Why This Matters
A worker in a brick kiln in Telangana accepts Rs. 150 per day because the alternative is no work at all. The notified minimum wage for the scheduled employment is Rs. 350. The employer argues the worker agreed voluntarily. Under the Code on Wages, 2019, paying below the minimum is prohibited outright (Section 5), and the agreement is void under the settled contracting-out doctrine (Section 25, Minimum Wages Act, 1948). Under Article 23 of the Constitution, this is forced labour (PUDR, 1982). This chapter covers how minimum wages are fixed, revised, and enforced: the statutory machinery that converts the conceptual floor from Chapter 1.1 into an enforceable legal obligation.
Chapter Overview
This chapter answers five questions:
- What is the floor wage? The Central Government's national minimum below which no state can go.
- How are minimum wages fixed and revised? The two methods, the advisory boards, and the factors considered.
- What types of minimum wages exist? Time rate, piece rate, and guaranteed time rate.
- What role does the cost of living play? The variable dearness allowance and cost of living index linkage.
- What happens when the employer violates minimum wage provisions? Claims, remedies, and the constitutional dimension.
The Floor Wage Concept
Section 9 of the Code introduces a concept with no equivalent in the old Minimum Wages Act: the floor wage.
(1) The Central Government shall, before fixing the floor wage, obtain the advice of the Central Advisory Board, having regard to the minimum living standards of workers.
(2) The floor wage may be different for different geographical areas.
(3) Where the minimum wages fixed by the appropriate Government are higher than the floor wage, the minimum wages shall not be reduced.
(4) Where the minimum wages are lower than the floor wage, the appropriate Government shall, within such time as may be specified in the notification, increase the minimum wages to the level of the floor wage.
The floor wage creates a two tier structure. At the top, each state government fixes minimum wages for scheduled employments within its jurisdiction based on local conditions. At the bottom, the Central Government fixes a floor below which no state minimum may fall. A state may fix higher wages, never lower.
This concept originated from the First National Commission on Labour (Gajendragadkar, 1969) which proposed a National Minimum Wage. It took five decades to become law. The floor wage addresses the problem of extreme interstate disparity: under the old regime, minimum wages for identical work could vary by 300% between states, incentivising a race to the bottom where states competed to attract industry by keeping wages low.
How the floor wage is determined: The Central Government considers the minimum living standards of workers based on a balanced nutritional diet, clothing, housing, education, healthcare, transport, and a margin for contingencies. This is essentially the 15th ILC norms (FCHFE from Chapter 1.1) repackaged as a statutory basis.
| Dimension | Floor Wage | Minimum Wage |
|---|---|---|
| Who fixes | Central Government | State Government (or Central for certain employments) |
| Advisory body | Central Advisory Board | State Advisory Board or Committee |
| Scope | National, may vary by geographical area | State specific, varies by scheduled employment and skill level |
| Function | Absolute floor: no state minimum can go below | Actual wage payable to workers in specific employments |
| Legal basis | Section 9, Code on Wages | Sections 6 and 8, Code on Wages |
| Precedent | No equivalent in old law | Minimum Wages Act, 1948 (now subsumed) |
| Effect on existing wages | States above floor: no change. States below: must raise within specified time | Directly governs employer's payment obligation |
Advisory Boards
The Code establishes advisory boards at both central and state levels to assist in minimum wage fixation.
(1) The Central Government shall constitute a Central Advisory Board to advise on:
(a) fixation of the floor wage
(b) matters referred to it by the Central Government
(2) The State Government shall constitute a State Advisory Board to advise on:
(a) fixation and revision of minimum wages
(b) matters referred to it by the State Government
Composition: Each Advisory Board is tripartite: it includes representatives of employers, employees (in equal numbers), and independent members (not exceeding one third of the total, including the Chairman). The tripartite structure ensures that wage fixation is informed by the perspectives of those who pay wages, those who receive wages, and neutral experts.
