Introduction
If you’re running a startup or managing a business, understanding India’s wage laws is not just a legal requirement, it is essential for fair Human Resource (“HR”) practices, building trust, and avoiding compliance risks.

Why Does Minimum Wage Law Matter?
When you are building a business, you may focus more on hiring the right talent, building culture, and growing fast. But it's equally important to ensure that you're paying your team fairly, especially entry-level, support, or gig workers.
The Minimum Wages Act, 1948 (“MWA”) was created to ensure that workers, especially those in unorganized or low-paying sectors, get paid at least enough to cover basic living costs (food, shelter, clothing, healthcare, and education). It set legal wage floors to prevent exploitation. Over the years, this law helped millions of Indian workers receive fair pay. But it had limitations, especially for startups operating in new-age sectors.

How It Worked (Before the New Labour Codes)
Who Did It Apply To?
Originally, MWA only applied to workers in specific industries like textiles, construction, agriculture, etc., called “Scheduled Employments”. If your business wasn’t on the list, the law didn’t apply. The States could expand the list, and today over 300 (Three Hundred) types of employment are covered. But tech startups, digital workers, and gig platforms often fell through the cracks.

How Were Wages Decided?
The Government (State or Central) (“Govt.”) would fix minimum wages based various factors, such as Cost of living, Nature of work (skilled/unskilled) and Local conditions
Further, the Minimum wages could vary depending on the following factors such as the State, Sector, Job role and Skill level. The Govt. could also revise these rates (usually every 5 years).

What Did “Wages” Include?
The Wages included Basic Salary, House Rent Allowance (“HRA”) and Cost of Living Allowance (“CLA”). However, the Wages did not include factors like bonuses, medical perks, transport reimbursements, or contributions to Provident Fund.

Payment Obligations for Employers
An employer was required, as per the MWA, to pay at least the minimum Wage (even for part-time or piece work) along with overtime for extra hours. The employer was also required to maintain wage records and slips and refrain from deducting wages except as allowed by law. Failure to do this could result in penalties or jail time.

But the MWA gradually started to pose several problems for the up and coming entrepreneurs, startups, and modern business, as MWA had serious gaps, such as not covering every job or industry, no standard definition of “minimum wage”, compliance process being paperwork-heavy, and other compliance issues, owing to the fact that minimum Wages varied widely by state, making multi-state compliance hard. Clearly, a change was needed.

Code on Wages, 2019
In 2019, the Govt. passed the Code on Wages (“Wage Code”), which replaces MWA and other related legislations such as the Payment of Wages Act, Payment of Bonus Act, and Equal Remuneration Act. The Wage Code aims to simplify, unify, and modernize wage laws for all employers, in the manner as follows:
  • It Applies to All Employees (No Exceptions): Previously, the MWA applied only to scheduled employment. Now, under the Wage Code, every employee (whether in a factory, technology startup, warehouse, or working remotely) is covered. So even if a person is running an education-technology firm or a design studio, he / she must comply. The key takeaway here is that, whether a person / startup hires engineers, support staff, gig workers, or office boys, then such person / startup is legally bound to pay them minimum wages.
  • Introduction of a National Floor Wage: The Central Government will now set a National Floor Wage, which is a baseline rate below which no State can go (“Wage Floor”). States can still set their own minimum wages, but not below the Wage Floor. This helps bring some consistency across states. The key takeaway here is to keep an eye on both Central and State wage notifications, as the person / startup must pay whichever is higher.
  • Clear and Uniform Definitions: The Wage Code simplifies the definition of wages, thereby making it easier to calculate salary components. It standardises what counts as part of wages, which is important for startups designing salary structures and Cost to Companies (“CTCs”). The key takeaway here is that the person / startups must review their compensation models (basic + allowances) to ensure compliance with the new wage definition.
  • Digital Record-Keeping and Inspections: The Wage Code encourages digital wage payments, maintaining online records and E-inspection systems to reduce harassment. The key takeaway here is that if a person / startup pays salaries online and use HR software, they are already on the right path.
  • Stricter Penalties: If one pays below minimum wages or delay payments, one may face higher fines, while repeat offences could lead to criminal penalties. The key takeaway here is to not ignore compliance, even if the team is small. The law applies regardless of company size.

Staying Complaint
Step 1: Know the minimum wage rates in your State, as minimum wages differ by state and category (skilled/unskilled, rural/urban). Check the latest notification from the respective State Labour Department.
Step 2: Use Formal Contracts even for interns, gig workers, or part-time help, issue written contracts that mention the pay rate (must not be below minimum wage), work hours and payment method. This protects both the person / startup and the worker.
Step 3: Maintain records, even if it is a 10-person startup. Maintain a salary register (physical or digital), keep wage slips or email records and make timely payments (bank transfer is best)
Step 4: Set up grievance redressal. The Wage Code requires that every employer has a system to handle wage-related complaints. This could be a simple email escalation or a designated HR contact.

Frequently Asked Questions
What if I hire freelancers or remote contractors?
If they work regularly and depend on your business for income, authorities might treat them as employees. When in doubt, pay minimum wages and comply.

My startup is pre-revenue. Do these laws still apply?
Yes. The law applies regardless of company profits or funding. If you can’t afford to pay minimum wages, you legally can’t hire.

Can an employee waive minimum wage rights?
No. Any contract that waives or reduces minimum wage rights is null and void under the law.

Conclusion
Paying fair wages isn't just about legal compliance, it is about building a sustainable and ethical workplace. The MWA, and now the Code on Wages, ensures that even the most junior member of one's team is treated with basic dignity. As a founder, investor, or business leader, one should treat wage compliance as seriously as tax or corporate filings. It protects one's brand, avoids legal trouble, and strengthens one's company culture.

Disclaimer: The above article solely remits information and discusses relevant issues, it shall in no way be used for soliciting legal solutions. The information and/or observations contained in this article do not constitute legal advice and should not be acted upon in any specific situation without appropriate legal advice.