Explainer: How revised legal pay for workers is overdue

By Partha Pratim Mitra

India’s national minimum wage rate has not been revised in eight years. While there are variations across India, intra-state ones as well as those based on skills and sectors, living wages—which are not legally mandated—tend to be often higher, Partha Pratim Mitra points out.

How minimum wages are arrived at in India

The national minimum wage has not been updated for eight years, FE reported last week. The National Floor Level Minimum Wage (NFLMW), which is non-binding, has remained unchanged since 2017, whereas its adequate and timely revision—an exercise typically done every two years and taking into account the rise in the consumer price index for industrial workers—could enable millions of workers to escape poverty, the report said.

Minimum wages are determined according to the provisions of the Minimum Wages Act, 1948. This Act has, however, been subsumed under the Code on Wages, 2019, which has not yet come into force. Minimum wages are classified based on the nature of employment which includes time work, piece work, and overtime work.

Various state governments also fix minimum wages for different categories of employment mentioned in the Schedule to the Minimum Wages Act, 1948. Section 2(b) of the Act gives the appropriate jurisdiction of the central and state governments to fix minimum wages.

Minimum wage components

Minimum wages include all remuneration which could be expressed in money terms. These include house rent allowance but exclude the value of any house/accommodation, supply of light, water, medical attendance, or any other amenity or service excluded by any order of the appropriate government, any contribution for pension or provident fund or social insurance by the employer, any travelling allowance, gratuity or any special expenses entailed by the employee in the course of employment.

What are floor level wages?

The National Committee on Rural Labour in 1991 introduced NFLMW as a non-statutory measure to have a minimum wage structure and to reduce disparities across India. In 2019, NFLMW was subsumed within the Code on Wages, 2019, which provides for the Centre to fix the floor wages. The Code stipulates that minimum wage rates fixed by appropriate governments shall not be less than the floor wage. NFLMW was last revised from 160 to178 per day, effective from August 1, 2017.

Variation in wages among states

There are wide disparities among states in terms of minimum wages. For instance, in Delhi, the minimum wage rate for unskilled workers was 17,494, as effective since October 2023. The monthly wage was revised to18,456 with effect from April this year. At the other end of the spectrum, however, states have minimum wage rates as low as 5,280 in Nagaland (effective since June 14, 2019),6,600 in Arunachal Pradesh (since April 2023), and 6,734 in Rajasthan (since July 2021) for unskilled workers, according to data sourced from Simpliance. In per day terms, the minimum wage in Delhi is710for an unskilled worker, while in Bihar it is `428. In several states, including Tamil Nadu and Kerala, the actual wages generally tend to be higher than the minimum notified by the state governments.

Minimum vs living wages

Minimum wages in India vary across states, sectors, and skill levels with no single national rate in force. Minimum wages can also differ within different regions of a state. They are categorised by skill level, such as unskilled, semi-skilled, skilled, and highly skilled with higher skills receiving higher minimum wages. These categories are further divided based on industry and region.

A living wage is the amount needed to afford basic necessities and maintain a decent standard of living, which is often higher than a minimum wage and is not legally mandated. Minimum wages, meanwhile, are the legally mandated lowest amount that an employer must pay. The International Labour Organization (ILO) has endorsed the concept of living wages after consultations at a meeting of experts and endorsed by the ILO’s governing body in March 2024.

The ILO has defined living wage as the wage level necessary for workers and their families to afford a decent standard of living, taking into consideration the country’s circumstances and calculated based on the work performed during normal hours.

Norms for fixing minimum wages

The 15th Indian Labour Conference (ILC), held in 1957, had recommended the norms for fixing minimum wages. This was subsequently strengthened by the Supreme Court’s judgment of in the Workmen v Reptakos Brett & Co. case in 1992. In 1957, the ILC had recommended a minimum daily food requirement of 2,700 calories, 72 yards of clothing per year, and housing equivalent to the government’s industrial housing scheme.

Other expenses such as fuel, lighting, and miscellaneous expenses were supposed to constitute 20% of the total minimum wage. The apex court, in Reptakos Brett, expanded on the 15th ILC norms, stating that the minimum wage must include 25% to cover vital social needs including children’s education, medical requirements, recreation, and contingencies. An expert committee in 2017 updated the methodology for fixing national minimum wage, and advised a balanced diet based on Indian Council of Medical Research norms.

The author is former principal labour and employment advisor, Union ministry of labour and employment.