The Advisory Board is advisory, not binding. The government is not legally compelled to accept the Board's recommendations. However, in practice, governments typically follow the Board's advice, and departure from the Board's recommendation without justification may be challenged judicially as arbitrary.
Fixation of Minimum Wages
This section covers the two methods for fixing minimum wages, the factors considered, and the employment coverage.
Scheduled Employments
The appropriate Government shall fix the minimum rate of wages payable to employees employed in a scheduled employment.
"Scheduled employment" means any employment specified in the Schedule to the Code, or any employment added to the Schedule by notification. The Schedule includes a wide range of employments: agriculture, construction, textiles, mining, plantations, brick kilns, rice mills, oil mills, and many others. The appropriate Government may add any employment where it considers wage regulation necessary.
"Appropriate Government": For employments under the Central Government (railways, mines, oilfields, major ports, etc.), the Central Government fixes minimum wages. For all other employments, the State Government fixes them.
Two Methods of Fixation
The appropriate Government shall fix or revise minimum wages by either:
(a) appointing committees and sub committees to hold inquiries and advise, or
(b) publishing proposals in the Official Gazette, giving not less than two months from the date of notification for representations, and after considering such representations, fixing or revising minimum wages by notification.
Method 1: Committee Method. The Government appoints a committee with representatives of employers, employees, and independent members. The committee investigates wage conditions in the scheduled employment by visiting workplaces, collecting data on cost of living, examining existing wage levels in comparable employments, and hearing evidence from employers and workers. It then recommends minimum wages. This is the more thorough method, used for first time fixation or major overhauls.
Method 2: Notification Method. The Government publishes its proposals in the Official Gazette and invites representations from any person affected by the proposal. A minimum window of two months is mandatory. After considering all representations, the Government fixes or revises wages by notification. This is faster and used for routine revisions.
In practice, most states use the notification method for periodic revisions (linked to cost of living index) and the committee method for new scheduled employments or comprehensive wage restructuring.
- Committee: appoint → investigate → hear evidence → recommend → fix (thorough, slow, tripartite)
- Notification: publish proposal → minimum 2 month window → consider representations → fix (faster, broader consultation)
Factors for Fixation
The appropriate Government must consider the following when fixing minimum wages:
- Skill level of workers and difficulty of the work. Minimum wages are typically fixed at different rates for unskilled, semi skilled, skilled, and highly skilled workers within the same scheduled employment.
- Cost of living in the area. The 15th ILC norms (1957) and the Reptakos Brett (1992) fifth component remain the judicial benchmark, though the Code does not explicitly incorporate them.
- Geographical area. Wages in metropolitan cities are typically higher than in rural areas to account for the higher cost of living.
- Nature of the establishment. The type of industry and its economic characteristics.
- Arduousness of the work. Physically demanding or hazardous work may justify higher minimum wages.
The factors are not exhaustive. The government has discretion to consider any relevant factor. However, the floor wage (Section 9) sets the absolute bottom, and courts will strike down minimum wages fixed below the floor.
Revision of Minimum Wages
The appropriate Government shall review and revise, or review and fix, minimum wages at intervals not exceeding five years.
The five year revision cycle is mandatory, not discretionary. Under the old Minimum Wages Act, there was no fixed revision period. This led to situations where minimum wages remained unchanged for a decade or more while the Consumer Price Index rose by 50 to 80%. Workers effectively suffered a real wage decline without any statutory remedy. The Code addresses this by mandating a maximum five year interval.
What happens if the government fails to revise? The existing minimum wages continue in force. But the government is in breach of its statutory duty. Workers and trade unions may challenge the non revision through writ petitions under Article 226, directing the government to perform its statutory duty.
Variable Dearness Allowance (VDA)
Many states link minimum wages to the Consumer Price Index (CPI) through a Variable Dearness Allowance (VDA) component.
The minimum wage is split into two parts:
- Basic minimum wage: Fixed component, revised every 3 to 5 years
- Variable Dearness Allowance (VDA): Adjusted periodically (typically every 6 months) based on changes in the CPI
The VDA mechanism ensures that real wages keep pace with inflation between formal revisions. When the CPI rises, the VDA increases automatically without requiring a full wage revision process.
