Section 2 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
"Wages" in section 2(1)(zzj) of the OSH Code is a formula, not a label. It starts with all remuneration expressed in money, includes basic pay, dearness allowance and retaining allowance, excludes eleven kinds of payment, and then adds back any excess over a one-half limit. The result feeds the Code's overtime and leave-with-wages provisions.
Wages means all remuneration payable for employment and includes basic pay, dearness allowance and retaining allowance, but excludes items such as bonus, house-accommodation value, employer contributions to pension or provident fund, conveyance allowance, house rent allowance, overtime allowance, commission, gratuity and retrenchment compensation. If the excluded items under sub-clauses (a) to (i) exceed one-half (or a notified per cent.) of total remuneration, the excess is added back to wages. Remuneration in kind counts as wages up to fifteen per cent. of total wages.
The structure of clause (zzj)
Inclusion. "Wages" means all remuneration, whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed, which would, if the terms of employment (express or implied) were fulfilled, be payable to a person employed in respect of the employment or work done, and includes:
- basic pay;
- dearness allowance; and
- retaining allowance, if any.
Exclusions. Wages does not include:
| Sub-clause | Excluded item |
|---|---|
| (a) | Any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment |
| (b) | The value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity, or of any service excluded from the computation of wages by a general or special order of the appropriate Government |
| (c) | Any contribution paid by the employer to any pension or provident fund, and the interest accrued thereon |
| (d) | Any conveyance allowance or the value of any travelling concession |
| (e) | Any sum paid to the employed person to defray special expenses entailed by the nature of the employment |
| (f) | House rent allowance |
| (g) | Remuneration payable under any award or settlement between the parties or order of a court or Tribunal |
| (h) | Any overtime allowance |
| (i) | Any commission payable to the employee |
| (j) | Any gratuity payable on the termination of employment |
| (k) | Any retrenchment compensation or other retirement benefit payable to the employee, or any ex gratia payment on termination of employment |
The first proviso: the one-half rule
For calculating wages, if the payments made by the employer under sub-clauses (a) to (i) exceed one-half, or such other per cent. as the Central Government notifies, of all remuneration calculated under the clause, the amount that exceeds the limit is deemed remuneration and is added to wages. Sub-clauses (j) and (k) (gratuity, retrenchment compensation and ex gratia on termination) are outside this test.
Illustration (numbers invented). An employee's total monthly remuneration is Rs 40,000: basic pay Rs 12,000, dearness allowance Rs 3,000, house rent allowance Rs 12,000, conveyance allowance Rs 6,000 and commission Rs 7,000. Excluded items under (a) to (i) total Rs 25,000 (house rent, conveyance and commission), which is more than one-half (Rs 20,000). The excess, Rs 5,000, is added back. Wages = Rs 15,000 (basic plus dearness allowance) + Rs 5,000 = Rs 20,000, which is one-half of total remuneration.
Payroll teams checking how salary structures perform against the one-half rule can use our payroll compliance audit service.
The second proviso: gender equality and payment of wages
"For the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in sub-clauses (d), (f), (g) and (h) shall be taken for computation of wages." That is, conveyance allowance, house rent allowance, award or settlement remuneration and overtime allowance are counted when computing wages for those two purposes, even though they are excluded elsewhere.
The Explanation: remuneration in kind
Where an employee is given, in lieu of the whole or part of the wages payable, remuneration in kind by the employer, the value of that remuneration in kind which does not exceed fifteen per cent. of the total wages payable is deemed to form part of the wages.
Where the definition matters in the OSH Code
- Overtime. Section 27 requires payment of wages at twice the rate of wages for overtime work beyond the prescribed hours. The meaning of "rate of wages" therefore depends on this definition. See sections 27 and 28 and, for the Central Rules, rule 69.
- Annual leave. Section 32 gives a worker leave with wages; see section 32.
- Wage thresholds elsewhere in the definitions. Some other terms use fixed monthly wage limits (Rs 18,000) for supervisors, inter-State migrant workers and audio-visual workers; see employer, employee, worker and occupier.
The OSH Code's wages definition is its own clause. Do not assume it is identical to the definition in another Labour Code; read each Code's clause for the purpose in hand. For the separate wage Codes, see payment of wages under the new labour codes and minimum wages under the new labour codes.
Example. A worker has a basic pay of Rs 10,000, dearness allowance of Rs 2,000 and a house rent allowance of Rs 4,000, total remuneration Rs 16,000. Excluded items total Rs 4,000, below one-half (Rs 8,000), so no add-back is needed and wages are Rs 12,000. Overtime under section 27 is then paid at twice the rate of wages; for Central-sphere establishments, rule 69(3) of the Central Rules treats the daily wages of a worker paid by the month as 1/26th of monthly wages.
Need help with wage structures?
Salary structures that keep basic pay low and allowances high can fall foul of the one-half rule. Our payroll compliance audit team can test your structures against the clause and show the effect on overtime and leave payments. Bring a sample of payslips across grades.
Key takeaways
- Wages includes basic pay, dearness allowance and retaining allowance, plus other remuneration not excluded.
- Eleven items are excluded, from bonus and employer PF contributions to house rent allowance, overtime, commission, gratuity and retrenchment compensation.
- If items (a) to (i) exceed one-half (or a notified per cent.) of total remuneration, the excess is added to wages.
- For equal wages to all genders and for payment of wages, conveyance, house rent, award or settlement remuneration and overtime are counted.
- Remuneration in kind counts up to fifteen per cent. of total wages payable.
Read next
- Sections 27 and 28: extra wages for overtime and night shifts
- Section 32: annual leave with wages
- Section 2: adolescent, adult, day, week, relay and family
- Payment of wages under the new labour codes
Disclaimer: Based on the Occupational Safety, Health and Working Conditions Code, 2020 (as enacted) and, where noted, the Occupational Safety, Health and Working Conditions (Central) Rules, 2026 (G.S.R. 345(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.