New wage code requires employer to settle dues within two days after last working day

Archana V

Most of the professionals have rued the delay in final settlement of dues when they quit an organisation for a new one. This irritant could soon be a thing of the past.

The Code on Wages, 2019, recently passed by Parliament, stipulates that an employee has to be paid all salary dues within two days after his last working day. The code considers as wage everything including the basic salary, dearness allowance and retention allowance. House rent allowance, conveyance allowance and travel allowance are not included in the definition.

Under the present rules, there is no clarity on the timeframe to settle dues once an employee has left the organisation. Each company has its own policy.

Meanwhile, extraordinary situations such as firing employees or cutting jobs, the companies are governed by the Payment of Wages Act, 1936.

Once the new code comes into effect, all companies will have to follow it. The government is yet to give any indication on the date the code comes into effect, even after being passed by Parliament.