Minimum Wages in India - Governing Act and applicability

A Minimum Wage is a level of income that ensures a sustaining standard of living while also providing comfort. A minimum wage not just supports the basic level of employment, but also seeks continuous improvement. In other words, it aims at preventing the exploitation of labour. It mainly protects the interest of skilled and unskilled workers.



Governing Act and applicability

The Minimum Wages Act, 1948 governs the computation of minimum wages to the workers. It was enforced to ensure the employers did not exploit employees with insufficient wages.

The Ministry of Labour and Employment has classified workers based on a Skill matrix classification. Workers are classified as

  • Unskilled
  • Semi-skilled
  • Skilled
  • Highly skilled


Unskilled workers- These are the workers doing menial work, mainly applying physical force. Though it is necessary to have familiarity with the working environment, the work requires little or no prior experience and revolves around ground-level jobs.


Semi-skilled workers- A semi-skilled worker has a defined set of instructions (from a higher level) and responsible for the discharge of duties assigned. The work is limited to the performance of routine operations of limited scope.


Skilled and Highly skilled workers- Establishments may choose to demarcate responsibilities between skilled and highly skilled in the case of availability of both or can be handled by one. These works require a thorough knowledge of the trade and job process, taking up overall responsibilities, practising independent judgment, possess adequate over-viewing and reviewing skills and managing the lower level workforce.

The Act is primarily applicable to all establishments, factories, place of business and industry types. Unscheduled industries are generally excluded, though a state can add a minimum wage for an occupation or specify it for a sector during a revision cycle. However, the specifics of areas of applicability differ based on state-specific rules. Parameters are prescribed under respective State Legislations.



Rate of Wages

  • There is no single uniform minimum wage rate across the country

· Under the Minimum Wages Act, 1948, both Central and State government are entrusted with powers over fixing the minimum wages

· The State governments define their own scheduled employments and further release the rates

· Rates are determined for Minimum Wages and Variable Dearness Allowance (VDA)

· Wage boards are set up to review and fix minimum wages at specified intervals

· The wage rates in scheduled employments differ across states, sectors, skills, regions and occupations owing to a lot of differentiating factors

  • Timely revision of the rates is also conducted
  • Like the rates, the revision cycle also differs for states


Penalties for Offences

Non-Payment of Minimum Wage is deemed as an offence under the Central Act. The penalty attracts imprisonment up to 5 years and a fine of Rs.10,000.

If wages to a worker are below the minimum wage rate specified, it is termed as Forced labour. ‘Under Payment’ of prescribed wages is also equally considered a penal offence.

Any agreement whereby an employee reduces their right under this Act shall be Null and Void.

Therefore, due to the distinction in cost of living, consumption patterns and regional standards of industrial sectors, the rate of wages within the scheduled employments is different across states, regions, sectors, skills, and occupations.