The minimum wage is the lowest wage an employer may legally pay for a kind of work in a particular place. Paying below it is an offence, whatever the employee has agreed to.
Since 21 November 2025, minimum wages have been governed by the Code on Wages, 2019, which replaced the Minimum Wages Act, 1948 along with three other wage laws. The position below is as of October 2026. It is general information and not legal advice. The actual rates are notified by your state, and they change.
01Who fixes minimum wages
Under the Code, minimum wages are fixed by the "appropriate government":
- The Central Government
- for establishments in the central sphere, such as railways, mines, banks and some others
- The state government
- for most other establishments, including most shops, factories, offices and service businesses
So a garment unit in Tiruppur follows Tamil Nadu's notified rates, and a tile factory in Morbi follows Gujarat's.
02The floor wage
The Code introduces a national floor wage, fixed by the Central Government taking into account the minimum living standards of a worker. State minimum wages cannot be set below it. The floor wage sets the base. Your state's notified rate is what you must pay, and it can be higher.
03Minimum wages now cover everyone
Under the older law, minimum wages applied only to "scheduled employments", the trades listed by each state. Under the Code on Wages, minimum wages apply to all employees. As the Ministry's handbook puts it, the Code provides for universal minimum wages. If your business type was not on your state's old list, it is covered now.
04How rates are set
States fix rates based on factors such as:
- Skill level
- typically unskilled, semi-skilled, skilled and highly skilled
- Geographical area
- cities often have higher rates than towns and villages
- Type of work,
- in some states
Rates are fixed by time (per hour, day or month), and in some trades by piece. Most states also revise rates periodically for changes in the cost of living, often through a variable dearness allowance. Check for revisions at least twice a year.
05What counts as wages
The Code on Wages has one definition of wages that applies across all four Labour Codes. In short, as the Ministry's FAQs explain:
- Wages include basic pay, dearness allowance and retaining allowance.
- If allowances together are more than 50 percent of total remuneration, the excess is added back to wages.
- Some payments are left out, such as performance-based annual incentives and certain reimbursements.
For example, from the Ministry's own illustration: an employee with total remuneration of ₹76,000 a month, of which basic and DA are ₹20,000, allowances ₹40,000 and gratuity and retrenchment items ₹16,000. Allowances counted for the test total ₹56,000. Half of total remuneration is ₹38,000, so ₹2,000 is added to wages, which become ₹22,000 for statutory purposes.
06How to check you are compliant
- Find your state's current notification for your type of work and area, from the state labour department.
- Classify each employee as unskilled, semi-skilled, skilled or highly skilled, based on the work they do.
- Compare their wages with the rate for their category. Compare the right figure: the wages as defined by the Code.
- Check after every revision. Most states revise rates during the year.
- Display the rates on your notice board in English, Hindi and the local language, as the Code requires.
An example
A Ludhiana hosiery unit employs 18 people: 6 helpers, 8 machine operators and 4 checkers and supervisors. The owner looks up Punjab's notified rates for the area, classes helpers as unskilled, operators as semi-skilled or skilled depending on the machines they run, and checks each person's monthly wages against the rate. Two helpers have fallen below the unskilled rate after the latest revision, because their pay was last set a year ago. Their wages are raised from the date the revision took effect.
07Hours, overtime and minimum wages
The minimum wage is for a normal working day. Hours beyond the normal limits are overtime, paid at least twice the normal rate for employees whose minimum wage is fixed under the Code. Weekly off and rest intervals follow the Codes and your state's rules.
08Piece rates
Where workers are paid by the piece, as in many garment, embroidery and diamond units, the piece rate must give a worker of normal ability at least the minimum time rate for the hours worked. Keep records of pieces and hours.
09Deductions
Deductions from wages are limited to those allowed by the Code, such as for absence, advances, damage and fines after a hearing, and cannot exceed half of the wages in a wage period. Deductions cannot be used to bring pay below what the law requires.
10Equal pay
The Code prohibits discrimination on the ground of gender in wages for the same or similar work.
11Penalties and inspections
The Codes introduced compounding of some offences and improvement notices, so a first lapse may be corrected without prosecution. The aim is compliance. Paying wages correctly and keeping the records is still the safe course.
12For larger employers
A manufacturer with several units in different states must follow each state's rates. Keep a table of rates by state, area and skill, with the date of the last revision, and assign someone to check for notifications. Contractors' workers are also covered: under the OSH Code, if a contractor fails to pay wages on time or pays short, the principal employer is liable to pay.
In MatruOS, you can keep staff records and mark attendance, which are the starting point for checking wages against the rates that apply.