This article is written by Debraj Mohanta pursuing B.A. LL.B, Second year student at South Calcutta Law College, Calcutta University, Kolkata during his internship at LeDroit India.
INTRODUCTION
For any service provided by an individual there must be certain consideration on the part of the person. Wage is generally the sum or amount paid to a person for the skillful or unskillful work done by him or it can defined as a regular payment, usually on an hourly, daily, or weekly basis, made by an employer to an employee, especially for manual or unskilled work. Now, the wages vary from work done by an individual. Wages refer to the financial compensation that employers provide to employees in return for their work and services. They are usually calculated on an hourly, daily, weekly, or monthly basis and may also encompass additional forms of remuneration such as bonuses, commissions, and overtime pay. Wage levels can differ greatly across various occupations, industries, regions, and countries. These variations in wages are shaped by several factors, including the demand for specific skills, the local cost of living, the negotiating power of workers, and government regulations such as minimum wage laws. While minimum wages are designed to ensure a basic standard of living, living wages represent higher income levels that enable workers and their families to afford essential needs like adequate housing, food, and other necessities. Laws related to minimum wage of a person is defined and explained under Minimum Wages Act, 1948. The earnings differ based on the tasks performed by a person.
Now, the Impact of Cost of Living on Wages is discussed underneath,
The cost of living is a significant factor in determining wages, as it directly affects the income needed for individuals to cover essential needs like food, housing, and healthcare. A living wage is typically defined as the income required sustaining a reasonable standard of living, which can vary greatly depending on geographic location and local economic conditions. In areas with a high cost of living, wages need to be higher to ensure that workers can satisfy their basic needs and avoid poverty. On the other hand, in regions where the cost of living is lower, wage expectations may also be reduced. This dynamic highlights the necessity of adjusting wage standards to align with local economic conditions, as stagnant wages amid rising living costs can result in reduced purchasing power and increased financial pressure on workers.
Additionally, government policies, such as minimum wage legislation, often consider the cost of living when establishing wage standards, with the goal of providing a foundational income that enables workers to afford essential goods and services.
Minimum wages are essential for safeguarding workers against excessively low compensation. Currently, the average minimum wage in India stands at Rs 176 per day for an eight-hour workday, and all unskilled, semi-skilled, and skilled workers are entitled to these minimum wages. Minimum wage regulations in India vary across states, prompting the question of how employers perceive the minimum wage. Each state determines its minimum salary by considering various factors, including economic conditions, working environments, the living standards of laborers, the cost of living, and the nature of the work involved.
Eventually, the components that make up the minimum wage include:
A minimum salary includes the basic pay in addition to different allowances. These allowances are provided for shift work and irregular working hours. Payments for overtime work are not included in the calculation of the minimum wage.
Gross wage encompasses:
• The base salary stipulated in your employment contract
• Performance-based remuneration and allowances for shift work, irregular hours, etc.
• Regular payments for your productivity made weekly or monthly
• Third-party payments for work-related services
According to the minimum wages notification for Delhi issued in October 2022, the following monthly minimum wages apply:
• Unskilled workers: ₹16,792
• Semi-skilled workers: ₹18,499
• Skilled workers: ₹20,357
• Non-matriculate clerical staff: ₹18,499
• Matriculate clerical staff: ₹20,357
• Graduate clerical staff: ₹22,146
Employers in Maharashtra are required to make arrear payments in accordance with the revised minimum wages for shops and establishments, which came into effect on July 1, 2022. The new minimum wage rates are as follows:
• For unskilled workers, the minimum wage per month is ₹12,127
• Semi-skilled workers should receive a minimum wage of ₹12,962 per month
• Skilled workers should be paid a minimum wage of ₹13,738 per month
The minimum wages outlined below are based on the Gujarat minimum wages notification from October 2022:
• For unskilled workers, the monthly minimum wage is ₹9,445.
• Semi-skilled workers are entitled to a minimum wage of ₹9,653 per month.
• Skilled workers should receive a minimum wage of ₹9,887 per month.
The minimum wages for Rajasthan are based on the Tamil Nadu minimum wages notification from April 2022:
• Unskilled workers earn a monthly minimum wage of ₹6,734.
• Semi-skilled workers should receive ₹7,046 per month as minimum wage.
• Skilled workers are entitled to a minimum wage of ₹7,358 per month.
The main criteria for minimum wages in India are:
Minimum time rate: A minimum hourly or daily wage rate based on the number of hours worked Minimum piece rate: A minimum wage based on the quantity of products produced
Guaranteed time rate: A minimum wage for timely work done:-
Overtime rate: A minimum wage for overtime work done by employees
Parameters for Fixing Minimum Wages
The key parameters considered when fixing minimum wages are:
• Cost of living index
• Type of employment (skilled, semi-skilled, unskilled)
• Geographic location (urban or rural areas)
A minimum of 20% of the total wage should cover:
• Food for 3 consumption units per year
• Minimum nutrition of 2700 calories per adult
• Clothing of 66 meters per year per family
• Housing rent for minimum area under Industrial Housing Scheme
• Fuel, lighting and other items
At least 25% of the total wage should cover:
• Children’s education
• Medical needs
• Minimum recreation
• Old age and marriage
Responsibility for Fixing Minimum Wage
Both the central and state governments in India are responsible for fixing minimum wages, as labor is a concurrent subject under the Constitution. The central government fixes minimum wages for certain employments, while state governments set wages for most other employments within their jurisdiction.
