The Evolution of Minimum Wage in India: From the 1948 Act to the Code on Wages, 2019

For over seven decades, the framework for minimum wages in India has been a cornerstone of the nation’s labor laws, aimed at protecting workers from exploitation and ensuring a basic standard of living. This intricate system, historically governed by the Minimum Wages Act of 1948, has undergone a monumental transformation with the introduction of the Code on Wages, 2019. This article provides a comprehensive analysis of India’s minimum wage structure, tracing its journey from its post-independence origins to its current, consolidated form. We delve into the core objectives, the roles of the central and state governments, pivotal judicial interpretations, and the significant changes brought forth by the new Code, including the concept of a national floor wage.

The Bedrock of Worker Protection: The Minimum Wages Act, 1948

Enacted in the nascent years of independent India, the Minimum Wages Act, 1948, was a landmark piece of legislation. Its primary goal was to prevent the exploitation of labor by establishing a floor for wages, below which no employer could legally pay. This was particularly crucial for workers in “scheduled employments,” which were industries and occupations identified as being vulnerable to low pay due to weak bargaining power.

The Act was a testament to the nation’s commitment to social justice, ensuring that workers received a remuneration sufficient to cover their basic needs. The Supreme Court of India, in several landmark judgments, has reinforced the significance of this Act. In the seminal case of Sanjit Roy v. State of Rajasthan (1983), the Court held that paying less than the minimum wage amounted to “forced labor,” a practice prohibited under Article 23 of the Constitution. This interpretation elevated the payment of minimum wages from a mere statutory obligation to a fundamental right, underscoring its protective and foundational nature.

The Dual Authority: Central and State Governments in Wage Fixation

A defining feature of the Minimum Wages Act, 1948, was the shared responsibility between the Central and State Governments in the fixation and revision of minimum wages. The “appropriate Government,” as defined in Section 2(b) of the Act, was the Central Government for employments under its authority (such as railways, mines, and major ports) and the State Government for all other scheduled employments within their respective territories.

This dual structure allowed for a nuanced approach to wage setting, theoretically enabling states to tailor minimum wages to their specific economic conditions and cost of living. However, it also led to a complex and often fragmented system, with over 2,000 different types of jobs for unskilled workers and more than 400 categories of employment, each with its own minimum wage.

The key duties and powers under the Act included:

Fixation and Revision of Wages: Section 3 of the Act mandated the appropriate government to fix minimum rates of wages for scheduled employments and to review and revise them at intervals not exceeding five years. This periodic revision was intended to account for inflation and changes in the cost of living.
Central Advisory Board: To ensure coordination and provide guidance, Section 8 of the Act required the Central Government to establish a Central Advisory Board. This board’s role was to advise both the central and state governments on the fixation and revision of minimum wages and to coordinate the work of various state-level advisory boards.
Procedural Framework: Section 5 laid out two primary methods for fixing or revising minimum wages: the “committee method,” which involved appointing committees to hold inquiries and advise the government, and the “notification method,” where proposals were published for public feedback before being finalized.

Anatomy of the Minimum Wage: Key Components and Calculations

Section 4 of the 1948 Act detailed the components that could constitute a minimum wage. These included:

A basic rate of wages and a special allowance (Cost of Living Allowance), which is adjusted based on the consumer price index.
A basic rate of wages, with or without the cost of living allowance, and the cash value of concessions for essential commodities.
An all-inclusive rate that combines the basic rate, cost of living allowance, and the value of concessions.

The calculation of minimum wages in India is a complex process, taking into account various factors such as the skill level of the worker (unskilled, semi-skilled, skilled, and highly skilled), the geographical area, and the nature of the industry. The norms for fixing minimum wages were significantly influenced by the recommendations of the 15th Indian Labour Conference in 1957. These norms considered a family as comprising three consumption units, with specific requirements for food (2700 calories per adult), clothing (72 yards per year), and housing. Many states also factor in a Variable Dearness Allowance (VDA), which is revised periodically (usually twice a year) to offset the impact of inflation.

