The minimum wage in India and what employers must know
Reviewed by Mellow Editorial Team, HR & payroll content team
Minimum wage in India is not a single national figure — it is a layered system of central and state rates that varies by industry, skill level and geography. Employers must pay whichever rate is highest: the central floor wage, the relevant state scheduled rate, or any sector-specific rate that applies to their workers.
How the minimum wage system is structured
India sets minimum wages at two levels.
The central government publishes rates for workers employed in "scheduled employments" under central jurisdiction — ports, railways, mines, oil fields and certain contract work. It also periodically revises a national floor wage, which acts as a lower bound below which no state should go.
State governments set their own minimum wages for scheduled employments within their borders. Because labour has historically been a concurrent subject, states have built up their own tables over decades. These tables typically break wages into categories: unskilled, semi-skilled, skilled and highly skilled. Some states add a Variable Dearness Allowance (VDA) that revises automatically with the Consumer Price Index.
The result is that a garment manufacturer in Tamil Nadu, a construction contractor in Haryana and a software company's housekeeping staff in Karnataka may all operate under different minimum wage schedules — even if they sit under the same parent company.
What changes under the Labour Codes
India's four consolidated Labour Codes are in force from 2026, and the Code on Wages is directly relevant here. It introduces the concept of a universal minimum wage — one that applies to all employees regardless of whether their occupation was previously scheduled or not. This is a meaningful shift. Previously, an employer could argue that an unscheduled employment fell outside the Minimum Wages Act. Under the Code on Wages, that argument largely disappears.
The Code also standardises the definition of "wages" for the purpose of calculating compliance. Employers need to understand what counts as wages under the new definition before comparing their payroll to the applicable minimum — allowances treated separately may now need to be included in the calculation.
The components employers often get wrong
Minimum wage compliance is not simply a matter of checking the gross CTC against the published rate.
Deductions reduce take-home pay. Statutory deductions — EPF contributions at 12% of basic wages, ESI contributions — come off the employee's in-hand amount. The minimum wage is generally the floor for gross wages, not take-home pay, but employers should confirm the applicable state rules.
Basic wage structuring matters. Many employers structure compensation with a low basic salary and large allowances to reduce EPF liability. Under EPF rules, the employer and employee each contribute 12% on basic wages and dearness allowance. If basic wages are artificially suppressed below the applicable minimum wage, this can create a compliance gap on two fronts at once: both minimum wage law and EPF.
Piece-rate and contract workers. Minimum wages also apply to workers paid by output. If a piece-rate calculation results in daily earnings below the daily minimum wage rate, the employer must make up the difference. Contract workers supplied by a third-party contractor must also receive the applicable minimum wage — the principal employer carries residual liability if the contractor fails to pay correctly.
Practical steps for employers
First, identify the right schedule. Find the state government gazette notification for your state and sector. If your business operates across multiple states, you need the correct table for each location. Rates are revised periodically — often twice a year where VDA applies — so build a calendar reminder to check for revisions.
Second, map your workforce categories correctly. A worker doing basic loading may be unskilled; a worker operating machinery may be semi-skilled. Misclassification downward is a common audit finding.
Third, audit your wage structure against the full definition of wages. Given the changes under the Code on Wages, it is worth reviewing which components of your CTC structure count toward the minimum wage calculation and which do not.
Fourth, keep records. Under wage legislation, employers are required to maintain registers showing wages paid, deductions made and attendance. These records are the first thing an inspector asks for. Digital payroll records that map to the statutory format are acceptable, but must be complete and accurate.
Fifth, treat contract staff carefully. If you engage labour through a contractor, include a clause requiring the contractor to certify minimum wage compliance and retain copies of their wage registers. This does not eliminate your liability, but it creates a clear audit trail.
A note on penalties
Non-payment or under-payment of minimum wages carries penalties under both the older Minimum Wages Act (still operative during transition) and the Code on Wages. Penalties can include fines and, in some cases, imprisonment for repeat or wilful violations. Labour inspectors do conduct establishment audits, and employee complaints can trigger unannounced inspections.
This article is general information and does not constitute legal advice. Minimum wage rates change frequently; always verify the current gazette notification for your state and sector before making payroll decisions.
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