The Framework: Who Fixes Minimum Wages and for Whom
Minimum wages in India are fixed by the 'appropriate government'. For scheduled employments in the central sphere (railways, mines, ports, central government contractors, among others) that is the central government; for everything else it is the state. The Code on Wages 2019, in force since 21 November 2025, extends minimum wage protection to all workers, replacing the earlier list-based coverage of the Minimum Wages Act 1948, while state notifications continue to set the actual rates until the Code's rules fully take over.
Every notification classifies workers by skill: unskilled, semi-skilled, skilled and highly skilled, sometimes with a separate clerical or supervisory scale. Many states also divide the state into zones (Zone A for municipal corporations, Zone B for other areas, for example) with different rates. Security guards are typically semi-skilled if unarmed and skilled if armed or supervisory; housekeeping staff are usually unskilled or semi-skilled depending on the state's schedule; a plant operator is skilled. The classification is not a matter of job title but of the description in the notification, and getting it wrong is the most common minimum wage violation.
The rate has two parts: a basic rate fixed in the notification and a variable dearness allowance (VDA) linked to the consumer price index. The published total is the minimum you must pay for a full month of work. The minimum wages glossary entry summarises the concept; this guide covers what to do about it in payroll.
- Central government fixes rates for central-sphere scheduled employments; states fix the rest
- Rates are set by skill category (unskilled to highly skilled) and often by zone
- Security guards are commonly semi-skilled (unarmed) or skilled (armed/supervisor); confirm in your state's schedule
- Minimum wage = basic rate + VDA as notified; the total is the floor for a full month
The VDA Revision Cycle and the Code on Wages Floor Wage
VDA is revised periodically as the price index moves, typically twice a year. Delhi and Haryana, for instance, revise dearness allowance in April and October; several other states follow a similar half-yearly pattern, while some revise annually or on a different calendar. The notification is sometimes issued weeks after the effective date, which means arrears: if the April revision is notified in June, wages for April and May must be topped up. See the VDA glossary entry for how the index linkage works.
The Code on Wages introduces a national floor wage set by the central government, below which no state may fix its minimum wage. It is a floor, not a rate you pay; your obligation is the applicable state (or central) minimum wage for the category and zone, which will be at or above the floor. Its practical effect is to lift the lowest state rates over time, so employers with staff in historically low-wage states should expect upward pressure at each revision.
Do not quote a figure from memory or from a two-year-old vendor sheet. Minimum wage figures change every six months in many states, and the only defensible source is the latest notification from the state labour department (or the Chief Labour Commissioner for the central sphere). Build the check into your calendar: in the first week of April and October, look for the notification, and update the wage master the day it appears.
- VDA revisions are typically half-yearly; Delhi and Haryana revise in April and October
- Late notifications create arrears from the effective date; pay them in the next run
- The Code on Wages floor wage is a national minimum for states, not the rate you pay
- Source every figure from the current state or central notification, never from memory
Converting Monthly Minimum Wage to Daily and Hourly Rates
Most notifications publish both a monthly and a daily rate. Where only the monthly figure is given, the accepted conversion is to divide by 26, on the logic that a month of 30 days contains 4 weekly offs that are paid rest days, leaving 26 working days. The hourly rate is the daily rate divided by the normal working day, which is 8 hours under most notifications and under the Factories Act's 9-hour maximum framework. So hourly rate = monthly minimum wage ÷ 26 ÷ 8.
Take a semi-skilled monthly minimum wage of M rupees. The daily rate is M ÷ 26 and the hourly rate M ÷ 208. Overtime, which must be paid at twice the ordinary rate under the Factories Act and the Code on Wages, is 2 × M ÷ 208 per hour. A guard on a 12-hour post in a state that has notified an 8-hour day works 4 overtime hours per duty; on 26 duties that is 104 overtime hours a month, at double rate, which is why a 12-hour post costs substantially more than 1.5 times an 8-hour post. The overtime calculation formula under Indian labour law covers the weekly-off and holiday variants.
Absence is deducted at the same daily rate. A worker on the monthly minimum who misses two days is paid M − 2 × (M ÷ 26). Do not switch to a 30-day divisor for deductions while using 26 for the wage; that under-deducts and confuses the register. Check the arithmetic on the salary per day calculator and the overtime pay calculator for India.
- Daily rate = monthly minimum wage ÷ 26; hourly rate = daily ÷ 8
- Overtime = 2 × hourly rate for hours beyond the daily or weekly limit
- A 12-hour post against an 8-hour day means 4 OT hours per duty at double rate
- Use the same 26-day divisor for LOP deductions as for the wage itself
What Counts Toward the Minimum Wage
The minimum wage notified is basic plus VDA. The question employers ask is whether other components they pay, HRA in particular, can be counted toward meeting the minimum. The Supreme Court has held that the minimum wage is a total package and that components like HRA can be reckoned toward it, and the Code on Wages defines wages to include basic, DA and retaining allowance while excluding HRA and most other allowances. In practice, many state labour authorities and inspectors test basic plus DA against the notified minimum and treat HRA as additional. The safe position is to ensure basic plus DA alone meets or exceeds the notified minimum, and to check your state's stance if you intend to rely on other components.
