A Guide to Minimum Wage in India in 2026

Foreign businesses in India can have a challenging time comprehending and calculating the minimum wage, as they differ in every state and are categorised under multiple criteria, such as region, industry, skills level, and nature of work.

This article will address some frequently asked questions, including how minimum wages are calculated in India, what is the penalty for non-compliance, and what are some useful resources that hiring departments in foreign companies may refer to when assessing the country’s labour costs.

CLICK HERE: Standardizing Payroll in India: Leveraging the National Floor Wage Under the New Labour Codes

How is the minimum wage calculated in India?

It must be noted that India’s minimum wage and salary structure differ based on the following factors:

1. State
2. Area within the state based on development level (zone)
3. Industry
4. Occupation
5. Skill level

This offers foreign investors a range of options when choosing where to locate their setup.

India uses a complex method of setting minimum wages that defines nearly 2,000 different types of jobs for unskilled workers and over 400 categories of employment, with a minimum daily wage for each type of job. The monthly minimum wage calculation includes the variable dearness allowance (VDA) component, which accounts for inflationary trends, that is, the increase or decrease in the Consumer Price Index (CPI), and where applicable, the house rent allowance (HRA). 

As mentioned earlier, the calculation of the minimum wage factors in the skill level of the worker and the nature of their work. Broadly, workers in India are categorised as unskilled, semi-skilled, skilled, and highly skilled. The minimum wage rates across Indian states and union territories must, therefore, be regularly tracked, as they are subject to periodic changes, especially for the variable and dearness allowance rates.

How is the minimum wage regulated?

The Code on Wages, now in force, subsumes and replaces four earlier legislations, the Minimum Wages Act, 1948; the Payment of Wages Act, 1936; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976, into a unified legal structure governing wages and remuneration.

Under the new regime, employers are legally prohibited from paying wages below the notified minimum wage. The Code introduces the concept of a floor wage to be set by the central government, which serves as a baseline for states while fixing their respective minimum wages. This is intended to ensure greater uniformity and reduce regional wage disparities.

Additionally, both central and state governments are required to review and revise minimum wages at intervals not exceeding five years. The wage code also expands coverage by applying wage-related provisions universally across organised and unorganised sectors, thereby strengthening wage protection and standardising compliance obligations for employers across industries.

How to understand labour costs in India?

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India boasts the most competitive labour costs in Asia. It’s important to note that this figure serves as the baseline wage, subject to adjustments based on factors, such as geographical location and specific criteria.

Regional disparities in minimum wage floors are evident in India. Geographically, the minimum wage can range from INR 462/day in Odisha to INR 652/day in the Andaman & Nicobar Islands, in accordance with the latest labour laws. Specifically, the Kerala region stands out with the highest minimum daily rates for non-labourers, while other parts of the country maintain relatively uniform minimum wage levels for such workers.

Source: Simpliance

Note: This is not a comprehensive table, and the respective state governments in India announce their minimum wage rates differently, that is, according to skill level or other criteria. The criteria are unskilled, semi-skilled, skilled, and/or highly skilled work categories or occupation-based categories. For accurate and up-to-date information, companies are advised to consult local experts and official government sources in each state to ensure compliance with the latest minimum wage regulations.

Minimum wages in India (2026) in a global context

As of 2026, India’s minimum wage framework operates under the Code on Wages, 2019, which consolidates wage laws while retaining a multi-tiered structure. Unlike countries with a single national minimum wage, India’s system varies by skill level, sector, and geographic classification (Area A, B, C). Wages are revised twice a year through Variable Dearness Allowance (VDA), linked to the Consumer Price Index for Industrial Workers, ensuring inflation-based adjustments. In practical terms, monthly wages range from roughly INR 14,000 for unskilled workers to about INR 28,000 for highly skilled roles in metro areas.

Globally, India remains at the lower end of the wage spectrum, with countries like the United States, Germany, and Australia offering higher statutory wages, while peers such as China and Indonesia follow more regionally determined systems. However, India’s approach is comparatively more granular and complex, incorporating skill-based differentiation and automatic inflation indexation—features not uniformly present in other emerging markets. This makes India highly competitive from a labour cost perspective but also more compliance-intensive for businesses managing multi-location operations.

Revised minimum wages announced by the central government

India’s Central Government periodically revises the VDA, effective 1 April and 1 October each year, based on movements in the Consumer Price Index (CPI) for industrial workers. The latest revision, effective 1 April 2026, reflects an increase of 11.28 CPI points, resulting in an upward adjustment in minimum wages across centrally regulated scheduled employments.

These rates apply to contractual, unorganised, and low-wage workers engaged in sectors such as construction, cleaning, and security services

Source: Chief Labour Commission, Ministry of Labour and Employment, GoI.

