Code on Wages: Our View on the Real Risk Behind “Simple Compliance”
When the Code on Wages came into focus, many businesses treated it as a technical HR update, something to be handled quietly through payroll restructuring.
But we see it very differently.
The Code on Wages is not a compliance problem.
It is a decision-making problem, one that directly affects margins, cash flow, scalability, and employee trust.
And the biggest risk? Getting compliant without getting strategic.
Compliance is easy. Consequences are not.
On the surface, the law is clear:
- Wages (Basic + DA) must be at least 50% of total remuneration
- Uniform definitions apply across PF, gratuity, bonus, and other benefits
Most organisations respond by reshuffling salary components or increasing basic pay. What often goes unexamined is the long-term cost of these choices.
An increase in basic pay permanently increases:
- Statutory contributions
- Gratuity liabilities
- Overtime and leave encashment costs
- Contractor and vendor pricing
These are not HR costs. These are business costs and they compound over time.
The real risks founders should worry about
- Silent margin erosion
Small payroll changes can lock businesses into irreversible cost structures that hurt profitability at scale. - Growth constraints
Poor wage design affects hiring plans, expansion timelines, and cash runway especially in high-growth or capital-sensitive businesses. - Future regulatory exposure
Artificial or overly complex structures designed only to “manage the 50% rule” often fail audits, inspections, and disputes.
- Culture damage
Employees don’t read the law but they read intent. Poorly handled wage changes erode trust faster than most leaders anticipate.
The founder’s question should be simple
Not:
“Are we compliant?”
But:
“Will this wage structure still work when we are twice our size?”
Compliance that doesn’t scale is not compliance, it’s deferred risk.
Our approach: Decision-first, compliance-aligned
We work with founders and boards to:
- Evaluate the true financial and operational impactof wage revisions
- Segment workforce decisions intelligently
- Design clean, defensible, and scalablepay structures
- Protect growth momentum while staying fully compliant
We believe compliance should support business ambition, not restrict it.
Partner with us
If you are approaching the Code on Wages as a checklist exercise, pause.
Partner with us to:
- Make confident, founder-level decisions
- Protect margins and culture
- Turn statutory change into strategic advantage
Let’s build compliance that scales with your business, write to us at growthpartners@gppc.in