Foreign firms in India may find it difficult to understand and calculate the minimum wage because it varies by state and is classified according to many factors such as geography, industry, skill level, and kind of employment.
Until last year, the Minimum Wages Act of 1948 was in charge of setting the minimum pay. Last year, after the Code on Wages Act, 2019, was passed by parliament in August, this changed.
The Code on Wages Act repeals the Minimum Wages Act of 1948, the Payment of Wages Act of 1936, the Payment of Bonus Act of 1965, and the Equal Remuneration Act of 1976.
Employers are no longer allowed to pay workers less than the minimum wage under the new wage regulation.
Furthermore, minimum wages must be revised and reviewed by both the federal and state governments every five years.
This page will answer several often asked issues, such as how India’s minimum wages are computed, what the punishment for non-compliance is, and what resources international firms’ hiring departments can use to assess the country’s labor expenses.
In India, how is the minimum wage calculated?
With a national minimum salary of around INR 176 (US$2.80) per day, which works out to INR 4,576 (US$62) per month, India has the most competitive labor prices in Asia.
This is a nationwide minimum wage, which will vary based on geographic areas and other factors.
Picodi.com recently published a global ranking of average wages, which revealed that India’s average monthly pay was INR 32,800 (US$437).
Furthermore, some state governments, like Andhra Pradesh, provide tax advantages to businesses that create local jobs.
It is important to note that India’s minimum wage and salary structure varies by state, area within the state depending on development level (zone), industry, vocation, and skill level. This gives foreign investors a variety of options when deciding where to establish up shop.
India has a complicated system for determining minimum wages, with approximately 2,000 different sorts of jobs for unskilled workers and over 400 different categories of employment, each with a different minimum daily salary. The variable dearness allowance (VDA) component of the monthly minimum wage is used to adjust for inflationary trends, such as increases or decreases in the Consumer Price Index (CPI), as well as the house rent allowance, if applicable (HRA).
As previously stated, the minimum wage is determined by the worker’s skill level and the nature of their profession. Workers in India are divided into four categories: unskilled, semi-skilled, skilled, and highly skilled.
Is there a penalty for non-compliance?
The government will designate inspectors-cum-facilitators to conduct inspections to ensure that businesses comply with the new pay law. The severity of the punishment would be determined by the nature of the offense. Three months in prison and/or a fine of up to INR 100,000 (US$1,405) are the maximum penalties.
Businesses must follow the pay guidelines set forth by their state governments and industry associations. Inspections of enterprises with foreign involvement are expected to be more strict, especially in the case of worker unrest.