The Minimum Wages Act, 1948 makes it illegal to pay any worker in a scheduled employment less than the minimum wage fixed by the government. Both the Centre and the states fix and revise these rates. This guide explains who is covered, how a minimum wage is built from basic pay and dearness allowance, how often it changes, and what happens if an employer pays less.
Key Takeaways
- The Act applies to scheduled employments, with no wage ceiling and no minimum headcount.
- Both the Central and State governments fix and revise minimum wages for the employments under their control (Section 3).
- A minimum wage is usually a basic rate plus a variable dearness allowance that tracks the cost of living (Section 4).
- Rates differ by skill level (unskilled, semi-skilled, skilled, highly skilled) and by zone or area.
- Wages must be reviewed at least once every 5 years, and the VDA is usually revised twice a year.
- Paying below the minimum is an offence under Section 22, with imprisonment up to 6 months or a fine.
What is the Minimum Wages Act, 1948?
The Minimum Wages Act, 1948 is the central law that sets a wage floor for workers in notified industries. It was passed to stop the exploitation of labour in employments where wages were low and bargaining power was weak.
The Act does not fix one national wage. Instead, it lets the appropriate government fix different rates for different scheduled employments, skills and regions. So the minimum wage for a construction worker in one state differs from a shop worker in another.
Who fixes minimum wages in India?
Section 3 gives the power to the appropriate government. For employments on the central list, the Central Government fixes the rate. For all others, the State Government fixes it.
This is why minimum wages vary so much across India. Each state notifies its own rates for each scheduled employment. You can see the current state-wise rates on our minimum wages in India page, with dedicated pages for states like Maharashtra and Karnataka.
What is a scheduled employment?
A scheduled employment is any industry or work listed in the Schedule to the Act, or added later by notification. Examples include agriculture, construction, shops and establishments, security services, and many manufacturing trades. If your employment is not in the Schedule, the 1948 Act does not apply to it, though the Code on Wages 2019 changes this.
What a minimum wage is made of
Under Section 4, a minimum rate of wages can be built in three ways:
- A basic rate plus a special allowance, the variable dearness allowance, adjusted to the cost of living index.
- A basic rate, with or without the cost of living allowance, plus the cash value of concessions like subsidised food or housing.
- An all-inclusive rate that already covers basic, cost of living and the value of concessions.
In practice most states publish a basic rate plus VDA. The basic stays fixed for a few years, while the VDA moves with inflation.
How rates differ by skill and zone
Minimum wages are not one number per state. They are split by:
- Skill level: unskilled, semi-skilled, skilled and highly skilled.
- Zone or area: many states use Zone A, B and C for metro, urban and rural areas, with higher rates in cities.
- Scheduled employment: each notified industry has its own schedule of rates.
So a single notification can carry dozens of rates. Your payroll has to map each employee to the correct employment, skill and zone.
Revision and the VDA
Section 3 requires the government to review and revise minimum wages at intervals not exceeding 5 years. Between revisions, the variable dearness allowance is usually revised twice a year, commonly with effect from 1 April and 1 October, based on the consumer price index.
Missing a VDA revision is the most common minimum wage error. The basic looks unchanged, but the VDA has gone up, so the wage you are paying is now below the legal minimum.
Payment, hours and overtime
The Act also governs how the wage is paid:
- Wages must be paid in cash, unless the government authorises payment in kind (Section 11).
- The employer must pay at least the minimum rate, with no unauthorised deductions (Section 12).
- The government fixes the normal working day, weekly rest and overtime (Section 13).
- Work beyond normal hours attracts overtime, often at double the ordinary rate (Section 14).
- A worker who reports but is given less than a normal day of work is still entitled to wages for a full normal day, subject to the rules (Section 15).
Records, inspectors and claims
Employers must maintain registers of wages, hours and overtime under Section 18. Inspectors appointed under Section 19 can enter premises and examine records.
If a worker is paid less than the minimum, they can file a claim with the Authority appointed under Section 20. The Authority can order payment of the shortfall plus compensation, which can be several times the amount due.
Penalties for paying below the minimum
Paying less than the minimum wage, or breaking the rules on hours and rest under Section 13, is an offence under Section 22. The penalty is imprisonment up to 6 months, a fine up to Rs 500, or both. Other contraventions carry a general penalty under Section 22A. An agreement by a worker to accept less than the minimum is void.
Who the Act applies to
The Minimum Wages Act has no wage ceiling and no minimum number of employees. If you employ even one person in a scheduled employment, you must pay at least the minimum wage. This is different from the EPF and ESI laws, which start at a headcount threshold. For how those work, see our guides to the EPF Act 1952 and the Payment of Bonus Act 1965.
How the Code on Wages 2019 changes minimum wages
The Minimum Wages Act, 1948 is being replaced by the Code on Wages 2019, which merges it with the Payment of Wages Act, the Payment of Bonus Act and the Equal Remuneration Act. The Code makes two big changes:
- Minimum wages will apply to all employees, not just those in scheduled employments.
- The Central Government will set a national floor wage, below which no state can fix its minimum wage.
The Code has been passed but is not yet fully enforced across all states, so the 1948 Act still applies in most places. HR teams should track both.
Quick Recap
| Rule | Position under the Act |
|---|---|
| Applies to | Scheduled employments; no wage ceiling, no minimum headcount |
| Who fixes | Central or State Government, as the appropriate government (Section 3) |
| Wage structure | Basic + variable dearness allowance, or an all-inclusive rate (Section 4) |
| Varies by | Skill (unskilled to highly skilled), zone and scheduled employment |
| Revision | At least every 5 years; VDA usually revised twice a year (Section 3) |
| Overtime | At the prescribed rate, often double the ordinary wage (Section 14) |
| Claims | Authority under Section 20, with compensation for shortfall |
| Penalty | Up to 6 months imprisonment or fine under Section 22 |
| Now governed by | Code on Wages 2019 (floor wage + universal coverage) |
Frequently asked questions
What is the minimum wage in India in 2026?
There is no single national minimum wage. Each state notifies its own rates by scheduled employment, skill and zone, revised with VDA. Check the current figure for your state and industry on our minimum wages in India page. The advisory national floor was Rs 178 a day, which the Code on Wages will replace with a statutory floor wage.
Is the Minimum Wages Act applicable to all employees?
The 1948 Act applies only to employees in scheduled employments, but with no wage ceiling and no minimum headcount. The Code on Wages 2019 extends minimum wage protection to all employees once it is fully enforced.
What is VDA in minimum wages?
VDA is the variable dearness allowance, the part of the minimum wage that moves with the cost of living index. Governments usually revise it twice a year so wages keep pace with inflation. Missing a VDA update is a common compliance gap.
Can an employee agree to work for less than the minimum wage?
No. Any agreement to accept less than the minimum wage is void under the Act. The employer must still pay at least the notified minimum, regardless of what the employee agreed to.
What is the penalty for not paying minimum wages?
Under Section 22, paying below the minimum wage can lead to imprisonment up to 6 months, a fine up to Rs 500, or both. The worker can also claim the shortfall plus compensation through the Authority under Section 20.
What is the difference between minimum wage and floor wage?
The minimum wage is the rate fixed by the appropriate government for a scheduled employment. The floor wage is a new national baseline under the Code on Wages 2019, below which no state minimum wage can fall. Until the Code is enforced, only the minimum wage applies.
Stay compliant with minimum wages
Minimum wage compliance is hard because the rates change by state, skill, zone and VDA cycle. factoHR India keeps the latest state-wise minimum wages and VDA updates built in, applies the correct rate to each employee, and flags any wage that falls below the notified minimum. So your payroll stays compliant across every location.
