Home  /  Code on Wages, 2019  /  Section 7

Section 7: Components of minimum wages

The Code on Wages, 2019 (Act No. 29 of 2019) • Official Statutory Text & Plain English Practice Guide

Statutory Mandate
Chapter II: Minimum Wages
Competent Labour Forum
Act No. 29 of 2019
Section 6 All 67 Sections of Code on Wages, 2019 Section 8

Legal Commentary & Landmark Judgments: Section 7

Section 7 of the Code on Wages, 2019 defines the statutory components of minimum wages, prescribing that any minimum rate of wages fixed or revised may consist of a basic rate with cost of living allowance (VDA), a basic rate with or without concessional commodity supply, or an all-inclusive composite rate.

  • Variable Dearness Allowance (VDA) Linkage: Section 7(1)(a) provides for a basic rate of wages coupled with a special cost of living allowance (VDA) indexed to Consumer Price Index numbers to neutralize the erosion of real purchasing power caused by inflation.
  • Concessional Essential Commodities Valuation: Section 7(1)(b) permits fixing a basic rate with or without the cash value of concessions in respect of supplies of essential commodities at subsidized rates, as determined by the competent statutory authority.
  • All-Inclusive Composite Minimum Wage: Section 7(1)(c) authorizes an all-inclusive rate encompassing the basic rate, cost of living allowance, and cash value of all authorized concessions, ensuring simplicity of compliance.
Key Landmark Precedents:
  • Air Freight Ltd. v. State of Karnataka (1999) 6 SCC 567: The Supreme Court held that where minimum wage is fixed as an all-inclusive composite rate, the employer satisfies statutory compliance so long as total remuneration paid equals or exceeds the notified total composite rate, regardless of the internal allocation between basic wage and allowances.
  • State of Rajasthan v. Hari Ram Maurya (2007) 12 SCC 376: The Supreme Court reaffirmed that dearness allowance is an essential statutory mechanism designed to protect the real wages of workmen against escalating inflation, and cannot be curtailed or denied during wage computation.
Courtroom Practice & Strategic Litigation Guidance:

Compliance counsel must determine whether the governing state notification specifies a bifurcated structure (Basic + VDA) or an all-inclusive composite rate. In bifurcated systems, employers must update their payroll systems immediately upon the publication of biannual VDA revision circulars (typically in April and October) to avert retrospective wage deficit claims and statutory interest penalties.

Section 6 All 67 Sections of Code on Wages, 2019 Section 8