Minimum wage = Basic (fixed, revised every 3 to 5 years) + VDA (adjusts with CPI every 6 months)
VDA prevents erosion of real wages between formal revisions.
Types of Minimum Wages
The Code provides for three types of minimum wages to cover different employment arrangements.
| Type | How Calculated | When Used | Example |
|---|---|---|---|
| Time rate | Fixed per hour, day, or month | Regular salaried/daily wage workers | Factory worker paid Rs. 350/day |
| Piece rate | Fixed per unit of output | Workers paid by production | Bidi roller paid Rs. 2 per bidi |
| Guaranteed time rate | Minimum time rate guaranteed to piece rate workers | Protects piece workers from below minimum earnings | Bidi roller guaranteed Rs. 300/day even if output is low |
The guaranteed time rate is a critical protection. A piece rate worker who produces fewer units on a given day due to machine breakdown, material shortage, power failure, or illness would earn below the minimum if paid purely by output. The guaranteed time rate ensures that even on such days, the worker receives at least the time rate minimum.
How the guaranteed time rate works: The employer must pay whichever is higher: (a) the piece rate earnings based on actual output, or (b) the guaranteed time rate. If a bidi roller's piece rate earnings for the day are Rs. 220 but the guaranteed time rate is Rs. 300, the employer must pay Rs. 300.
Overtime rate: Wages for work beyond normal working hours must be paid at not less than twice the normal rate. This applies to both time rate and piece rate workers.
The Prohibition on Below Minimum Agreements
Any agreement to accept wages below the minimum is void. Section 5 of the Code prohibits payment below the minimum rate; the void-agreement rule is the contracting-out doctrine codified in Section 25 of the Minimum Wages Act, 1948 and carried forward in substance.
Any contract or agreement, whether made before or after the commencement of this Act, whereby an employee either relinquishes or reduces his right to a minimum rate of wages or any privilege or concession accruing to him under this Act, shall be null and void in so far as it purports to reduce the minimum rate of wages fixed under this Act.
This provision operates alongside the constitutional prohibition established in PUDR (1982): below minimum wage payment is forced labour under Article 23. The statutory prohibition (Section 5 of the Code, with the contracting-out doctrine) and the constitutional prohibition (Article 23) together create an absolute barrier. No employer can contract around it. No worker can waive it.
The practical significance: even a written, signed agreement between employer and worker to accept below minimum wages is legally worthless. The worker retains the right to claim the full minimum wage plus arrears for the entire period of underpayment, regardless of the agreement.
📋 Facts: Employers challenged the Minimum Wages Act as violating Article 19(1)(g), arguing compelled payment regardless of financial condition restricted freedom of business.
⚖️ Issue: Whether minimum wage legislation is a constitutionally valid reasonable restriction.
🏛️ Held: Valid. Securing living wages for labourers is in the general public interest and constitutes a reasonable restriction under Article 19(6).
🎯 Principle: Minimum wage legislation is constitutionally valid. The state's power to fix wages is not limited by the employer's financial capacity.
📋 Facts: Employer argued inability to pay minimum wages due to poor financial condition.
⚖️ Issue: Whether inability to pay is a defence.
🏛️ Held: No. An employer who cannot pay minimum wages has no right to engage labour at all.
🎯 Principle: Capacity to pay is irrelevant. Cannot pay = cannot employ.
Claims and Remedies
Where wages are paid below the minimum rate, the worker has both statutory and constitutional remedies.
Statutory Remedy
Where wages less than the minimum rate of wages have been paid, or where any amount is due under the Code, the employee or any trade union registered under the Trade Unions Act may apply to the authority appointed by the appropriate Government for a direction for payment of the difference and compensation.
