Minimum Wages in India

In India, the Central Industrial Relations Machinery, also known as the organization of the Chief Labour Commissioner (Central) (CLC(C), is responsible for maintaining harmonious industrial relations in the sphere of the Central Government. Established in April 1945, the object of the Central Industrial Relations Machinery is to prevent and settle industrial disputes and to enforce labour laws to promote the welfare of workers in industrial establishments.

The organization has offices at Kanpur, Dhanbad, Madras, Asansol, Ajmer, Hyderabad, Bhubaneswar, Guwahati, Chandigarh, Bangalore, Ahmedabad, New Delhi, Cochin, Dehradun and Raipur. Further, the Organization of Chief Labour Commissioner (Central) (CLC(C) is entrusted with the following functions:

  1. Prevention and settlement of industrial disputes through conciliation and mediation.
  2.  Enforcement of Labour Laws and Rules made thereunder in Central Sphere.
  3.  Quasi-Judicial functions under various labour enactments
  4.  Verification of Trade Union memberships
  5.  Miscellaneous functions such as conducting periodic meetings of Minimum Wages Advisory Board and defending the Ministry of Labour in writ petitions filed against the Ministry in different High Courts.

As mentioned earlier, enforcement of labour laws and rules made thereunder is an important function of the Chief Labour Commissioner. Here, it must be noted that the Minimum Wages Act, 1948 is one of the significant enactments relating to labour laws in India. The Act's object is to review and revise minimum wages that are already fixed after suitable intervals not exceeding five years.

According to the Act, the Government is empowered to fix minimum wages for employees working in specified employments. The Central Government oversees the employment that is related to building and construction activities carried on by the Central Public Works Department, Ministry of Defense and agricultural farms under the Ministries of Defense and Agriculture.

On the other hand, the State Governments are the appropriate agencies concerning other scheduled employment. They are responsible for fixing and revising wages regarding scheduled employment within their spheres. Here, it is pertinent to note that the Central Government has fixed minimum wages under the Minimum Wages Act, 1948 for 40 scheduled employments under the Central Sphere.

Before moving on to the subject of updating minimum wages in India, one must understand the following dynamics of the term' minimum wages' in India:

  1. Meaning of minimum wages
  2. Calculation of minimum wages in India


1. Meaning of minimum wages

According to the Constitution of India, 'minimum wage' has been defined as 'the level of income for skilled and unskilled workers which ensures a sustaining standard of living while also providing for some measure of comfort.

Also, it must be noted that minimum wage aims to prevent the exploitation of labour by continuously improving the level of employment. The Minimum Wages Act, 1948 is applicable to all establishments, factories, places of business and industry types; it ensures that the employers of different places of employment do not exploit employees with insufficient wages. Although unscheduled industries are generally excluded, it must be noted that a State Government can add a minimum wage for an occupation or specify it for a sector during a revision cycle. 

2. Calculation of minimum wages in India

Let us understand how the minimum wage is calculated in India. It is pertinent to note that India has the most competitive labour costs in Asia, with its national-level minimum wage at around Rs. 176, i.e. USD 2.80 per day, and Rs. 4,576 i.e. USD 62, per month. Although the numbers vary based on geographical areas and other factors, India's labour costs hold a decent global ranking. As mentioned before, India's minimum wage and salary structure differs based on several factors. These factors include the State and the area within the State based on the development level, industry, occupation, and skill-level (unskilled, semi-skilled, skilled and highly skilled) of the worker and the nature of their work.

In India, the method of setting minimum wages is a little complex. With a minimum daily wage for nearly 2,000 jobs for unskilled workers and over 400 categories of employment, the calculation method is bound to be complicated. The monthly wage calculation in India includes the Variable Dearness Allowance (VDA) component accounting for inflationary trends i.e. the increase or decrease in the Consumer Price Index (CPI), and where applicable, the House Rent Allowance (HRA).

Fixation and Revision of Minimum Wages 

According to the Minimum Wages Act, 1948, both Central and State Governments are empowered to fix the wages in the country. Under the Act of 1948, the State governments release the minimum wage rates along with the VDA (Variable Dearness Allowance), and the Wage Boards are then set up to review and fix minimum wages at specified intervals not exceeding five years.

As mentioned earlier, the wage rates in India for scheduled employments differ across states, sectors, skills, regions and occupations because of several differentiating factors. Therefore, there is no 'uniform minimum wage rate' across the country.

This also leads to different revision cycles in each State. However, the main problem here is that foreign businesses in India face the challenge of comprehending and calculating the minimum wage because of the different wage rates in every State and because such wage rates are categorized under various criteria such as region, industry, skill level, nature of work, etc. Here, it is pertinent to note that after the Parliament passed the Code on Wages Act, 2019, the four labour regulations namely, the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965 and the Equal remuneration Act, 1976 were replaced by the Wage Code. According to the Wage Code, employers are prohibited from paying workers less than the stipulated minimum wage and such wages must be revised and reviewed by the Central and State Government at intervals not exceeding five years.

Conclusively, before 2019, the Minimum Wages Act would review and revise minimum wages that were already fixed after suitable intervals not exceeding five years. Now, according to the Code on Wages Act, 2019, minimum wages are updated in India by the Central and State Government at intervals not exceeding five years.