Decoding Karnataka's Revised Minimum Wage Notification

INTRODUCTION

The Government of Karnataka's notification dated 22 May 2026 revising minimum wages across the State has generated significant attention among employers, industry bodies, and labour law practitioners. While the notification aims to enhance worker welfare and establish a more streamlined and uniform wage structure, it has also given rise to important legal and practical concerns. In several categories, the revised rates reflect increases of nearly 60%, resulting in a substantial rise in labour costs for businesses across sectors. Further, as the notification has been issued after the Code on Wages, 2019 came into force, questions have emerged regarding the applicable legal framework and the validity of the revision process adopted by the State Government. Consequently, employers are now required to navigate not only complex compliance obligations but also a degree of uncertainty surrounding the notification's legal standing.

Through this article, we will examine the implications of the notification, the developments that led to the issuance of the notification, and the key implications it may have for employers across Karnataka.

UNDERSTANDING MINIMUM WAGES AND THE NEW WAGE REGIME

Minimum wages represent the minimum amount that an employer is legally required to pay a worker. They are intended to ensure that employees receive fair remuneration for their work and are able to maintain a basic standard of living.

For the longest time, minimum wages in India were governed by the Minimum Wages Act, 1948. Under this law, State Governments fixed and revised minimum wages for specific industries and occupations, known as "scheduled employments." As a result, different sectors such as manufacturing, retail, hospitality, healthcare, and security services often had different minimum wage rates.

This framework changed with the enactment of the Code on Wages, 2019, which consolidated four existing labour laws relating to wages into a single legislation. The Code aims to simplify wage regulation and create a more uniform framework for workers and employers across the country. Thereby, with effect from 21 November 2025, the Labour Codes replaced the earlier enactments and established a new legal framework for the regulation of wages.

It is in this context that Karnataka's minimum wage notification dated 22 May 2026 assumes significance. The notification substantially revises minimum wage rates across the State and has important implications for employers, workers, and businesses operating in Karnataka.

THE ROAD TO THE 2026 NOTIFICATION

The current controversy surrounding Karnataka's minimum wage revision can be traced back several years. In 2022 and 2023, the Karnataka Government revised minimum wages for various industries by approximately 5–10%. These revisions were challenged before the Karnataka High Court by trade unions, which contended that the Government had not adopted an appropriate precedent while determining the revised wage rates.

The Single Judge of the Karnataka High Court accepted this challenge and set aside the wage revision notifications, directing the Government to undertake a fresh exercise. Employer associations subsequently challenged this decision before a Division Bench. On 13 December 2024, the Division Bench set aside the Single Judge's order and remanded the matter for fresh consideration.

Meanwhile, the Government initiated a new wage revision process. On 11 April 2025, it issued a draft notification covering 99 scheduled employments and proposed a significantly different approach to wage fixation. Instead of prescribing separate wage rates for each industry, the draft sought to introduce a common wage structure based primarily on skill level and geographical location. A major development followed on 21 November 2025, when the Code on Wages, 2019 came into force and the Minimum Wages Act, 1948 stood repealed. Despite this change in the legal framework, the Karnataka Government proceeded with the wage revision exercise and, on 22 May 2026, issued the final notification revising minimum wages for 81 scheduled employments across the State with immediate effect.

WHAT DOES THE NOTIFICATION ACTUALLY PRESCRIBE?

One of the most significant changes introduced by the notification is its shift from Karnataka's traditional industry-specific approach to minimum wage fixation.

Earlier, minimum wages were prescribed separately for different industries and occupations. The new notification, however, adopts a largely common wage structure based on two key factors: the employee's skill level and the geographical location where the work is performed.

Employees are classified into four categories; unskilled, semi-skilled, skilled, and highly skilled. At the same time, workplaces are divided into three geographical zones: Zone-1: Areas falling under the jurisdiction of the Greater Bangalore Authority, Zone-2: Other Municipal Corporations of the state and all district headquarters, and Zone-3: All other areas except those mentioned in Zone-1 and Zone-2. The minimum wage payable to an employee is determined based on the combination of these two factors.

As a result, employees performing work of the same skill level within the same geographical zone may now be entitled to similar minimum wages regardless of the industry in which they are employed. This marks a significant shift from the earlier framework and has led many to describe the notification as moving towards a more uniform minimum wage structure.

The notification also broadens the scope of wage regulation by extending its coverage to eighteen additional sectors, including but not limited to e-commerce establishments, courier services, private educational institutions, and religious institutions.

Apart from revising wage rates, the notification reiterates several important employer obligations. Employers must ensure equal remuneration irrespective of gender, pay overtime wages at twice the ordinary rate of wages, make wage payments through banking channels, and more. These requirements, coupled with the revised wage rates, are expected to have a significant impact on employment costs and compliance obligations across industries in Karnataka.

The notification also retains and formalizes the concept of Variable Dearness Allowance (VDA). It provides that VDA will be revised annually with effect from 1 April based on changes in the consumer price index over the preceding twelve months. This means that minimum wage rates are likely to increase periodically, requiring employers to account for future wage revisions while planning their workforce costs and budgets. The Government has also clarified that the present increase reflects not only the revision of basic wages but also the accumulation of VDA for the past two years due to the time taken to finalize the notification.

