 36 fields per employee), Form 4 (Wages, OT, Advances, Fines and Deductions), Form 9 (Attendance Register-cum-Muster Roll). Maintainable electronically or physically.
• Records preserved for five years from the date of last entry (Rule 51(4)).
• Wage slip in Form 5 (Rule 52): electronic or physical, issued to every employee on or before the time of payment of wages. Mandatory across every establishment regardless of size or sector.

Where any amount payable to an employee is due after death, or because the employee's whereabouts are unknown, and could not be paid to the nominee within three months — or for any other reason within six months — the employer must deposit it with the Deputy Chief Labour Commissioner (Central).

• Three-month timeline for nominee (Rule 45(2)): if the amount cannot be paid within three months, deposit with Deputy CLC. The Deputy CLC must locate the nominee and disburse within two months.
• Six-month timeline for unnominated dues (Rule 46): employer deposits within fifteen days of the end of the six-month period, by bank transfer or crossed demand draft.
• Public notice (Rule 47(2)): notice on the Deputy CLC's notice board for at least fifteen days, published in two local-language newspapers in the area where wages were earned and two in the area of permanent residence.
• Seven-year escheat (Rule 47(4)): if the amount remains unclaimed for seven years, it is dealt with as the Central Government directs.

Form-VII nomination: fresh nomination required after marriage — any nomination made before marriage is deemed invalid if it didn't include the spouse. HR teams should run a marital-status update + re-nomination drive.

Rule 53 (enquiry): on a complaint by an authorised officer, an aggrieved employee, a registered trade union, or an Inspector-cum-Facilitator, the officer issues summons, takes evidence on oath, allows cross-examination, gives the accused an opportunity of defence, and decides the complaint per the Code. This is quasi-judicial — not a paper review.

Rule 54 (composition): an accused desirous of composition under Section 56(1) applies in Form 6 (Part A). The gazetted officer checks whether the offence is compoundable and may compound it for a sum equal to fifty per cent of the maximum fine, payable within thirty days. Composition certificate (Form 6 Part B) issued within ten days of receipt. If the accused fails to deposit within the specified time, prosecution is instituted.