What is the 50% wage rule under the new labour code?

Under the Code on Wages 2019, basic pay, dearness allowance, and retaining allowance must constitute at least 50% of an employee's total remuneration. If allowances and excluded components exceed 50% of total compensation, the excess is reclassified as wages for statutory calculations. This directly affects PF, gratuity, and ESI contributions, and limits the earlier practice of structuring salaries with a low basic pay and high allowances to reduce statutory obligations.