Minimum wages and the floor wage

In short

• You may not pay any employee less than the minimum rate of wages notified by the appropriate Government s. 5.
• Minimum rates are fixed by skill category (unskilled, semi-skilled, skilled, highly-skilled), geographical area, or both s. 6(6).
• No minimum rate may be lower than the floor wage fixed by the Central Government s. 9(2).
• Paying less than what the Code requires is punishable with a fine of up to ₹50,000 s. 54(1)(a).

Does this apply to you?

• The duty to pay at least the minimum rate applies to every employee s. 5.
• The Central Government does not fix minimum wages for its own employees under the Code rule 3(1).
• The rates themselves are not in the Code; they are fixed by notification of the appropriate Government s. 5 s. 8(3).

What the law requires

How minimum rates are fixed

• The appropriate Government fixes minimum rates for time work or piece work s. 6(2).
• Time-work rates may be fixed by the hour, the day or the month s. 6(4).
• It must mainly consider skill and geographical area, and may also consider arduous work such as high temperature or humidity, hazardous occupations or underground work s. 6(6).
• A minimum rate may be a basic rate plus a cost of living allowance, a basic rate with the cash value of concessions on essential commodities, or an all-inclusive rate s. 7(1).

Central sphere: how the rate is worked out

• The Central Government fixes minimum wages on a day basis rule 3(1).
• The hourly rate is the daily rate divided by eight, and the monthly rate is the daily rate multiplied by twenty six rule 3(2).
• In a week of fewer than six working days, the hourly rate is used to work out the daily minimum rule 3(3).
• The cost of living allowance is revised before 1 April and again before 1 October every year, using the Consumer Price Index for Industrial Workers rule 4.

Revisions and the floor wage

• To fix or revise rates, the Government either appoints committees or publishes its proposals and considers them after at least two months s. 8(1).
• A new rate comes into force three months after its notification is issued, unless the notification says otherwise s. 8(3).
• Minimum rates are to be reviewed or revised ordinarily at intervals of not more than five years s. 8(4).
• The Central Government fixes a floor wage based on minimum living standards, and may fix different floor wages for different areas s. 9(1).
• A rate already above the floor wage may not be reduced s. 9(2).

Special cases

• An employee on a daily rate who works less than a normal working day must be paid for the full day, unless the shortfall is because they were unwilling to work s. 10.
• An employee doing two or more classes of work with different minimum rates must be paid at least the applicable rate for the time spent on each s. 11.
• A piece worker for whom only a minimum time rate is fixed must be paid at least that time rate s. 12.

Numbers at a glance

What	Figure	Where
Notice of proposals before consideration	at least two months	s. 8(1)
New rate comes into force	three months after notification, unless stated otherwise	s. 8(3)
Review interval	not more than five years	s. 8(4)
Hourly rate (Central)	daily rate ÷ 8	rule 3(2)
Monthly rate (Central)	daily rate × 26	rule 3(2)
Fine for underpaying	up to ₹50,000	s. 54(1)(a)

Records and deadlines

• Keep the employee register, the wages register and the attendance register-cum-muster roll in Forms I, IV and IX rule 51.
• Check each cost of living revision before 1 April and before 1 October rule 4.
• A repeat underpayment within five years is punishable with imprisonment of up to three months or a fine of up to ₹1 lakh, or both s. 54(1)(b).

Not covered here

• The actual minimum rates and the floor wage, which are set by notification and change over time.
• State rules on calculating minimum wages, where the State is the appropriate Government.

In short

• Your employer must pay you at least the minimum rate of wages notified by the Government s. 5.
• The minimum depends on your skill level (unskilled, semi-skilled, skilled or highly-skilled), on where you work, or on both s. 6(6).
• No minimum rate can be below the floor wage set by the Central Government s. 9(2).

Does this apply to you?

• Yes. The minimum wage applies to every employee, whatever the job s. 5.
• Central Government employees are the exception: the Central Government does not fix their minimum wages under this Code rule 3(1).

What the law requires

• Rates can be fixed by the hour, the day or the month, and for piece work as well as time work s. 6(2)–(4).
• Harder or riskier work, such as work in high heat, hazardous jobs or underground work, can carry a higher rate s. 6(6)(b).
• The rate can include a cost of living allowance that changes with prices s. 7(1). Where the Central Government fixes rates, this allowance is revised before 1 April and again before 1 October every year rule 4.
• Rates must be reviewed at least every five years s. 8(4).
• If you are on a daily rate and your employer gives you less than a full day’s work, you must still be paid for the full day, unless you chose not to work s. 10.
• If you do two kinds of work with different minimum rates, you must get at least the right rate for the time you spend on each s. 11.
• If you are paid by the piece and a minimum time rate applies, you must get at least that time rate s. 12.

Numbers at a glance

What	Figure	Where
Rates reviewed at least every	five years	s. 8(4)
Hourly rate where the Central Government fixes rates	daily rate ÷ 8	rule 3(2)
Monthly rate where the Central Government fixes rates	daily rate × 26	rule 3(2)

What to do if it isn’t followed

• You, a registered trade union you belong to, or an Inspector-cum-Facilitator can file a claim with the authority appointed under the Code s. 45(4).
• File the claim within three years of it arising; a later claim may be accepted if there is good reason for the delay s. 45(6).
• The authority can order your employer to pay what is owed plus compensation of up to ten times that amount, and should try to decide within three months s. 45(2).
• An employer who pays less than the Code requires can be fined up to ₹50,000 s. 54(1)(a).

Not covered here

• The actual minimum rate for your job and area, which the Government publishes by notification.
• State rules, where your State Government fixes your minimum wage.