Two main methods used to fix minimum wages are:
Committee method: The government appoints committees to conduct investigations and provide recommendations for setting and revising minimum wages.
Notification method: The government publishes proposals in the official gazette to inform affected parties, specifying a date at least 2 months later when the proposals will be reviewed.
India does not have a single national minimum wage. Minimum wages vary across states and are set by state governments to better account for local cost of living, expenditures, working conditions and living standards in scheduled employments. Ensuring a uniform national minimum wage for all workers across the country is not practically feasible given the diverse economic conditions, infrastructure and government policies across different states. If a worker in India is not paid the minimum wage, they can file a complaint with the Labour Commission. If the employer is found guilty after an investigation, they may face up to six months in jail and/or a fine of Rs. 500.The new Code on Wages, 2019, which has not yet been implemented, proposes harsher penalties: three months in prison and a fine of up to one lakh rupees. Minimum wages in India are determined by both the central and state governments and can vary by state based on factors like infrastructure, type of work, and economic conditions. Paying less than the minimum wage is illegal, and employers can be fined if they are caught. The Indian government aims to protect workers’ rights, and the 2019 Code on Wages seeks to enforce stricter penalties for non-compliance.
Now, Section 2 of the Minimum Wages Act, 1948 defines important terms used in the Act. Here are the key definitions:
Adolescent: A person aged between 14 and 18 years.
Adult: A person who is 18 years of age or older.
Appropriate Government: This term differentiates between the Central Government and State Governments based on the type of scheduled employment. For instance, the Central Government oversees scheduled employment related to railways and major ports, while State Governments manage other scheduled employments.
Child: A person who is under 14 years of age.
Competent Authority: The authority appointed by the appropriate government to determine the cost of living index number for employees in scheduled employments.
Cost of Living Index Number: An index number that indicates the cost of living for employees in scheduled employments, as established by the competent authority.
Employer: Any individual or entity that employs one or more employees in scheduled employment, including managers and department heads.
Prescribed: Refers to the rules set forth under the Act.
Scheduled Employment: Employment listed in the Act’s schedule or any related process or branch of work.
Wages: All types of monetary compensation payable for work performed, including house rent allowance, but excluding certain benefits such as housing accommodation and other amenities unless specifically stated.
This section is essential for establishing a clear understanding of the terms used throughout the Minimum Wages Act, promoting clarity and consistency in its implementation.
Section 4 of the Minimum Wages Act, 1948 addresses the establishment of minimum wage rates that employers must pay to employees engaged in scheduled employments. Here are the main points:
• Responsibility for Fixation: The appropriate government—either Central or State—is tasked with determining the minimum wage rates for various scheduled employments. This includes setting different rates for categories of workers, such as skilled, semi-skilled, and unskilled laborers.
• Components of Minimum Wages: The minimum wage may include various elements, such as basic wages and allowances. The Act stresses that these wages should be sufficient to meet the basic needs of workers and their families.
• Periodic Review: The minimum wage rates established under this section are subject to regular reviews and revisions to ensure they remain aligned with changing economic conditions and living costs.
• Notification Requirement: After determining the minimum wages, the appropriate government must publish this information in the official gazette to inform all relevant parties, including employers and employees.
• Applicability: The minimum wage rates apply to all employees working in scheduled employments as defined by the Act, ensuring that all workers receive fair compensation for their labor.
This section is vital for creating a legal framework for minimum wages, ensuring fair compensation for workers and protecting them from exploitation.
Section 5 of the Minimum Wages Act, 1948 explains how minimum wages are set and changed. Here are the key points in simple terms:
• Authority: The central or state government decides the minimum wages for different jobs. They can set different pay rates for skilled, semi-skilled, and unskilled workers.
• Review Intervals: The government must review the minimum wage rates every five years. If they don’t do this on time, they can still change the wages later, and the previous rates will stay in effect until new ones are set.
• Exemption for Small Employment: The government can choose not to set minimum wages for jobs with fewer than 1,000 employees. If the number of employees goes up to 1,000 or more, the government must quickly establish minimum wages.
Types of Minimum Wages: The government can create different types of minimum wages, such as:
Minimum time rate: Pay based on hours worked. Minimum piece rate: Pay based on the amount of work done.
Guaranteed time rate: A minimum wage that ensures piece workers earn a certain amount based on hours worked.
This section is important because it provides a clear way to set and update minimum wage rates, ensuring they are fair and suitable for current economic conditions.
