The Code on Wages, 2019 introduced the concept of a floor wage to ensure uniform living standards across India. However, many employers remain uncertain: Can wages be legally paid at the floor wage level when the minimum wages notified by the appropriate Government are higher?
The answer is clear: No. Employers cannot legally substitute minimum wages with the floor wage.
Legal Framework
Section 9(1) – Floor Wage
- The Central Government fixes a floor wage based on minimum living standards.
- This wage acts as a benchmark for governments, not a payable wage for employers.
Section 5 – Binding Nature of Minimum Wages
- Employers are prohibited from paying less than the minimum rate of wages notified by the appropriate Government.
- The language is mandatory: “No employer shall pay to any employee wages less than the minimum rate of wages notified…”
Section 9(2) – Express Prohibition
- Minimum wages cannot be reduced to the floor wage level.
- If minimum wages are higher than the floor wage, they retain statutory sanctity.
This creates a hierarchy:
Floor Wage → Minimum Wage (Government-notified) → Actual Wage Paid
Legal Interpretation Principles
- Literal Rule: Section 5’s mandatory wording leaves no discretion.
- Purposive Rule: The floor wage ensures uniformity, not downward substitution.
- Harmonious Construction: Sections 5, 6, and 9 together establish that employer liability attaches at the minimum wage level.
- Anti-Circumvention Principle: Employers cannot indirectly reduce wages by citing the floor wage.
Role of Central Rules, 2025
The Draft Code on Wages (Central) Rules, 2025 prescribe methodology for calculating floor wages and minimum wages.
- They consider living costs, consumption norms, and socio-economic factors.
- Crucially, they do not authorize employers to pay only the floor wage when higher minimum wages are notified.
Employer Liability
Paying wages at the floor wage level when higher minimum wages are applicable constitutes a statutory violation under the Code on Wages, 2019. Consequences include:
- Penalties under Section 53 of the Code
- Prosecution for non-compliance
- Labour inspection objections and claims
Compliance Checklist for Employers
- Always verify the latest minimum wage notifications issued by the appropriate Government.
- Treat the floor wage as a benchmark, not a payable rate.
- Update payroll systems to reflect notified minimum wages.
- Maintain wage registers and payslips showing compliance.
- Train HR and payroll teams on the statutory hierarchy of wages.
Disclaimer: This blog is for educational purposes only. Minimum wage notifications vary by state and sector. For case-specific advice, consult a certified Labour Law Consultant or practicing advocate.