Section 7 of the Code on Wages, 2019: Components of Minimum Wages
Updated: 16 September 2026
Section 7 of the Code on Wages, 2019 explains the forms in which a minimum rate of wages fixed or revised by the appropriate Government under Section 8 may be structured. It recognises a basic wage plus cost of living allowance, a basic wage with specified concessions, or an all-inclusive minimum wage rate.
What does Section 7 provide?
Section 7 forms part of Chapter II of the Code, dealing with minimum wages. The minimum rate is fixed or revised by the appropriate Government through the procedure contemplated by Section 8. Section 7 then identifies the components that may make up that notified minimum rate.
Section 7(1): Permissible components
A minimum rate of wages fixed or revised under Section 8 may consist of:
(a) a basic rate of wages together with an allowance adjusted at prescribed intervals and in the manner directed by the appropriate Government so as to reflect, as nearly as practicable, changes in the cost of living index applicable to the workers. The Code describes this as the cost of living allowance; or
(b) a basic rate of wages, with or without cost of living allowance, together with the cash value of concessions relating to supplies of essential commodities at concessional rates, where such concessions are authorised; or
(c) an all-inclusive rate incorporating the basic rate, cost of living allowance and the cash value of concessions, if any.
Meaning of the key components
Basic rate of wages: For Section 7, this is the base component used by the appropriate Government while structuring a notified minimum wage. It should be read in the context of the minimum-wage notification applicable to the relevant employment, skill category and geographical area.
Cost of living allowance: Section 7(1)(a) describes an allowance intended to be adjusted in line with variations in the applicable cost of living index. It is commonly associated with variable dearness allowance in minimum-wage notifications.
Cash value of concessions: Where authorised concessions permit essential commodities to be supplied at concessional rates, their cash value may form part of the minimum-wage structure under Section 7(1)(b) or an all-inclusive rate under Section 7(1)(c).
Section 7(2): Who computes the allowance and concessions?
Under Section 7(2), the cost of living allowance and the cash value of concessions for essential commodities supplied at concessional rates are to be computed by an authority appointed by the appropriate Government by notification. The computation is made at the intervals, and according to the directions, specified or given by that Government from time to time.
How Section 7 works with Sections 5, 6 and 8
- Section 5 prohibits an employer from paying an employee less than the minimum rate of wages notified by the appropriate Government.
- Section 6 deals with fixation of minimum wages, including time work, piece work, skill categories, geographical area and other permitted considerations.
- Section 7 specifies the components in which that minimum rate may be expressed.
- Section 8 lays down the procedure for fixing or revising minimum wages.
Minimum wages and the general definition of wages
The expression minimum wages should not be confused with the general definition of wages in Section 2(y) of the Code. Minimum wages are statutory rates fixed by the appropriate Government. Section 2(y), by contrast, defines "wages" for the purposes of the Code and specifies included and excluded remuneration components, subject to the statutory provisos.
Practical effect of Section 7
For compliance, the controlling document is the applicable minimum-wage notification issued by the appropriate Central or State Government. That notification should be checked to identify the operative basic rate, cost of living allowance or variable component, category of employee, geographical classification and effective date. Section 7 supplies the statutory framework for those components; it does not itself prescribe a single rupee rate for every employee in India.
Text and official legal resources
The Code on Wages, 2019 is Act No. 29 of 2019. For the authoritative statutory text and commencement notifications, consult the official India Code database and the Ministry of Labour and Employment. The Central commencement notification dated 21 November 2025 brought Sections 1 to 41 into force from that date.
Related provisions
Readers may also refer to the linked provisions on fixation, revision and application of minimum wages for a complete understanding of Chapter II of the Code.