The Code extends minimum wage protection to all employees and sets a national floor below which no state minimum wage can fall. Overtime must be paid at twice the normal rate.
For decades, the Minimum Wages Act protected only workers in employments that government had specifically listed in a schedule. A worker in an unscheduled occupation had no statutory minimum wage at all. The Code on Wages ends that distinction.
Under the Code, minimum wage protection extends to all employees, across the organised and unorganised sectors alike. The schedule of employments is gone. The obligation to pay at least the minimum wage is now a baseline that applies to every employer for every employee.
The Code introduces a new concept: the floor wage. The central government sets a national floor wage, and it may set different floor wages for different geographical areas. In doing so it takes into account the minimum living standards of workers.
The floor wage is not the wage an employer pays. It is a lower limit on the minimum wages that the central and state governments fix. No minimum wage notified by any government can fall below the applicable floor wage. Where a state has already fixed a minimum wage above the floor, that higher rate stands and cannot be reduced.
The design is deliberate. The floor wage prevents a downward drift in wage protection across states, while leaving the actual minimum wage to be set close to the cost of living in each area.
The appropriate government fixes minimum wages for the work in its sphere. Minimum wages can be set on a time basis, by the hour, the day or the month, and the rate can vary with the skill level of the work, whether unskilled, semi skilled, skilled or highly skilled, with the arduousness of the work, and with the geographical area.
Minimum wages must be reviewed or revised at intervals not exceeding five years. A dearness allowance component can be built in and revised to keep pace with the cost of living. The Code also contemplates fixing a minimum rate of wages for different categories of work in the same establishment.
The appropriate government fixes the number of hours that make up a normal working day, including intervals, and provides for a day of rest in the week. Where an employee works beyond the normal hours on any day, the Code requires overtime to be paid at not less than twice the normal rate of wages.
For employers, the double rate is a hard floor. Overtime cannot be settled at the ordinary rate, and the calculation of the normal rate flows from the same uniform definition of wages that governs the rest of the Code. A higher wage base therefore raises the overtime rate as well.
Check every rate against two limits. Each pay rate must clear both the applicable state minimum wage and, through it, the national floor wage.
Map your states. An employer operating across states will face different minimum wages and possibly different floor wages by area. Build a state by state wage matrix and keep it current with revisions.
Recalculate overtime. Confirm that overtime is paid at twice the normal rate and that the normal rate is computed on the correct wage base.
Extend coverage. Bring previously unscheduled roles, including support and contract roles, within the minimum wage discipline, because the schedule based exemption no longer exists.
Short, direct, on the record.
The floor wage is a national baseline set by the central government, below which no state can fix its minimum wage. The central government may set different floor wages for different geographical areas, after taking into account the minimum living standards of workers. The floor wage is a lower limit for state minimum wages, not the minimum wage itself.
The floor wage is the national lower limit set by the central government. The minimum wage is fixed by the appropriate government, central or state, for the work concerned, and it cannot be lower than the floor wage. Where an existing minimum wage is higher than the floor, it cannot be reduced. So the floor wage protects against a race to the bottom while the minimum wage remains the operative rate an employer must pay.
Yes. The older Minimum Wages Act applied only to employments listed in a schedule. The Code on Wages removes that limitation and extends minimum wage protection to all employees in all sectors. This is one of the largest expansions of statutory wage protection in Indian labour law.
The appropriate government must review or revise minimum wages at intervals not exceeding five years. Minimum wages may be fixed by the hour, by the day or by the month, and may take into account the skill of the worker, the difficulty of the work, and the geographical area.
Where an employee works beyond the normal number of hours on a day, the Code requires payment for the overtime at a rate of at least twice the normal rate of wages. The normal working hours and the conditions for overtime are prescribed by the appropriate government.
No. A state minimum wage cannot be lower than the floor wage set by the central government. If a state has already fixed a minimum wage higher than the floor, that higher rate continues and cannot be brought down on account of the floor wage.
Speak with our team about a state by state minimum wage and overtime review for your workforce.