By S&S Co. Advocates & Solicitors · Published 20 August 2026 · Informational content, not legal advice: see our disclaimer
How Minimum Wages Are Fixed
The Minimum Wages Act, 1948 empowers the appropriate government, central or state, depending on the industry, to fix and periodically revise minimum wage rates for specific 'scheduled employments' listed under the Act, ranging from agriculture and construction to shops, factories and various services. Rates are typically fixed with reference to a basic rate plus a variable dearness allowance (VDA) component that is revised periodically to account for cost-of-living changes, and rates commonly differ by category of work, skill level, and zone or region within a state.
Who Is Covered
Coverage turns on whether the employment falls within a scheduled employment notified for the relevant state or by the Centre: most common forms of manual, skilled, semi-skilled and unskilled work across industry, construction, and services fall within one schedule or another, though the precise applicable rate depends on the specific employment category the worker falls into and the state or central notification in force.
What Counts Toward the Minimum Wage
The notified minimum rate generally includes the basic rate plus the variable dearness allowance; other components of a compensation package, such as certain allowances, bonus, or in-kind benefits, are not always creditable toward satisfying the minimum wage obligation, and employers should check the specific state notification rather than assume that total gross compensation, however structured, automatically satisfies the requirement so long as it exceeds the headline minimum figure.
Remedies for Underpayment
An employee paid below the applicable minimum wage can file a claim before the designated Authority under the Act, who can direct payment of the difference along with compensation. Underpayment can also be raised with the labour inspectorate, which has the power to inspect establishments and registers for compliance. Employers engaging contract labour should note that the principal employer can also be held liable for a contractor's minimum wage default under the Contract Labour (Regulation and Abolition) Act.
Frequently Asked Questions
Who decides the minimum wage rate applicable to a particular job?
It depends on whether the employment is 'scheduled' at the central or state level: the appropriate government notifies rates for each scheduled employment, and rates often vary by skill category (unskilled, semi-skilled, skilled, highly skilled) and by zone within the state.
Can an employer pay a consolidated salary below the notified minimum but call it a fair market rate?
No: the minimum wage is a statutory floor, not a negotiable market benchmark, and any agreement or arrangement resulting in payment below the applicable notified rate is void to that extent under the Act.
Is a principal employer liable if its contractor underpays contract workers?
Yes, in many circumstances: under the Contract Labour (Regulation and Abolition) Act, a principal employer can be required to ensure minimum wage compliance by its contractor and can be held directly liable, with a right of recovery from the contractor, where the contractor defaults.
How often are minimum wage rates revised?
The variable dearness allowance component is typically revised periodically (commonly every six months in many states) to track inflation, while the basic rate is revised less frequently through a fuller review process: employers should track state notifications rather than assume a rate remains static.
References & Further Reading
This article references the following statutory provisions. Readers should always verify current rules, fees and timelines against the applicable statute and rules as amended, since these are revised from time to time.
- Minimum Wages Act, 1948, Sections 3, 20 and 25.
- Contract Labour (Regulation and Abolition) Act, 1970, Section 21.