Please note: Figures are derived from revised daily wages × 26 days. Increase is driven by the VDA revision linked to CPI rise (11.28 points). Structure remains consistent:

1. Area A = metros (highest pay)
2. Area B = mid-tier cities
3. Area C = other regions

The relative wage hierarchy across categories remains unchanged.

India’s labour market size

Overall, India’s labour market size is above 471 million as per the World Bank. Consequently, several state governments, like Andhra Pradesh, offer tax breaks for companies generating local employment.

By 2030, it is estimated that India’s working-age population will cross the 1 billion mark, per a market report. This would effectively make India the largest provider of human resource assets in the world.

This youthful demographic not only strengthens India’s competitiveness in services and manufacturing but is also set to drive discretionary spending as the purchasing power increases among the expanding youth population.

Delhi’s minimum wage

Minimum wage update: April 1, 2025

On 15 April 2025, the Delhi state government announced a hike in the monthly minimum wage across all categories of workers. Effective 1 April 2025, the monthly wage rates were revised as the following:

1. Unskilled: INR 18,456
2. Semi-skilled : INR 20,371
3. Skilled: INR 22,411
4. Non-matriculate: INR 20,371
5. Matriculate but not graduate: INR 22,411
6. Graduate and above: INR 24,356

Meghalaya revamps minimum wage; enhance worker benefits

Is there a penalty for non-compliance?

Once the new wage code is implemented, the government will appoint inspectors-cum-facilitators to carry out inspections to ensure that the companies are compliant with the code. The penalty would depend on the nature of the offence. The maximum penalty is imprisonment for three months and/or a fine of up to INR 100,000 (US$1,197.85).

It is important that companies are compliant with the wage norms stipulated by the respective state government and industry body. Inspections are likely to be more stringent on companies with foreign investment, especially in the event of any labour unrest.

If workers are paid less than the government-declared minimum wages, then they can file a complaint with the labour inspectorate. The complaint can be filed individually by the worker, or through a lawyer, or through an official of the registered trade union.

Why India has no national minimum wage

Under the Code on Wages Act, 2019, workers from all industries are entitled to receive minimum wages fixed by their respective state governments. Matters concerning labour and its welfare come under the purview of both the state and central governments as per constitutional law, thereby resulting in multi-jurisdictional regulation.

Earlier, only workers from a particular set of industries (40 per cent of the entire workers’ population) were entitled to receive minimum wages. Nevertheless, since passing the wage code in 2019, there has been no new development on implementing a national minimum wage for Indian workers.

The government has not prioritised the implementation of a minimum wage plan, as it is highly polarising and would adversely impact employers in the post-pandemic period. 

Labour law reforms under the new labour codes

India has now operationalised its long-pending labour law reforms through the implementation of the four consolidated labour codes, marking a structural shift in the country’s employment regulation framework. These codes replace a complex web of legacy laws and aim to simplify compliance while expanding worker protections.

The four codes are:

1. Code on Wages, 2019
2. Industrial Relations Code, 2020
3. Code on Social Security, 2020
4. Occupational Safety, Health and Working Conditions Code, 2020

Together, they subsume 29 central labour laws, creating a more unified and digitised compliance ecosystem.

Key implications for businesses and workers

1. Expanded social security coverage: For the first time, gig workers, platform workers, and interstate migrant workers are formally recognised under the Code on Social Security, enabling access to benefits such as insurance, pensions, and welfare schemes.

2. Standardised wage framework: The Code on Wages introduces:

1. A uniform definition of wages across statutes
2. A framework for a potential national floor wage
3. Continued use of VDA-linked revisions, ensuring inflation-indexed wage adjustments

3. Increased labour market flexibility: The IR Code provides higher thresholds for prior government approval in layoffs and retrenchment. The new law also simplifies processes for dispute resolution and allows greater flexibility in workforce restructuring. 

4. Rationalised compliance and digitisation: Employers benefit from:

1. Consolidated registrations and licenses
2. Reduced multiplicity of filings
3. Increased use of online compliance systems

For more analysis, read our overview – India Notifies All Four Labour Codes in Landmark Reform and deep dives – Social Security Code 2020: Universal Coverage, Reporting Digitised; India Code on Wages, 2019: An Employer’s Compliance Handbook and Overtime Regulations for Private Companies in India: A Brief.

Seeking local expertise is important

Foreign entities doing business in India can learn more about the minimum wages in India through the Ministry of Labour and Employment database, which provides industry-wise wage norms. The new wage code can be accessed here, and the website for the chief labour commissioner can be accessed here.

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Where to locate your investment in India

Since determining wages in India is complex, and labour compliances are carefully monitored, it is recommended to seek advice from a local firm to assess costs and other liabilities. Otherwise, the firm may be exposed to additional risks during times of labour unrest and strikes by workers that can lead to reputational and financial damage to the company.

For more information and advice for foreign investors on doing business in India, please feel free to email us at india@dezshira.com.

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