How is Minimum Wage Calculated in India?

The Government prescribes the lowest wage to be paid to any employee taking into account basic needs, with the exception of certain types of jobs with fewer than a thousand people employed statewide. The minimum wage varies for different occupations and is determined by the Government and the government deciding such wages may be the State Government or the Central Government depending upon the state where the wages are being calculated. This is established by the provisions of the Minimum Wages Act, 1948.

The Minimum Wage Act of 1948 was enacted to ensure that the welfare and rights of workers employed in certain establishments are protected in today's competitive market. This law helps workers avoid exploitation by employers or management.

Objectives of the Minimum Wage Act

The aim of the minimum wage laws is to protect employees from being exploited by their employers. It makes sure that workers are paid enough to fulfill their basic requirements like clothing, food and shelter.

Key goals of this Act:

• Establish minimum wages in the unorganized sector.
• Prevent employee exploitation.
• Empowers the government to quickly set and review minimum wages.
• Application of this order to most parts of the organized sector.

Employers' Obligations under the Minimum Wage Act, 1948

All employers must pay wages that meet minimum wage guidelines set forth by the Government.

• Wages must be paid in cash, by cheque or bank transfer.
• To establish a minimum wage, work must initially be listed on the schedule or be inserted in the schedule by notice under Section 27 of the Act.
• Employers should double overtime by making 9 hours per day and 48 hours per week the norm.
• According to the provisions of the law, each employer must ensure the minimum wage according to the provisions of the notice of the minimum wage by rank.
• The employer must fix the salary payment period no more than one month apart or as prescribed by the competent authority
• If employing less than 1,000 people, the salary must be paid no later than the 7th day of the following month. For employers with more than 1000 workers, this can last until the 10th of the following month.
• For laid-off employees, payment must be made within the 2nd working day after dismissal.
• Each employer should keep a wage register that clearly states the following details for each worker:
  - Minimum wage to be paid
  - Overtime days
  - Total salary
  - Salary paid and payment date
• Employers must obtain each worker's signature or fingerprints on the pay register and pay slip.
• Employers must post notices in English and vernacular at the main entrance of the facility or office describing the following characteristics.
  - Minimum wage
  - Summary of applicable behaviors and rules
  - Name and contact details of Labor/Asst Inspector. labor commissioner, etc.

How to calculate minimum wage in India?

The central minimum wage is calculated differently depending on the skills and nature of the workforce. The workforce in India is generally classified as ‘highly skilled’, ‘skilled’, ‘semi-skilled’, and ‘unskilled’. Guidelines of Indian Labor Conference, 1957 are used for calculating the minimum wage.

The Indian Labor Conference held in 1957 proposed a number of standards for calculating the minimum wage for workers in any field. They are:

• Three consumption units per employee. The minimum dietary requirement is 2700 calories per average adult.
• 72 meters of clothes supply per family, per year.
• Rent over the minimum acreage set forth under the Government's ‘Industrial Housing Scheme’.
• Fuel and other miscellaneous expenses should account for 20% of the overall minimum wage.

Minimum Wage by State

State governments have the exclusive right to set minimum wages as well as variable allowances (VDAs) in their respective territories. As a result, there are disparities in minimum wages between states. Some states also have salary differences in specific areas. Some states review their minimum wage every six months and every five years.

Following are the minimum wages on a per month basis for different States in India:

State	Unskilled (in INR)	Skilled (in INR)	Highly skilled (in INR)
Andaman and Nicobar Islands	13,988	17,680	19,188
Andhra Pradesh	12,344	13,844	14,844
Arunachal Pradesh	6,600	7,200	NA
Assam	9,246.10	13,430.85	17,265.55
Bihar	10,088	12,766	15,600
Chandigarh	12,623	13,298	13,698
Chhattisgarh	10,480	11,910	12,690
Dadra and Nagar Haveli	9,237.80	9,653.80	NA
Daman and Diu	9,237.80	9,653.80	NA
Delhi	17,234.00	20,903	NA
Goa	10,790	13,728	NA
Gujarat	11,752	12,324	NA
Haryana	10,532.84	12,802.69	13,442.82
Himachal Pradesh	11,250	13,062	13,592
Jammu and Kashmir	8,086	12,558	14,352
Jharkhand	8,996.34	12,423.87	14,351.39
Karnataka	14424.63	16,858.07	18,260.20
Madhya Pradesh	9,650	11,885	13,185
Maharashtra	12,699	14,310	NA
Nagaland	5,280	7,050	NA
Punjab	10,353.77	12,030.77	13,062.77
Rajasthan	6,734	7,358	8,658
Tripura	7,277	8,928	NA
Uttar Pradesh	10,089	12,432	NA
Uttarakhand	9,891	11,078	NA
West Bengal	9,784	11,804	13,023

Minimum Wage Data for Central Government as of 1 April 2023 (in INR)

Category	Area A	Area B	Area C
Sweeping and cleaning	19,136	16,016	12,844
Watch and ward without arms	23,322	21,216	18,070
Watch and ward with arms	25,298	23,322	21,216
Construction, maintenance – unskilled	19,136	16,016	12,844
Construction, maintenance – semi-skilled/supervisory	21,216	18,070	15,002
Construction, maintenance – skilled/clerical	23,322	21,216	18,070
Construction, maintenance – highly skilled	25,298	23,322	21,216

Note: Cities have been categorized into Area A, B & C based on parameters like ‘urban agglomeration’, ‘municipal corporation’ and places which don’t fall under these parameters but to which the Minimum Wages Act, 1948 extends.

Penalty for Non-Compliance

As per the new wage code, inspectors, who shall also act as facilitators, shall be appointed by the Government to conduct relevant checks to make sure companies adhere to the code. The penalty will be calculated based upon the seriousness of the offence.

The maximum penalty for this is three months of imprisonment, a fine that may extend up to INR 1 lakh or both.
It is crucial for companies to adhere to the wage standards defined by the State Government and industry bodies of the State they are located in. The scrutiny is likely to be stricter on foreign-invested companies, especially in the case of social unrest.

Conclusion

If workers are paid less than the minimum wage announced by the Government, they can file a complaint with the labor inspectorate. Workers can file a complaint, either through an attorney or through a registered Union official. Besides, considering the minimum wages for workers have been defined by the Government, it is imperative for companies to comply with the relevant guidelines to ensure they do not have to bear any penalty for failing to do so.