Labour Code Advisor
⚡ THE PULSE CHECK

Sec 2(y) Wage-Base & Allowance Reckoner

Check "the current status of your Payroll compliance" under Section 2(y) of the Code on Wages 2019. Grade 68 salary components against the 50% basic wage cap and Supreme Court audit precedents.

68 Payroll Components
21 100% Wage Triggers
34 Capped Exclusions (Cl. a–i)
17 High Audit Risk Traps

🧮 Interactive 50% Wage Cap Simulator

Test if your typical Cost-to-Company (CTC) percentage split violates the Section 2(y) threshold.

🟢 HEALTHY PULSE
45%
Included 100% in statutory calculations.
20%
Excluded subject to 50% cap.
15%
Vulnerable under Surya Roshni (SC 2019) ruling.
12%
Must be bill-backed to claim exclusion.
8%
Excluded subject to 50% cap.
Total CTC Structure: 100%
THE COMPLIANCE PULSE VERDICT
40%
Total Capped Exclusions (Cl. a–i)
0% Exclusions 50% Statutory Cap Threshold 100%

✅ Healthy Compliance Pulse!

Your total exclusions stand at 40%, which is well within the 50% statutory threshold under Section 2(y). No mandatory wage add-back triggered.

⚠️
Surya Roshni Audit Warning: You have allocated 15% to Special Allowance. Under SC precedent, if this is paid universally across the board without variable performance criteria or proof of expense, inspectors will club it into Basic Wages!

⚡ 68-Component Wage Exposure Reckoner

Click any tile below to open the deep-dive Audit Reckoner with Supreme Court rulings and HR defensibility tips.

Frequently Asked Questions

What is The Pulse Check for Payroll Compliance?

The Pulse Check is our signature interactive diagnostic tool designed to evaluate your salary structure against Section 2(y) of the Code on Wages 2019. It audits 68 standard payroll components to determine whether they count toward the statutory basic wage base or qualify as specific exclusions under Clauses (a) through (k).

How does the 50% Basic Wage Rule work under Section 2(y)?

Under the first proviso to Section 2(y) of the Code on Wages 2019, specified allowances (such as HRA, Conveyance, Overtime, and Employer PF under Clauses a to i) are excluded from the definition of wages. However, if the aggregate of these excluded allowances exceeds 50% of total remuneration, the amount in excess of 50% is automatically added back to Basic Wages for calculating PF, Gratuity, Bonus, and Retrenchment Compensation.

Why is Special Allowance classified as a High Audit Risk?

In landmark Supreme Court rulings (Surya Roshni Ltd. vs EPFO & Vivekananda Vidyamandir, 2019), the court established that universal allowances paid across the board to all employees without variable performance criteria or proof of special expense are a subterfuge to avoid statutory contributions. Such allowances must be clubbed with Basic Pay for PF and Gratuity assessment.

What is the difference between Capped Exclusions and Absolute Exclusions?

Capped Exclusions (Clauses a to i): Include HRA, Conveyance, LTA, Overtime, Commission, and Employer PF/NPS. The sum of these cannot exceed 50% of total salary.
Absolute Exclusions (Clauses j and k): Include Gratuity payable on termination, Retrenchment compensation, VRS, and terminal Leave Encashment on exit. These are 100% exempt from the wage base and are NOT subject to the 50% cap dilution.