MC Explains: Karnataka's minimum wage hike proposal caught in a tug of war between industries and unions

Karnataka government issued a fresh wage revision notification on April 11

The Karnataka government recently issued a draft notification proposing a significant hike in minimum wages, but it now finds itself in a bind. Industry bodies claim the revision would make Karnataka the state with the highest minimum wage in the country—surpassing Delhi—and warn it could lead to shutdowns or relocations. In contrast, trade unions have welcomed the hike as fair and long overdue. Moneycontrol takes a deep dive into the issue.

Why has the Karnataka government issued a draft notification on minimum wages?

The state issued a fresh wage revision notification on April 11 after the Karnataka High Court quashed the 2022–23 wage notifications for 34 scheduled industries, citing procedural lapses. The earlier revision, introduced under the previous Bharatiya Janata Party government, had proposed a 5–10 percent wage hike, which was challenged by trade unions including All India United Trade Union Centre (AIUTUC). The court directed the government to follow due process as outlined in the Supreme Court’s Reptakos Brett judgment. The government is now considering introducing a uniform wage structure across all industries, replacing the earlier practice of industry-specific wage rates.

Also read: Govt hikes minimum wages as living costs surge

What does the draft notification propose in terms of wages?

The draft notification prepared by labour department proposes a monthly minimum wage ranging from Rs 19,319.36 for unskilled workers in Zone 3 to a maximum of Rs 34,225.42 for highly skilled workers in Zone 1.

MC Explains

What are the zones under the draft wage structure?

Karnataka has been divided into three wage zones under the draft structure. Zone 1 comprises areas under the Bruhat Bengaluru Mahanagara Palike (BBMP) and Bengaluru Urban. Zone 2 includes other city corporations and district headquarters. Zone 3 covers the rest of the state. This revised structure replaces the earlier four-zone system, which was criticised for creating inconsistencies in wage implementation.

How many workers will benefit from this wage revision?

According to government estimates, around 2 crore workers across Karnataka will benefit from the proposed wage hike.

What are the 18 new categories of employment added?

The new categories include workers employed in e-commerce and courier services, amusement parks, mobile tower maintenance, non-teaching staff in private schools and colleges, and employees of religious institutions such as temples and churches. The additions also cover artisans, workers in the coir and cane industries, those involved in poultry farming, aluminium and tin works, and employees in ready-mix concrete factories.

Also, read: Bengaluru's Peenya industrial region is now a hotbed for manufacturing startups

When will the final notification be issued?

The draft notification is now open for suggestions and objections for two months. After the feedback period, the draft will be reviewed by the Minimum Wages Advisory Board. A final notification is expected to be issued within three months.

How are employees classified under the notification?

The notification classifies workers into four categories: unskilled workers perform basic physical tasks without prior experience; semi-skilled workers handle routine, often machine-assisted tasks; skilled workers carry out complex tasks requiring judgement and expertise; and highly skilled workers are capable of supervising others and performing advanced duties that involve specialised knowledge.

Also read: Delhi govt raises minimum wages of unskilled, semi-skilled, skilled workers

What is the trade unions’ response?

Trade unions such as AIUTUC have welcomed the proposed wage hike. However, they have also raised concerns over the absence of a Variable Dearness Allowance (VDA), the lack of retrospective application of the revised wages from 2022, perceived flaws in the zonal classifications and delays in updating wages for certain sectors.

What are the industry bodies saying?

Industry bodies, particularly the Federation of Karnataka Chambers of Commerce and Industry (FKCCI), have strongly opposed the proposed wage hike. The FKCCI has warned that nearly 20 percent of small industries in industrial areas like Peenya could be forced to shut down or relocate to states such as Tamil Nadu or Telangana, where the minimum wages are lower. It argues that the revised wages would make Karnataka the costliest state in terms of labour and has urged the state government to introduce separate wage slabs for micro, small and medium enterprises, form a wage rationalisation committee, and provide relief in the form of subsidies or waivers to avoid large-scale job losses.

What are some other concerns?

One major issue is the Rs 21,000 monthly wage ceiling under the Employees’ State Insurance (ESI) scheme. With the revised wages, many workers may no longer be eligible for ESI benefits, which include health coverage. Trade unions and the state government have been urging the Centre to raise the eligibility ceiling to Rs 30,000 per month to ensure broader coverage.

Also read: Trade Unions demand hike in minimum EPFO pension to Rs 5000, constitution of 8th pay panel