RR Electronics Ltd., a multinational manufacturing company, undertakes a restructuring of its employee remuneration system. Under the revised structure, the management substantially reduces the basic pay component while

The dispute must be examined under the provisions of the Code on Wages, 2019, particularly Section 2(y) which defines the term wages. The term "wages" under the Code is defined broadly to encompass all monetary remuneration payable to an employee in respect of employment or work done, whether under express or implied terms of employment. This ensures that the statutory scope of wages is not confined merely to salary but extends to allowances and other forms of compensation 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 his employment or of work done in such employment. The definition explicitly includes- basic pay; dearness allowance; and retaining allowance, if any, The Code provides that wages include all remuneration such as basic pay and dearness allowance but exclude certain specified allowances such as bonus, house rent allowance, overtime allowance, conveyance allowance, employer's contribution to provident fund, gratuity and other specified allowances. The Code also stipulates that the excluded components of remuneration should not exceed one-half (50%) of the total remuneration. However, where the aggregate of such excluded components exceeds fifty per cent of the total remuneration, the amount exceeding fifty per cent shall be deemed to form part of wages and shall be taken into account for the purposes of calculating statutory benefits under the Code. In the present case, the employer has reduced the basic salary to 39% of total remuneration and increased various allowances. Such structuring may amount to artificial splitting of wages to avoid statutory obligations like bonus and other wage-related benefits. The workers are therefore justified in challenging the arrangement. The labour authority or Inspector-cum-Facilitator may examine the wage records and structure adopted by the employer. If it is found that the employer has violated the 50% wage rule, the authority may direct the employer to restructure wages in compliance with the Code. The excess allowances must be treated as part of wages for statutory calculations. The authority may also order payment of differential benefits due to workers. Additionally, the employer may face penalties for non-compliance with the wage provisions.