The COVID-19 pandemic apart from wreaking a health havoc, has deeply impacted India's workforce. The mass exodus of nearly 30 million migrant workers comprising about 15-20% of India's urban workforce, from cities, triggered by the pandemic, has affected several industries like manufacturing, construction, mining and logistics. Industries reportedly, are not only managing operations with a fraction of the required workforce, but also at higher operating costs.

To encourage industrial activity after an unprecedented national lockdown, the government has been making future-facing announcements like ‘vocal for local', touting India as the world's next manufacturing hub. To achieve such a massive feat however, factors including enhancing FDI, developing robust industrial infrastructure and indigenously producing raw material, require consideration. Similarly, the critical role of well-considered, sustainable labour law reforms, in facilitating such transformation must be looked into.

The government's recent labour reforms initiative focuses on amalgamating forty-four Central labour laws into four Labour Codes. The Code on Wages, 2019 (‘Code') enacted last year, which amends and consolidates laws related to wages, bonus and connected matters has been a significant development in this regard. Recently, public comments have been solicited by the Ministry of Labour and Employment on the draft Rules under the Code (‘Rules'), proposing to implement them in September.

In this context, we analyze certain issues pertaining to minimum wages as contained in the Code and corresponding Rules, as a critical development in labour reforms in India. We comment on how they may be improved upon, to balance interests of all stakeholders and contribute to harmonious industrial relations.

“Floor Wages”

The Rules do not specify unique factors for determining floor wage. They indicate that minimum living standards, as specified for “minimum wages”, in addition to “any other factors”, would be considered. Therefore, it may seem that fixing “floor wage” is not different from fixing “minimum wages”. However, this obscures the point that fixing floor wages is different from fixing minimum wages.

Both, the Code and Rules indicate the possibility of a model allowing for multiple regional floor wages. Given this, the Rules should have ideally specified additional factors for fixing of regional wages. Currently, however, the Rules only replicate factors relevant to fixing minimum wages, for guidance on fixing floor wages. Specifically, the Rules are silent on whether there would be one national floor wage, or floor wages for regional groupings. This is important given the recommendations made by the Expert Committee on Determining the Methodology for Fixing the National Minimum Wage, 2019 (‘Expert Committee') in considering a single national floor wage or five regional floor wages.

In ILO's view, floor wages guarantee a minimum amount which meets needs of workers and their families, irrespective of nature or size of the industry. The Code, too, prohibits setting minimum wages lower than the floor wage. Fixing floor wages is necessarily complex, since factors including regional variations in cost of living and differences in labour markets must be given consideration. This would ensure vibrant industrial activity, the importance of which has only been reinforced by the ongoing pandemic. A simple, comprehensive, and easily enforceable system of floor wages is imperative to enhance worker welfare, as well as to boost industrial productivity.


Under the Code, one of the criteria on which minimum wages shall be fixed is ‘skill of workers'. The Rules suggest, interestingly, that ‘skill of workers' will be determined on the basis of the ‘occupation' such workers are engaged in, and not ‘level of skill' displayed by workers in their occupations. Accordingly, the Rules provide a Schedule listing occupations under the heads “unskilled”, “semi-skilled”, “skilled”, and “highly-skilled”. As per the Expert Committee some state governments prefer determining skills based on this methodology. However, its use by the Central Government, to determine minimum wages for workers across different states of the country may be problematic, as different occupations possess varied degrees of value across the country. 

The Expert Committee further noted that India lacks a framework to recognize and compensate different skill levels of workers. Recognizing the merit in estimating minimum wages for different levels of skill based on the National Skill Qualification Framework (‘NSQF'), the Expert Committee recommended deeper analysis of the issue jointly, by the government, employers and worker-organizations. The Rules, on the other hand, specify the use of NSQF only to identify occupations for skill categorization, but not to define levels of skill.     

“Geographical area”

Another parameter proposed in the Rules to fix minimum wages concerns ‘geographical area', namely, ‘metropolitan area', ‘non-metropolitan area', and ‘rural area'. The Rules define these terms solely on the basis of ‘population', without clarifying other aspects by which such areas may be defined, characterized and officially demarcated.

Importantly, ‘metropolitan area' is defined differently in the Rules, and in the Constitution under Article 243P(c) which apart from indicating the possible ‘population' of ‘metropolitan area', also refers to the area as consisting of two or more municipalities or Panchayats/other contiguous areas (a characteristic), and one which is mandated to be specified as a ‘metropolitan area' by the Governor of the state, by public notification (an official demarcation).

For clarity, and to avoid employer-worker disputes and strikes by labour unions pertaining to payment of wages, it is desirable that especially critical parameters like skill and geographical area, held responsible for fixing minimum wages, must be clearly and unequivocally defined.

This is especially crucial in the context of the ongoing pandemic which has highlighted the importance of ground-level workers and daily wagers.

“Minimum calorific intake”

The Rules specify minimum calorific intake by workers and their associated consumption units as an important criterion to fix minimum wages. The Rules and the Expert Committee Recommendations differ significantly, on this point.

While the Rules base calorific intake on 3 adult consumption units and a net daily intake of 2700 calories per day/consumption unit, the Expert Committee suggests the same at 3.6 consumption units and a minimum intake of 2,400 calories, 50 grams of protein and 30 grams of fats, per day/per consumption unit.

In the Indian context, minimum wages have served as a tool to improve living standards of workers, of which adequate nutrition is critical. With the ongoing pandemic and its deleterious impact on health, strengthening the Rules pertaining to minimum calorific intake, would signal commitment to improving nutritional standards of India's workforce, eventually translating into enhanced industrial productivity levels, and improved industrial relations.

The pandemic has been harsh to industries and their workforce, leading to huge challenges in industrial activity. This crisis has however given us the opportunity to re-assess ways in which India's economy can flourish.

To bring the economy back on track, the government is envisioning various policies like the National Employment Policy to improve conditions of India's workforce. Companies have also made commendable efforts to incentivize workers to re-join the workforce. There is, however, need for a sustainable and long-term legal framework to be envisioned, which takes into consideration concerns and meets the needs of all stakeholders in India's workforce, be it employers or workers. The four labour codes which are a part of the government's labour reforms initiative should therefore be a reflection of this intent in order for India to grow sustainably.  

Originally published 21 August, 2020

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