Another important aspect of wage calculation is the concept of a 26-day working month. This method assumes a six-day workweek with one paid weekly day of rest, ensuring fair compensation.

The Judiciary’s Role: Shaping the Landscape of Minimum Wage

The Indian judiciary has played a pivotal role in interpreting the provisions of the Minimum Wages Act and safeguarding the rights of workers. Several landmark decisions have clarified the scope of the Act and the obligations of employers and the government.

The Imperative of Fair Remuneration: Sanjit Roy v. State of Rajasthan

As mentioned earlier, the 1983 judgment in Sanjit Roy v. State of Rajasthan was a watershed moment in Indian labor law. The Supreme Court ruled that workers engaged in famine relief projects were entitled to minimum wages, and that paying them less, even under the pretext of providing relief, constituted “forced labor” under the Constitution. The court emphatically stated that economic compulsion that forces a person to work for less than the minimum wage is a form of “force.” This decision firmly established that the payment of minimum wages is a non-negotiable constitutional obligation.

The Limits of Governmental Power: Hindustan Sanitaryware and Industries Ltd. v. The State of Haryana

In this 2019 case, the Supreme Court delineated the boundaries of the government’s power in fixing and revising minimum wages. The court held that while the government has the authority to fix minimum wages, it cannot alter other terms of the employment contract. Specifically, the court ruled that the government could not:

Re-categorize workers from a lower skill level to a higher one based solely on experience, as this encroaches upon the employer’s promotion policies.
Prohibit the segregation of wages into different components, such as allowances.
Include job roles like “security inspector” or “security supervisor” in the minimum wage notification if they do not fit the definition of an “employee” under the Act.
Fix the training period for employees.

This judgment was crucial in preventing governmental overreach and ensuring that the Minimum Wages Act remained focused on its core objective of wage regulation.

A New Era of Wage Regulation: The Code on Wages, 2019

In a significant move to simplify and consolidate India’s complex web of labor laws, the Parliament enacted the Code on Wages, 2019. This new Code subsumes and repeals four existing laws, including the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976.

While the 1948 Act has been formally repealed, a saving clause in the new Code ensures that the actions taken under the old Act, such as existing minimum wage notifications, remain in force until they are superseded by new notifications under the Code.

Key Changes and Innovations in the Code on Wages

The Code on Wages retains many of the fundamental principles of the Minimum Wages Act but introduces several significant changes and new concepts.

The National Floor Wage: A Game Changer

Perhaps the most groundbreaking provision of the Code is Section 9, which empowers the Central Government to fix a national floor wage. This floor wage will serve as a baseline, and no state government can fix a minimum wage that is lower than the national floor wage. This is a major step towards reducing the disparity in minimum wages across different states and establishing a uniform standard of living for workers across the country.

The Central Government can fix different floor wages for different geographical areas. If a state’s existing minimum wage is higher than the national floor wage, it cannot be reduced. As of mid-2025, while the legal framework for the national floor wage is in place, its formal notification and implementation are eagerly awaited. The current national floor level minimum wage stands at INR 178 per day, a non-statutory measure.

Universal Coverage

A key objective of the Code on Wages is to expand the coverage of minimum wage provisions. Unlike the Minimum Wages Act, which was limited to “scheduled employments,” the new Code aims to extend the right to a minimum wage to all workers, including those in the unorganized sector. This has the potential to benefit an estimated 50 crore workers.

Other Notable Provisions

Revision Period: The Code maintains the five-year interval for the revision of minimum wages.
Overtime: The overtime rate is set at a minimum of twice the normal rate of wages.
Clearer Definitions: The Code provides for clearer and more uniform definitions of terms like “wages,” which now includes basic pay, dearness allowance, and retaining allowance.
Penalties: The Code has introduced stricter penalties for non-compliance. Employers who fail to pay minimum wages can face fines and even imprisonment for repeat offenses.

