Minimum wage is a statutory floor set by law, and employers cannot pay workers below this amount for work performed. That’s why it is deemed a minimum wage. It protects basic income, prevents exploitation of workers, and sets a legal standard for pay.

Minimum wage ensures that workers get compensation which can help them live a dignified life. These are based on multiple social and economic factors and ensure that workers are not exploited by employers.

The minimum wage are assigned and ruled by these legal frameworks:

Minimum Wages Act 1948: It is the original statute that requires governments to fix minimum rates for various employments.

Code on Wages, 2019: It consolidates and updates four Indian labour laws (including the Minimum Wages Act).

Labour is a concurrent subject in the Indian Constitution. Which means both the central and state governments have the power to make laws.

The central government sets rates for establishments falling under it. States and Union Territories take care of other industries.

Division of responsibility:

The central government prescribes minimum wages for:

Employments notified as central sphere under the Constitution and relevant statutes.

Typical examples are :

• Railways, mines, defence establishments, major ports, central government public sector undertakings, and air transport in some cases.
• Scheduled employments listed in central notifications and sectors explicitly brought under central purview.

Central rules and notifications apply across India for these establishments.

State and Union Territory governments prescribe minimum wages for:

• All other employments (not in central govt list) within their territorial jurisdiction.
• States/UTs notify minimum wages by occupation, industry types, skill level (unskilled, semi-skilled, skilled), and sometimes by geographic zones (rural/urban, districts).

They can set different rates for the same job in different districts or localities.

Which raises the obvious question: why should same job can have different minimum wages?

As mentioned above, the law making is decentralised. Both Central Government as well as states and Union Territories, make their rules. And this fragmentation of power has a practical aspect. Let us look at them–

Diverse cost of living and regional economies:

India is a huge nation. Some of our states are larger than many countries.

So there are large regional differences in prices, housing costs, food, and general living expenses. Some states are more costly than others. Also, there are differences between cost of living in urban and rural centres.

• That’s why a single national wage would be too low for geographical areas with high-cost of living.
• On the other hand, it will be unaffordable for employers in low-income regions.

These diversities are addressed when states set rates to reflect their local needs, food habits, and culture.

Wide variation between sectors and skills requirements:

Different industries have different productivity levels, profit margins, and labour requirements.

Uniform wages would ignore these differences.

For example, IT needs an educated workforce, and agriculture needs unskilled but physically fit labour.While industries like mining are hazardous and demand a higher minimum wage to retain workers in that sector.

These differences are taken care of by setting different minimum wages industry-wise. And also by skill set levels.

So, skilled, semi-skilled, and unskilled labour have different minimum wages set by the law.

Administrative practicality and enforcement:

State governments are closer to local employers and workers. So they are in a better position to design schedules, classifications, and enforcement mechanisms suited to their context.

A single nationwide rate would complicate implementation and monitoring.

Historical and institutional reasons:

Historically, the Minimum Wages Act (1948) and later the Code on Wages (2019) were designed to give states the primary role in setting minimum wages.

There is institutional machinery at the state level like advisory boards and inspectorates. These play an important role in the enforcement of minimum wage compliance. And supports a decentralized wage-setting approach.

The Minimum Wages Act comes under the Code on Wages, which is the umbrella regulation.

Many minimum wage regulations had overlapping aspects. And there was a demand from practitioners for clarity on these regulations.

The Code on Wages (2019) consolidates four central laws– Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, and Equal Remuneration Act– into a single statute to simplify wage regulation in India.

The Code on Wages allows the Centre to notify a national floor wage — a national minimum below which no state government can set minimum wages. Though it permits states to set higher wages.

This maintains a basic national safeguard without enforcing a rigid uniform rate that ignores regional realities.

The wage code goes beyond minimum wages. It also takes care of timely payment, permissible deductions, overtime wages, bonuses, and equal pay for equal work.

This improvement uses the states’ traditional capability of enforcement, inspection, and penalty mechanisms, and also addresses modern work arrangements like contract work and gig work.

Important note: employers must follow both provisions– the central govt. guidelines and also the relevant state notifications to remain compliant.

A payroll software like Opportune payroll is a blessing. Because we pre-configure the software for our clients. This is a great help to small businesses and SME organisations who may not have an expert compliance team.

Also Opportune Payroll Software is automatically updated for all the revisions in compliance regulations. So you do not need to follow all the regulations and complexities of law.

The payroll generation will always be up-to-date and compliant!

Minimum wages have multiple roles. It is a matter of compliance as well as a humanitarian aspect for employers. It supports a dignified living for all members of the society.

In India, the laws are governed by both central as well as state governments and Union Territories.

These pose many challenges for payroll generation professionals. Many times, errors happen inadvertently. And still could result in penalties.

So implementing a payroll management software that updates regularly with these compliances is a good idea.