Key features of the claims mechanism:
- Who can file: The employee, any legal practitioner authorised by the employee, any trade union of which the employee is a member, any Inspector appointed under the Code, or any other person with the permission of the authority
- Time limit: Within one year from the date on which the minimum wages became due
- Burden of proof: Where an employee claims underpayment, the employer must prove that the minimum wages were in fact paid. The onus shifts to the employer, not the worker. This reversal of burden is a protective feature.
- Compensation: The authority may direct payment of the difference between the minimum wage and the amount actually paid, together with compensation not exceeding ten times the underpayment amount. The compensation element penalises the employer beyond mere restitution.
Constitutional Remedy
Payment below minimum wages violates Article 23 (prohibition of forced labour) as held in PUDR (1982). The worker may file a writ petition under Article 32 (Supreme Court) or Article 226 (High Court). This remedy is in addition to, not instead of, the statutory claim.
📋 Facts: The Rajasthan government paid workers on famine relief works below the notified minimum wage, relying on a state law exempting relief works.
⚖️ Issue: Whether the relief character of the work exempted the State from paying minimum wages.
🏛️ Held: It did not. The exemption was struck down as violative of Article 23. The State cannot take advantage of the helplessness of drought-affected workers to pay less than minimum wage.
🎯 Principle: The PUDR principle applies even to famine relief work. Relief employment is not a licence to underpay.
📋 Facts: A PIL exposed bonded labourers working in stone quarries near Delhi in inhuman conditions for wages far below the minimum.
⚖️ Issue: How bonded labour is to be identified and what the State must do about it.
🏛️ Held: Where a labourer works for less than the minimum wage, the presumption is that they are a bonded labourer acting under compulsion; the burden shifts to the employer and the State to prove otherwise. The Court issued detailed rehabilitation directions.
🎯 Principle: Below-minimum payment raises a presumption of bonded labour. The burden of disproving compulsion lies on the employer.
Penalties
| Offence | First Offence | Repeat Offence |
|---|---|---|
| Payment below minimum wage | Fine up to Rs. 50,000 | Enhanced fine + imprisonment up to 3 months |
| Non maintenance of registers/records | Fine up to Rs. 10,000 | Enhanced fine |
| Obstruction of Inspector | Fine up to Rs. 10,000 | Enhanced fine + imprisonment |
| Contravention of any other provision | Fine up to Rs. 20,000 | Enhanced fine |
The Role of Inspectors
The appropriate Government may appoint Inspectors cum Facilitators for the purposes of the Code. The Inspector may enter any premises of an establishment, examine records and registers, take copies, examine any person, and make such inquiries as may be necessary.
Inspectors serve a dual role under the Code: enforcement (detecting and prosecuting violations) and facilitation (advising employers on compliance requirements). The "Inspector cum Facilitator" designation reflects the Code's attempt to shift from purely punitive enforcement to a combination of guidance and enforcement.
Common Confusions
Wrong. Crown Aluminium (1958): capacity to pay is irrelevant. An employer who cannot pay minimum wages must cease operations. Profit or loss has no bearing on the statutory obligation. This is the sharpest distinction between minimum wages (capacity irrelevant) and fair wages (capacity is the central factor).
Different concepts, different levels. Floor wage is the national absolute minimum fixed by the Central Government under Section 9. Minimum wage is the state level wage fixed for specific scheduled employments under Section 6. Minimum wage must always be at or above the floor wage. Floor wage is the floor under the floor.
The contracting-out doctrine voids any such agreement, and Section 5 of the Code prohibits the payment. PUDR (1982) makes it forced labour under Article 23. The agreement is null regardless of how voluntarily the worker signed. Poverty vitiates consent.
Wrong. Minimum wages apply to all "scheduled employments" listed in the Schedule to the Code. This includes agriculture, construction, textiles, plantations, brick kilns, domestic work, security services, and many others. The Code allows the government to add any employment to the Schedule.
