Minimum salary calculation method proposed in new draft rules on Code on Wages: Explained

Ahead of the New Year 2026 on Wednesday, the Ministry of Labour and Employment released the draft rules on the four labour codes on wages, industrial relation, social security and safety, health and working conditions to seek stakeholders' feedback.

These rules are required to make the new labour laws fully operational. Among them, the draft Code on Wages (Central) Rules, 2025 proposes the manner of calculating the minimum rate of wages or salary.

This article explains the minimum salary calculation method proposed in the draft rules on Code on Wages:

According to the draft rules, the minimum rate of wages shall be fixed on the day basis, keeping in view the following criteria:

• The standard working class family which includes a spouse and two children apart from the earning employee; an equivalent of three adult consumption units

• A net intake of 2700 calories per day per consumption unit;

• 66 meters cloth per year per standard working class family;

• Housing rent expenditure to constitute 10% of food and clothing expenditure;

• Fuel, electricity and other miscellaneous items of expenditure to constitute 20% of minimum wage; and

• Expenditure for children education, medical requirement, recreation and expenditure on contingencies to constitute 25% of minimum wage;

The draft rules further say that when the rate of wages for a day is fixed, then, such amount shall be divided by eight for fixing the rate of wages for an hour and multiplied by 26 for fixing the rate of wages for a month. In such division and multiplication, the factors of one-half and more than one-half shall be rounded as next figure and the factors less than one-half shall be ignored.

In case of a five day working week, the hourly rate of minimum wages so calculated shall be used to derive the minimum wages for the day.

Daily wage/8 = Hourly wage

Daily wage * 26 = Monthly wage

For example, if daily wage = ₹800, the hourly wage will be ₹800/8 = ₹100 and monthly wage will be ₹800*26 = ₹20800

The following table shows hourly and monthly wages for different assumed daily wages, as per the formula proposed in the new draft rules

*Numbers have been rounded off as suggested by the draft rules.

Norms for fixing minimum rate of wages

The draft rules says that the central government shall take into account the following while fixing the minimum rates of wages

• Geographical area,

• Experience in the area of employment, and

• Level of skill required for working under the categories of unskilled, semiskilled, skilled and highly skilled.

The draft rules have clarified that the central government cannot fix minimum wages and allowances of central government employees under the Code on Wages.

The draft rules will come into effect after stakeholder feedback and formal notification by the government.