Implementation and the Road Ahead

The Code on Wages, 2019, marks a paradigm shift in India’s approach to wage regulation. While its full implementation is still in progress, it holds the promise of a more streamlined, equitable, and effective minimum wage regime. The successful rollout of the national floor wage will be a critical step in realizing this vision.

The transition to the new Code will require a concerted effort from both the central and state governments, as well as employers and employees, to understand and adapt to the new legal framework.

Frequently Asked Questions (FAQs)

1. What is the current minimum wage in India?

There is no single uniform minimum wage across India. Both the Central and State Governments fix minimum wages for different categories of employment within their respective jurisdictions. As of 2025, the national floor level minimum wage is ₹178 per day. However, the actual minimum wages in many states are higher than this. For instance, the monthly minimum wage for an unskilled worker under the Central sphere is ₹20,358. In Delhi, the minimum wage for an unskilled worker is ₹18,066 per month.

2. How is the minimum wage calculated in India?

The calculation of minimum wages is complex and considers several factors:

Skill level: Workers are categorized as unskilled, semi-skilled, skilled, and highly skilled, with corresponding wage rates.
Geographical location: Wages can vary between different states and even within a state based on whether the area is urban, semi-urban, or rural.
Industry: Different industries may have different minimum wage rates.
Cost of living: The minimum wage is often linked to the cost of living index, and a Variable Dearness Allowance (VDA) is frequently a component of the wage to offset inflation.
Working days: The monthly wage is typically calculated for a 26-day working month.

3. What is the difference between the Minimum Wages Act, 1948, and the Code on Wages, 2019?

The Code on Wages, 2019, has subsumed and repealed the Minimum Wages Act, 1948. The key differences are:

Coverage: The Code has universal coverage, extending to all employees, whereas the 1948 Act was limited to “scheduled employments.”
National Floor Wage: The Code introduces the concept of a national floor wage, which was absent in the old Act.
Consolidation: The Code consolidates four labor laws into one, simplifying the legal framework.

4. What is the penalty for not paying the minimum wage?

The penalties for non-payment of minimum wages have been made more stringent under the Code on Wages. Employers can face significant fines, and for repeated offenses, there is a provision for imprisonment. Under the amended Minimum Wages Act in Delhi, for example, the penalty was increased to a fine of up to ₹50,000 and imprisonment for up to three years.

5. How often are minimum wages revised?

The Code on Wages mandates that the central and state governments must review and revise minimum wages at an interval of not more than five years. The Variable Dearness Allowance (VDA) component of the wage is typically revised twice a year, on April 1st and October 1st.

6. What is the overtime wage rate?

Under the Code on Wages, the overtime rate must be at least twice the normal rate of wages.

7. Are contract laborers entitled to minimum wages?

Yes, the Supreme Court has clarified that there is no distinction between an employee directly employed by the principal employer and one employed through a contractor. Therefore, contract laborers are entitled to minimum wages.

8. Has the Code on Wages, 2019, been fully implemented?

The implementation of the Code on Wages, 2019, is being done in a phased manner. While some provisions have come into force, the full implementation, including the notification of the national floor wage, is still underway.

9. Where can I find the latest minimum wage rates for a particular state?

The latest minimum wage notifications are published in the Official Gazette of the respective state governments. The website of the Labour Department of the concerned state is a reliable source for this information.

10. What is a “living wage” and how is it different from a “minimum wage”?

A minimum wage is the legally mandated lowest wage that an employer can pay. A “living wage,” on the other hand, is a theoretical wage that is high enough to maintain a normal standard of living, covering basic necessities and allowing for some discretionary income. While the goal is for the minimum wage to be a living wage, this is not always the case in practice. The concept of a living wage is often used in policy discussions and advocacy for higher minimum wages.