Introduction

The transition from the Maternity Benefit Act, 1961 to the Code on Social Security, 2020 appears, at first glance, to preserve the core maternity benefit framework. The qualifying service requirement, the maximum period of maternity benefit and the broad statutory object of protecting women during pregnancy and childbirth remain substantially intact. Yet, one important change deserves closer attention: the wage base on which maternity benefit is computed.

This issue is not merely a payroll issue. Maternity benefit is meant to secure income continuity during a period when a woman employee is away from work because of pregnancy, delivery and post-natal recovery. That income also supports the child who has just entered this world. Any reduction in the wage base, therefore, affects not only the employee as an individual wage-earner, but also the newborn child whose earliest weeks depend upon maternal health, nutrition, medical care and a stable home environment.

The Earlier Position: A Broader Wage Base Under the 1961 Act

Under the Maternity Benefit Act, 1961, maternity benefit was payable at the rate of the average daily wage for the period of actual absence. The definition of wages under the 1961 Act was welfare-oriented and comparatively broader for this specific purpose. It included all remuneration paid or payable in cash to a woman, including cash allowances such as dearness allowance and house rent allowance, incentive bonus, and the money value of concessional supply of food grains and other articles.

Equally important, the 1961 Act expressly excluded certain items such as bonus other than incentive bonus, overtime earnings, employer contributions to pension or provident fund, and gratuity payable on termination.

The point, however, remains that regular allowance-based salary components such as HRA and certain cash allowances formed part of the maternity benefit computation. This ensured that the woman employee received a benefit closer to her real monthly earnings, and not merely her basic pay.

The Supreme Court, in B. Shah v. Presiding Officer, Labour Court, Coimbatore, also emphasised the beneficial nature of maternity legislation. While dealing with whether weekly holidays and rest days should be counted for payment of maternity benefit, the Court adopted a purposive interpretation and held that the benefit should be paid for the entire period of absence, including Sundays. The underlying principle was clear: maternity benefit legislation must be read in a manner that advances its protective object and does not reduce the woman employee to a lesser economic position during maternity absence.

The Labour Code Position: Uniformity With a Possible Reduction

The Code on Social Security, 2020 adopts the uniform Labour Code definition of wages. Under this framework, wages primarily include basic pay, dearness allowance and retaining allowance, if any. Several components are excluded, including house rent allowance, conveyance allowance, employer contribution to provident fund or pension fund, sums paid to defray special expenses, commission, overtime allowance, gratuity, retrenchment compensation and certain other payments.

This uniform definition was introduced to reduce fragmentation across labour laws and to prevent artificial salary structuring. However, when applied to maternity benefit, the impact may be different from the earlier maternity-specific regime. Components such as HRA and incentive-linked payments, which may have had relevance under the 1961 Act, may now fall outside the direct wage base unless the statutory add-back rule is triggered.

The 50:50 Add-Back Rule: Safeguard, but Not Full Restoration

The Labour Codes contain an important safeguard: where excluded components exceed one-half of total remuneration, the amount exceeding such one-half is deemed to be wages and is added back.

In simple terms, the law discourages salary structures where basic pay, dearness allowance and retaining allowance are kept artificially low while allowances are inflated.

However, this safeguard does not fully recreate the earlier maternity benefit wage base. It operates only where excluded components cross the 50% threshold. If a woman employee’s salary structure is exactly or nearly in the 50:50 ratio, the excluded half may still remain outside the wage base. Thus, in a salary structure of Rs. 100, where Rs. 50 is basic pay and dearness allowance and Rs. 50 is HRA, conveyance, special allowance or other excluded components, maternity benefit may be computed only on Rs. 50, subject to the precise statutory and payroll classification. Under the earlier maternity law, the computation could have been closer to the actual cash remuneration where regular allowances such as HRA were included.

This is where the concern arises. A rule designed to create wage uniformity and prevent abuse may, in the maternity benefit context, produce a reduction in the actual amount payable during maternity leave. The question is whether such an outcome is consistent with the protective purpose of maternity benefit law.

Why This Concern Goes Beyond Women Employees Alone

Maternity benefit is often discussed as a benefit for women employees. That is correct, but incomplete. The entitlement also has a direct connection with the welfare of the child. The post-natal period is not a normal leave period; it is the first stage of care, bonding, feeding, medical follow-up and recovery. A reduction in income during this period can affect nutrition, healthcare choices, childcare support and the mental and physical well-being of both mother and child.

Seen from this perspective, maternity benefit is not a concession granted to an employee. It is a social protection measure attached to childbirth. It recognises that pregnancy and childbirth should not push a working woman into financial insecurity, and that the law has a legitimate interest in protecting the newborn child’s earliest conditions of life.

An Issue Open for Discussion

The legal debate, therefore, should not be limited to whether the 50% rule has been correctly applied as a matter of payroll arithmetic. The larger question is whether maternity benefit, being a special welfare entitlement, should be interpreted and administered in a manner that preserves the earlier level of protection, unless the legislature clearly intended a reduction.

Several questions merit discussion:

• Should the uniform Labour Code definition of wages be applied mechanically to maternity benefit, even if it reduces the benefit compared with the 1961 Act?
• Can the beneficial interpretation adopted in B. Shah continue to guide authorities and courts while interpreting wage-linked maternity benefit under the Code on Social Security?
• Should regular and universally paid allowances, though labelled as allowances, be examined more closely where their exclusion materially reduces maternity benefit?
• Should employers voluntarily preserve maternity benefit at a level closer to the employee’s actual monthly earnings, as a matter of policy, welfare and retention?
• Should further clarification be issued so that the 50:50 rule does not unintentionally dilute maternity protection?

Practical Approach for Employers

Until greater clarity emerges, employers should review maternity benefit computation with caution. A purely cost-driven interpretation may invite disputes, particularly where salary structures appear designed to keep the statutory wage base low. Employers should document the basis for inclusion and exclusion of each pay component, test the 50% add-back rule carefully, and ensure that maternity benefit computation is consistent with the beneficial object of the law.

As a matter of good employment practice, employers may also consider adopting a maternity benefit policy that protects the employee’s real income during maternity absence, even where the strict statutory computation produces a lower amount. Such an approach aligns legal compliance with the broader social purpose of maternity protection.

Conclusion

The Code on Social Security, 2020 preserves the structure of maternity benefit, but the shift in the definition of wages may alter its economic value. This is the real concern. A benefit that was historically computed on a broader wage base may, under the Labour Code framework, be restricted by the new definition of wages and the 50:50 architecture of allowances.

The issue calls for open discussion. Maternity benefit should not be viewed only as a statutory payout to a woman employee. It is also a support system for the newborn child and the family during a vulnerable transition. If the Labour Codes are intended to modernise labour welfare, their implementation should not result in a silent reduction of maternity protection. The conversation, therefore, must move beyond wage classification and ask whether the law continues to honour the social promise behind maternity benefit: dignity for the mother and care for the child who has just entered this world.