India’s labour law overhaul has introduced a unified wage framework under the Code on Wages, 2019, which came into effect in November 2025. One of its most critical innovations is the National Floor Wage—a benchmark wage level below which no state can fix its minimum wage. But who actually determines this floor wage, and how does it impact employers, workers, and compliance officers? This blog breaks down the legal authority, process, and implications of floor wage determination under the new Labour Code.
1. Legal Basis: Code on Wages, 2019
The National Floor Wage is governed by Section 9 of the Code on Wages, 2019, which empowers the Central Government to fix a floor wage for different geographical regions.
“The Central Government may, by notification, fix the floor wage taking into account minimum living standards of workers in different geographical areas.” — Section 9, Code on Wages, 2019
This provision replaces earlier fragmented wage mechanisms and creates a national benchmark for wage protection.
2. Authority: Central Government
The Central Government is the sole authority responsible for determining and notifying the National Floor Wage.
- It does so through official Gazette notifications.
- The process involves consultation with the Central Advisory Board, which includes representatives of employers, workers, and independent experts.
- The wage is fixed based on cost of living, inflation, consumption patterns, and regional disparities.
Recent notifications (e.g., S.O. 5322(E) dated 21.11.2025) confirm that the Central Government has exercised this power to implement the wage floor.
3. How Is the Floor Wage Calculated?
While the Code does not prescribe a formula, the Central Government typically considers:
- Minimum nutritional requirements
- Housing and clothing costs
- Education and medical expenses
- Consumer Price Index (CPI)
- Regional cost-of-living variations
These inputs are studied by expert committees and validated through stakeholder consultations.
4. Legal Effect: Binding on States
Once notified, the National Floor Wage becomes binding:
- States cannot fix minimum wages below the floor wage.
- If a state’s existing minimum wage is lower, it must be revised upward.
- If a state’s minimum wage is higher, it remains unaffected.
This ensures uniform wage protection across India and prevents exploitation in low-wage regions.
5. Floor Wage vs Minimum Wage: Key Differences
| Feature | National Floor Wage | Minimum Wage |
| Authority | Central Government | State Government |
| Applicability | Nationwide benchmark | State-specific |
| Legal Basis | Section 9, Code on Wages | Section 6, Code on Wages |
| Revision | Periodic by Centre | Periodic by States |
| Purpose | Prevent wage suppression | Ensure fair pay locally |
The floor wage acts as a legal lower bound, while minimum wages are tailored to local conditions.
6. Compliance Implications for Employers
Employers must:
- Ensure wages paid are not below the floor wage, regardless of state notifications.
- Track Central Government notifications for updates.
- Adjust payroll systems to reflect changes in wage thresholds.
- Avoid misclassification of workers to bypass wage rules.
Non-compliance can attract penalties under Section 53 of the Code on Wages, including fines and prosecution.
7. Recent Developments
As of November 2025:
- The Central Government has notified the National Floor Wage applicable across India.
- States are in the process of aligning their minimum wages accordingly.
- The wage floor is expected to be revised periodically, based on economic indicators.
This marks a major shift toward transparent and enforceable wage governance.
Conclusion
Under India’s new Labour Code, the Central Government is the sole authority empowered to determine the National Floor Wage, which acts as a legal minimum benchmark across all states. This reform ensures uniform wage protection, simplifies compliance, and strengthens the rights of workers in low-wage sectors.
For employers, HR teams, and compliance consultants, tracking floor wage notifications and aligning payroll practices is now a statutory necessity.
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