Glossary
Deemed wages
Under the Code on Wages, if excluded pay exceeds 50% of total remuneration, the excess is added back into "wages" for gratuity, PF, leave encashment and overtime.
The Code on Wages caps how much of an employee’s pay can sit outside the statutory “wages” definition. If exclusions such as HRA, conveyance or bonus push past 50% of total remuneration, the excess counts as wages anyway for benefit calculations.
The practical floor: deemed wages can never fall below 50% of total remuneration for any benefit computed “on wages.” This applies from 21 November 2025, including for gratuity on a prospective, last-drawn-wages basis.
Why it matters now: most Indian CTC structures put well under half of pay into basic. This rule silently raises gratuity, PF and leave-encashment liabilities without anyone touching the offer letter.