Key Takeaways
Floor Wage (Section 9):
- Central Government fixes, Central Advisory Board advises
- National minimum, may vary by geography
- No state minimum can fall below it
- No equivalent in old law
Fixation and Revision:
- Two methods: committee (tripartite, thorough) or notification (Gazette, 2 month window)
- Advisory Boards at central and state level (tripartite: employers, employees, independent)
- Factors: skill, cost of living, geography, nature of establishment, arduousness
- Mandatory revision every 5 years
- VDA links minimum wage to CPI between revisions
Three Types:
- Time rate (per hour/day/month)
- Piece rate (per unit of output)
- Guaranteed time rate (floor for piece workers)
- Overtime: minimum twice the normal rate
Prohibition:
- Section 5 + contracting-out doctrine: agreement below minimum is void
- Article 23 + PUDR: below minimum is forced labour
- Bijay Cotton Mills: Act is constitutionally valid
- Crown Aluminium: capacity to pay irrelevant
Claims and Remedies:
- File within 1 year, burden on employer to prove payment
- Compensation up to 10x the underpayment
- Constitutional writ under Articles 32/226
- Fine up to Rs. 50,000 for first offence
Explain the procedure for fixing minimum wages
Under Section 8 of the Code on Wages, 2019, the appropriate Government fixes minimum wages by two methods. First, the committee method: the Government appoints a tripartite committee with employer, employee, and independent representatives. The committee investigates wage conditions, collects cost of living data, hears evidence, and recommends minimum wages. Second, the notification method: the Government publishes proposals in the Official Gazette, invites representations for a minimum of two months, considers the representations, and fixes wages by notification.
The Government must consider: skill of workers, cost of living (15th ILC norms and Reptakos Brett fifth component), geographical area, nature of establishment, and arduousness of work. Advisory Boards (tripartite) at central and state levels advise on fixation.
Minimum wages must be revised at intervals not exceeding five years (Section 8(4)). Between revisions, Variable Dearness Allowance (VDA) adjustments linked to the Consumer Price Index protect against inflation. Three types: time rate, piece rate, and guaranteed time rate (floor for piece rate workers).
Part B (15 marks)
What is Minimum Wage? Explain the procedure for fixation and revision of minimum wages under the Code on Wages, 2019
- Minimum wage: bare subsistence floor; Crown Aluminium 1958: capacity irrelevant
- Floor wage Section 9: Central Govt fixes national minimum
- Advisory Boards Section 42: tripartite (employers, employees, independent)
- Two fixation methods Section 8: Committee or Notification (2 month window)
- Factors: skill, cost of living, geography, nature of establishment, arduousness
- Three types: time rate, piece rate, guaranteed time rate
- Mandatory revision every 5 years; VDA links to CPI between revisions
- Section 5 + contracting-out doctrine: agreement below minimum is void; PUDR 1982 forced labour under Article 23
Conclusion. The Code on Wages, 2019 establishes a comprehensive framework for fixing and revising minimum wages. The floor wage under Section 9 sets the national absolute minimum. The Advisory Boards provide tripartite consultation. The two methods under Section 8 offer thoroughness or speed depending on the circumstances. The five factors guide substantive fixation, with the floor wage as the absolute bottom. The three types cover different employment arrangements, with the guaranteed time rate protecting piece rate workers from output fluctuations. Mandatory revision every five years with VDA adjustments between revisions ensures that real wages keep pace with inflation. Section 5 and Article 23 together render any below minimum arrangement unlawful. The framework converts the conceptual floor of minimum wage into an enforceable legal obligation, with both statutory and constitutional remedies available to workers who are denied the minimum.
Part B (15 marks)
Discuss whether non-payment of minimum wages amounts to violation of fundamental rights, with reference to Supreme Court cases
- Article 23: prohibition of forced labour and traffic in human beings
- PUDR v. Union of India (1982): below minimum wage = forced labour
- Sanjit Roy v. State of Rajasthan (1983): famine relief workers entitled to minimum wage
- Bandhua Mukti Morcha v. Union of India (1984): bonded labour and minimum wage linkage
- Article 21: right to life includes right to livelihood
- Section 5 Code on Wages + contracting-out doctrine: statutory prohibition operates alongside Article 23