Components that never count: overtime wages, bonus, gratuity, employer PF and ESI contributions, reimbursements and any payment for work beyond the normal day. A structure that pays basic below the minimum and makes up the difference with 'incentive' or 'attendance bonus' is a minimum wage violation regardless of the total. It also collides with the Code's 50% rule, which adds excluded allowances back to wages above the 50% mark, raising PF on exactly the structures designed to avoid it.
Payment in kind, canteen facilities and accommodation do not reduce the cash minimum unless the notification specifically authorises a deduction and values it. Where you provide housing to security guards or housekeeping staff on a site, treat it as a benefit, not as part of the wage, unless your state's notification and rules permit a valued deduction.
- Notified minimum = basic + VDA; safest to meet it with basic + DA alone
- HRA: judicially reckonable toward the minimum but often not accepted by inspectors; check your state
- Never count OT, bonus, gratuity, employer contributions or reimbursements toward the minimum
- Accommodation and meals do not reduce the cash wage without an authorised, valued deduction
Compliance Steps: Mapping, Masters, Revisions and Arrears
Step one is mapping. List every role in your establishment and assign it a scheduled employment, skill category and zone from the applicable notification. Write down the reasoning; an inspector will ask why a 'site supervisor' was paid as semi-skilled. Where a role sits between categories, pay the higher one. For a security agency, the state-wise minimum wages guide for security guards walks through the guard, gunman and supervisor classifications.
Step two is the wage master. Each employee's basic and DA must be at least the mapped minimum for the current period, with an effective date. When a revision is notified, update the master from the effective date, run an arrears calculation for any months already paid at the old rate, and pay the arrears with the next salary, shown as a separate line on the wage slip. Keep the old and new rates in the record; a master that only shows the current rate cannot prove what was paid in the past.
Step three is monitoring. After every payroll, run a report of employees whose basic plus DA is below the mapped minimum for their category and zone; the report should be empty. New joiners are the usual culprits, because offer letters are drafted from templates that predate the last revision. Fixing the template in April and October, when the revision lands, removes the source of the error.
- Map every role to a scheduled employment, skill category and zone, with written reasoning
- Store minimum wage rates with effective dates in the wage master; update on every notification
- Compute and pay arrears from the effective date, shown as a separate wage slip line
- Run a post-payroll exception report for anyone below their mapped minimum
Records, Wage Slips and the Contract Labour Angle
Minimum wage compliance is proved through records: the muster roll showing days worked, the wage register showing basic, DA and each other component, overtime hours and wages, deductions and net paid, and the wage slip acknowledged by the worker (electronically or by signature). Payment through bank transfer strengthens the record because the credit amount is independent evidence. Cash payment is still permitted in limited circumstances, but it makes disputes about the amount actually received unwinnable.
If you are a principal employer engaging contract labour (housekeeping, security, canteen, loading), you are liable to ensure the contractor pays at least the minimum wage, and to pay it yourself if the contractor defaults, then recover from the contractor. That means verifying the contractor's wage register and bank payment evidence every month against attendance recorded at your gate. A contractor invoice priced below the minimum wage plus statutory contributions is a warning sign, not a bargain. The contract labour compliance guide for principal employers covers the verification routine.
Attend Mitra supports the attendance and wage-record side. Employee records carry basic and DA with effective dates, attendance produces the paid days and overtime hours by employee and site, and the salary register export shows each component separately so an inspector, or a principal employer's audit, can test basic plus DA against the notified minimum and check that overtime was paid at double rate. The notification itself, and the decision on category and zone, remain your responsibility.
- Muster roll, wage register with component-wise columns, OT register and acknowledged wage slips
- Pay through bank transfer so the credited amount is independent evidence
- Principal employers must verify contractor wage registers and bank evidence monthly
- Keep effective-dated rates in the system so past months can be proved
Preparing for an Inspection or Client Audit
Inspections under the Codes and the older Acts usually start with the same request: the muster roll and wage register for a sample of months, the current notification you are applying, and evidence of payment. Have a compliance file that contains the notification, your role-to-category mapping, the wage master extract with effective dates, arrears computations for each revision, and bank payment evidence. If you can produce these in an hour, most inspections end quickly.
Large clients now audit their vendors for minimum wage compliance as part of their own principal employer obligations. A security agency or facility management company that can hand over site-wise attendance, wage registers by category and payment evidence within a day wins renewals; one that needs two weeks to reconcile WhatsApp attendance with Excel salary sheets does not. Treat minimum wage records as a sales asset, not just a legal obligation.
- Maintain a compliance file: notification, mapping, effective-dated master, arrears workings, payment proof
- Sample-month registers should be producible in an hour
- Client audits test the same evidence; fast, clean records win contract renewals