Floor Wage and Minimum Wage

Under the Code on Wages, 2019, a floor wage is the wage benchmark fixed by the Central Government, while a minimum wage is the enforceable wage rate fixed by the appropriate government for employees within its jurisdiction. The floor wage constrains wage-fixing governments, whereas the minimum wage directly protects employees against payment below the notified rate.

Floor wage: the central benchmark

Under Section 9, the Central Government fixes the floor wage after considering the minimum living standards of a worker. It may prescribe different floor wages for different geographical areas, so the Code does not require one uniform rate throughout India.

• The Central Government may seek the advice of the Central Advisory Board and consult state governments before fixing the floor wage.
• A minimum wage fixed by an appropriate government cannot be lower than the applicable floor wage.

Minimum wage: the enforceable rate

Under Section 6, the appropriate government fixes minimum wages for employees under its jurisdiction. The rate is primarily determined according to workers' skill categories, geographical areas and the arduousness or hazardous nature of work.

• The appropriate government may be the Central Government or a state government, depending on the establishment concerned.
• An employer is legally prohibited from paying an employee less than the notified minimum wage.
• Minimum wages must ordinarily be reviewed or revised at intervals not exceeding five years.

Relationship between the two

The floor wage establishes a statutory lower boundary for government wage fixation, while the minimum wage is the specific rate payable in a particular jurisdiction or category of employment. If a government had already fixed a minimum wage above the floor wage, the Code does not permit it to reduce that existing rate merely because the floor is lower.