Section 8 of the Minimum Wages Act, 1948 establishes the Central Advisory Board to help the central government with minimum wage issues for specific jobs. Here are the key points:
• Purpose: The Central Advisory Board gives advice to the central government on minimum wages and related matters for scheduled employments.
• Composition: The board has representatives from employers, employees, and independent members. This mix ensures that different perspectives are considered when discussing wage issues.
• Functions: The board’s main job is to review and recommend minimum wage rates and other related matters. It helps balance the interests of both workers and employers.
This section is important because it enables dialogue and collaboration between various stakeholders in the labor market, helping to shape effective wage policies.
Section 12 of the Minimum Wages Act, 1948 focuses on how minimum wages should be paid to employees. Here are the main points in simple terms:
Payment Requirement: Employers must pay the minimum wage rates to all employees working for them. This payment has to be made within a specific time frame set by the relevant government authority. Method of Payment: Wages should be paid in cash. However, if there is a tradition of paying wages in goods instead of money, the employer needs permission from the appropriate government to do so.
This section is important because it ensures that employees receive their minimum wages on time, protecting their rights and financial security.
Section 14 of the Minimum Wages Act, 1948 deals with overtime pay for employees. Here are the main points in simple terms:
Overtime Payment: If an employee works more hours than the normal working day set by the government, they must be paid extra for those additional hours. The overtime pay is calculated at a higher rate, which is either set by this Act or by any relevant law from the government, whichever is more favorable to the employee.
Minimum Wages for Shorter Hours: If an employee works fewer hours than the normal working day, they are still entitled to receive the minimum wage for the day, as long as the reduced hours were not due to their own choice not to work.
This section is important because it ensures that employees are fairly compensated for any extra hours they work and also protects their rights if they work less than the standard hours.
Section 18 of the Minimum Wages Act, 1948 is about employers keeping records of wages. Here are the main points in simple terms:
• Record Keeping: Employers must keep registers that show the wages they pay their employees. This helps make sure that wage payments are clear and accountable.
• Inspection: These records should be available for authorized officials to check. This allows them to ensure that employers are following the minimum wage laws.
• Purpose: This section is designed to protect workers’ rights by keeping a clear record of wages paid, which makes it easier to resolve any disputes or claims about payments.
Section 24 of the Minimum Wages Act, 1948, called “Bar of Suits,” states that:
No Lawsuits: No court case can be filed regarding matters covered by the provisions of this Act. This means that disputes about minimum wages must be handled through the processes provided in the Act itself, not through regular courts.
Claims and Appeals: Instead of going to court, employees must file claims with the authorities designated under the Act. These authorities have the power to decide wage-related disputes.
This section is important because it simplifies the process for resolving wage disputes. It ensures that issues about minimum wages are dealt with within the framework of the Act, rather than through the normal legal system.
Section 26 of the Minimum Wages Act, 1948 talks about exemptions and exceptions to the Act. Here are the main points in simple words:
Exemptions for Disabled Employees: The government can decide not to apply the Act to certain disabled employees if it thinks it’s appropriate and can set conditions for this exemption.
Exemptions for Specific Jobs or Areas: The government can also exempt certain groups of employees in specific jobs or areas for special reasons. This exemption is announced through a notification in the Official Gazette and can be for a limited time.
Exemptions Based on Salary Limits: If the government believes that minimum wages are not necessary for employees in a scheduled job who earn above a certain limit, it can exempt those employees from the Act’s rules, again with conditions.
Exemption for Family Members: The Act does not apply to wages paid by an employer to family members who live with them and depend on them. Family members include a spouse, child, parent, brother, or sister.
This section allows the government to provide flexibility in applying the Act based on specific situations and needs.
Conclusion: Minimum wage laws are crucial in labor markets worldwide, aiming to safeguard workers from exploitation and ensure a basic standard of living. The Minimum Wages Act, 1948, in India, is an example of such legislation. It sets legal minimum wage rates for different categories of workers, including skilled, semi-skilled, and unskilled laborers. This Act establishes these rates and requires regular reviews and adjustments to keep up with economic changes. The Act significantly impacts both employees and employers. For workers, it provides protection against inadequate pay, helping to reduce poverty and improve living standards. For employers, it creates a framework they must operate within, potentially increasing labor costs but also fostering a more stable workforce.
However, the effectiveness of minimum wage laws is an ongoing debate. While many studies suggest these laws can boost earnings for low-wage workers without significantly harming employment levels, there are concerns that excessively high minimum wages may lead to job losses, particularly among unskilled workers. Critics argue that such laws can create barriers for young or inexperienced workers, hindering their ability to gain employment.
In conclusion, while minimum wage laws like the Minimum Wages Act, 1948, are essential for protecting workers and ensuring fair compensation, they must be carefully designed and implemented to balance the needs of employees and employers. Ongoing adjustments and complementary policies, such as the Code on Wages, 2019, are necessary to address the complexities of the labor market and the diverse needs of the workforce.
