Minimum Wages: Who Decides Them, the Central or State Government?

How are the minimum wages fixed? Are they determined by the central government or are they a subject matter of the state government?

Understanding Minimum Wage Fixation

In general, the fixation or revision of Minimum Wages is done for a certain period under the Minimum Wages Act, 1948, by the "Appropriate Government" based on the hike in the Consumer Price Index Number during a certain period. The index number of the base year is notified accordingly, and the difference in the average of the Consumer Price Index Number is calculated, leading to the revision of Minimum Wages.

However, this is a basic point, and different states have different patterns. Moreover, in some states, it is done based on the nature of employment or places as well. For instance, in Delhi, some factors have been fixed for different kinds of employment (US, SS, S), and the average hike is multiplied by the factor, leading to the revision of Minimum Wages. It is common for all employments and all places. In contrast, in Maharashtra, different rates are applicable based on three area categories (Area A, B & C).

In UP, the percentage of the hike is determined accordingly, and DA is revised. In UP, some industries are defined in the notification.

Role of Appropriate Government

The "Appropriate Government" can either be the "Central Government" or the "State Government." This depends on the working, registration, or jurisdiction status of the establishment. For example, if you are registered under the Shops and Establishment Act and are working or trading independently in a state, then the "State Government" Minimum Wages will be applicable. However, if you take any contract for supplying manpower or doing job work for an establishment that comes under the "Central Government," then the Minimum Wages as defined by the "Central Government" in the states will be applicable.

I hope the above information helps to clear your doubts. For any specific queries, please share the details. Fellow members can provide more insights on the matter.

What the learned colleague has attempted to clarify mainly is the method of computing the variable special allowance (Dearness Allowance) under the Minimum Wages Act. Your query was how the minimum wages are fixed under the Act. The minimum wages under the Act have two components: 1. Basic wages and 2. Special Allowance.

Fixing Minimum Wages

For fixing minimum wages for the scheduled employments as selected by the Appropriate Government, the government appoints a committee to recommend minimum wages for the selected industry/employment for different skill levels/categories of jobs, including fixation and computation of periodic variable DA component (Special Allowance). The government may accept the recommendations of the committee or reject the same. For more details, please refer to the Act and state rules.

Regards, Vinayak Nagarkar HR Consultant.