Karnataka’s draft wage rules mirror Centre’s rules, raise concerns on worker coverage

Envisaged as a step towards universal wage protection, Karnataka’s Draft Wage Rules largely reflect the Centre’s framework; Labor union members argued that wages were low, weakening enforcement and leaving most workers out of effective coverage.

They argued that the bill reflected the limited scope that States had to correct structural flaws in a centrally designed law and could suppress rather than protect wages.

The Draft Wages Act (Karnataka) Rules, published on January 27, lays down the procedures for determining and implementing minimum wages in the state. However, unions said they retained key features of the central Act, including voluntary base wage determination, narrowed definition of wages and diluted enforcement mechanisms.

Unregistered workers were excluded

The Wage Law of 2019 gathered four labor laws on minimum wage, payment of wages, bonuses and equal pay into a single piece of legislation. The Union government has pitched this as a reform to simplify compliance with rules, ensure uniformity across States and extend wage protection to all workers, aimed at implementing Karnataka’s draft law.

But All India Trade Union Congress State Secretary Satyanand Mukund said the Act effectively excluded more than 90 per cent of India’s workforce, especially unregistered women and domestic workers. He argued that digital compliance systems and employer self-reporting disadvantage employees who lack documentation, bargaining power and access to grievance redressal.

The Karnataka draft details the classification of workers by skill level and regions (metropolitan, non-metropolitan and rural) and bases wage calculations on the needs of a standard working-class family, including food, clothing, housing, education and medical expenses. It also necessitates the revision of the annual dearness allowance (DA) depending on inflation.

But labor unions said the draft left little room for the State to address long-standing concerns. Maitreyi Krishnan of the All India Central Council of Trade Unions (AICCTU) called the rules “fundamentally anti-worker” and argued that the State should resist implementing them, especially given that even the Congress has openly criticized the rules.

It also flagged the treatment of housing costs, arguing that the assumptions used bore little resemblance to actual rent or housing costs.

Base pay issues

A major concern remains the floor wage fixed by the Union government, below which the States cannot go. Although consultation is required, the Code, unlike minimum wages, does not prescribe a clear methodology or mandate periodic revision. Mr. Mukund said that the lack of a DA revision for the base wage also raises concerns that it will not keep pace with inflation, adding that the base wage often becomes the default benchmark, especially in financially stressed states, and wages are pushed downwards.

Union members also pointed out that the Act also eliminates the old system of planned employment, where wages were fixed by occupation based on sector-specific risks and conditions. Under the new framework, wages are determined largely by skill and geography.

Definition of ‘wage’

Additionally, the uniform definition of “wages” excludes components such as house rent allowance, bonuses, overtime and employer provident fund contributions, which are subject to a 50% cap. Mr Mukund said this allowed employers to restructure salaries to keep statutory wages low, reducing associated benefits such as social security and maternity benefits.

The inclusion of the Equal Pay Act 1976 in the Wages Act raised concerns about gender justice. While the law uses gender-neutral language, union members argued that it eliminated a standalone law that explicitly addressed gender pay discrimination.