WHY IS THE NOTIFICATION BEING CHALLENGED?

While the notification seeks to create a more uniform wage structure, it has also attracted significant criticism from employer bodies, particularly the Karnataka Employers' Association, which has raised several concerns regarding its legality.

The primary challenge relates to the legal basis of the notification. The notification has been issued by invoking Sections 3 and 5 of the Minimum Wages Act, 1948. However, the Minimum Wages Act stood repealed on 21 November 2025 upon the coming into force of the Code on Wages, 2019. Employer associations therefore argue that the Government could not exercise powers under a law that was no longer in force. The State Government, on the other hand, is expected to rely on the saving provisions under the Code on Wages and the General Clauses Act, 1897 to justify the validity of the notification.

Another point of contention arises from the proceedings currently pending before the Karnataka High Court. In Writ Petition No. 22771/2025, the Court, by an interim order dated 28 July 2025, directed that “the order that would be passed by the meeting of the Advisory Board on 29.07.2025 or subsequently shall not be implemented till the next date of hearing.” In light of this, employer bodies contend that issuing the final notification on 22 May 2026, based on the Advisory Board’s recommendations—may not be consistent with the spirit of the Court’s interim directions. 

A further concern relates to the notification's continued reliance on the concept of "scheduled employments." While the Minimum Wages Act, 1948 required minimum wages to be fixed for specified scheduled employments, the Code on Wages, 2019 does not recognize or adopt this framework. Instead, the Code envisages a broader and more uniform approach to wage regulation across employments. Critics therefore argue that the notification relies on a concept that no longer finds place under the current legislative regime.

HOW DOES THIS AFFECT EMPLOYERS?

The impact of the notification goes far beyond an increase in minimum wages. For employers, the revised wage rates are likely to increase overall employment costs and create additional compliance requirements.

The most immediate impact will be higher labour costs, particularly in labor-intensive sectors such as hospitality, retail, housekeeping, logistics, manufacturing, and security services. As minimum wages have increased significantly in several categories, businesses may need to revisit their budgets and workforce costs. This could be particularly challenging for small and medium-sized businesses that operate on tighter margins.

The increase in minimum wages may also lead to higher statutory costs for employers. Employers who calculate provident fund (PF) contributions on actual wages may have to contribute more each month as employee wages rise. In addition, the Code on Wages, 2019 requires at least 50% of an employee's total remuneration to be treated as wages. This prevents employers from significantly reducing wage-related statutory liabilities by allocating most of the salary to allowances.

The notification may also impact contributions under the Employees' State Insurance Scheme (ESIC). Since ESIC currently applies only to employees earning up to ₹21,000 per month, some employees may become ineligible for coverage if their wages exceed this threshold after the revision. However, for employees who continue to remain covered under the ESIC scheme, any increase in wages will result in a corresponding increase in ESIC contributions, since such contributions are calculated as a percentage of the employee's wages.

Employers should also keep in mind that an increase in wages can have a ripple effect on other employee benefits. Payments such as gratuity, statutory bonus, overtime wages, leave encashment, and other wage-linked benefits may also increase. As a result, the overall financial impact of the notification is likely to be much higher than the increase in minimum wages alone.

WHAT SHOULD EMPLOYERS DO NOW?

Given the legal uncertainty surrounding the notification and the likelihood of further litigation, employers should closely monitor developments while assessing the potential impact of the revised wage framework on their operations.

As a first step, employers may review their existing wage structures to understand how the revised minimum wage rates could affect their workforce and overall labour costs. Businesses should also evaluate the impact that any increase in wages may have on statutory contributions and wage-linked benefits such as provident fund, gratuity, bonus, overtime wages, and leave encashment.

Employers may further consider reviewing the classification of employees as unskilled, semi-skilled, skilled, or highly skilled, as well as the applicable geographical zone for each establishment. Since the prescribed wage rates vary based on these factors, understanding how employees would be classified under the revised framework can help businesses assess their potential exposure.

Employers engaging contract labour should also consider reviewing contractor arrangements and estimating the potential increase in vendor costs should the revised rates ultimately become enforceable.

Most importantly, employers should closely follow developments before the Karnataka High Court and any further guidance issued by the Government. As the validity of the notification remains subject to challenge, businesses should carefully assess their compliance strategy and seek appropriate legal advice based on their specific circumstances.

CONCLUSION

The Karnataka minimum wage notification dated 22 May 2026 marks a significant shift in the State's approach to wage regulation. By substantially increasing minimum wage rates and introducing a more uniform framework based on skill level and geographical location, the notification is expected to have far-reaching implications for both employers and employees.

At the same time, the notification has raised several important legal questions. Its issuance after the coming into force of the Code on Wages, 2019, the ongoing proceedings before the Karnataka High Court, and its continued reliance on concepts from the earlier legal framework have all contributed to uncertainty regarding its validity. However currently, the notification remains the subject of considerable debate and is likely to face further judicial scrutiny. The outcome of these challenges will not only determine the fate of the notification itself but may also provide important guidance on how wage revisions are to be undertaken under the new labour law regime.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.