This article is written by Sai Shriya Potla. It elaborates on the minimum wages in India as per the labour laws while highlighting the different legislations passed by Parliament on minimum wages. This article also deals with the components of minimum wages and how the minimum wages are calculated across all states in India.
Table of Contents
Introduction
A wage is a kind of remuneration provided by an employer to his employees on the basis of work done at a specified time, i.e., an hour, a day, a week, or a fortnight. A wage is generally paid for unskilled work or blue-collar jobs, in contrast to salaries, which are paid for skilled work or white-collar jobs that are given out at regular intervals.
The employers can lower the wages that are to be paid to the workmen to make more profits and the workers are compelled to accept those nominal wages due to their lack of stable employment and poverty. Unlike a salaried employee who has long-term security, workmen are often exploited by their employers. Therefore, every workplace must have a minimum wage. A minimum wage is the minimum amount of remuneration an employer is required to pay an employee to control workplace harassment.
The following article exhaustively deals with the minimum wage as per the labour law in India, the history of the minimum wage and special legislation passed in India to regulate the minimum wage.
Minimum wages
The minimum wage is the lowest amount of remuneration that is required to be paid by the employer to the employee for the performance of the work. The minimum wage cannot be reduced through collective agreement or individual agreement. The state determines the rate of the minimum wage, taking into view the economic conditions and cost of living in the nation.
Purpose of minimum wages
Basic standard of living: Minimum wages ensure that a person lives a decent life and fulfils his basic needs, including food, clothing, shelter, and other basic amenities.
Prevents workplace harassment: The workers will be prevented from paying low wages for their work. The state will constantly supervise to ensure that all workplaces follow the principle of the minimum wage.
Eliminate poverty: The minimum wage will raise the amount of remuneration for low-paying jobs. On some level, this can raise the living standards of people living below the poverty line.
Increase the output: When the employees are satisfied with the amount of remuneration, they are likely to increase their productivity in the workplace, which will lead to an increase in total output and indirectly help the country’s economy.
Boost to the economy of a country: With the increase in remuneration for all people, the country’s average income increases, leading to economic growth.
Types of salaries/ wages
The Tripartite Committee on Fair Wages, 1948, defined three types of wages, i.e., minimum wages, fair wages, and living wages.
Minimum wages: As mentioned earlier, minimum wages are the minimum amount of remuneration that the employer is required to pay to the employee. This is a compulsory obligation of the employer; he has to fulfil it at all costs.
Fair wages: The minimum wage is the statutory mandate, while fair wages are dependent on the discretion of the industry. Fair wages are dependent on the capacity of the industry to bear the financial burden and cost of living in a particular area. As of now, many organisations pay fair wages for their employees.
Living wages: A person is said to be earning living wages if he or she not only fulfils his and his family’s basic needs but also can afford to afford other luxuries like education, insurance, etc. Living wages are the ultimate goal of a nation. However, every country cannot provide living wages considering its economic conditions.
History of minimum wage laws
The Code of Hammurabi is the world’s earliest text addressing the minimum wage. It states, “If a man hires a workman, then from the beginning of the year until the fifth month he shall give six grains of silver per diem. From the sixth month until the end of the year, he shall give five grains of silver per diem.” In the modern era, New Zealand and Australia are the first among all nations to introduce minimum wage regulation.
Initially, the concept of minimum wages was used to settle disputes between workers and industries. The Industrial Conciliation and Arbitration Act, 1894, enacted by the government of New Zealand, empowered the court of arbitration to settle industrial disputes by fixing the minimum wage. This method of fixing minimum wages by arbitration was adopted by the courts of Australia.
At the same time, Australia and the United Kingdom introduced minimum wage legislation to eradicate the practice of sweating. Sweating is a method of paying insufficient wages to their workers, making it difficult for them to meet their basic needs.
History of minimum wage laws in India
The concept of the minimum wage has been present in Indian society since the ancient period. Arthashasthra and Sukranti are a few famous Indian texts that mention payment of wages, employer and employee relationships, minimum wages, etc.
After the Second World War, the rights of workers gained importance. In 1943, an Indian Labour Conference set up a Labour Investigation Committee with the help of the Standing Labour Committee to inquire into the working conditions of the workers in India. The Standing Labour Committee in 1946 recommended enacting special legislation to address the issue of minimum wage, which resulted in the introduction of the Minimum Wages Act, 1948, making India one of the first developing nations to enact its own minimum wage legislation.
The Minimum Wages Act, 1948
The Minimum Wages Act, 1948, was passed for the welfare of workers. The Act fixes minimum wages to ensure that workers are not exploited in the workplace. This Act was enacted specially to safeguard the rights of the unorganised sector, as they are an easy target for exploitation because of work instability and a lack of bargaining power.
The Minimum Wages Bill was introduced in the central legislative assembly on April 11, 1946, and passed in the same year. However, the Minimum Wages Act (hereinafter referred to as the “Act”) came into force on March 15, 1948.
Appropriate Government
The appropriate government has the power to determine the minimum wage with regard to scheduled employment. According to Section 2(b) of the Act:
- The central government has the authority to determine the minimum wage carried under the authority of the central government and railway administration, or any employment in relation to mines, oil-field and major ports, or any co-operation established under any central Act.
- The state government has the authority to determine the minimum wage with regard to other scheduled employment.
Section 2(g) of the Act defines scheduled employment as employment that falls within the purview of the schedule mentioned in the Act or any branch of work forming part of such scheduled employment. Scheduled employment is divided into two parts – Part I and Part II. Part I deals with non-agricultural employment and Part II deals with agricultural employment.
Fixation of minimum rates of wages
Section 3 states that the appropriate government has the authority to fix the minimum wages for Part I and Part II in the schedule. While determining the rate of minimum wage specified in Part II of the schedule, the appropriate government can fix the rate for a part of the state or a specific class.
The appropriate government can review the minimum wages at regular intervals not exceeding five years and change the rates of minimum wages if deemed necessary. Even if the appropriate government fails to review the minimum wages within five years, the government has the right to review and fix the minimum rate of wages. Until the new rates of minimum wage are fixed, the old rates of minimum wage will be in force.
The appropriate government cannot fix the rate of minimum wage if the total number of workers in that employment is less than a thousand members from that state. However, if it is brought to the notice of the appropriate government that the total number of workers has increased from a thousand members, the government can determine the rate of the minimum wage.
While fixing or revising the rates of minimum wages, the appropriate government can:
- Fix a different minimum rate of wages for
- different scheduled employment
- different classes of work in the same scheduled employment
- Adults
- Adolescents
- children and apprentices
- minimum wages in different localities.
- Fix one or more of the wage periods, namely- an hour, a week, a month, or any longer period.
When the appropriate government fixes or revises a new rate of minimum wage while any proceeding relating to minimum wages is pending before any tribunal, such a revised minimum rate of wage will not be applicable in the proceeding.
Minimum rate of wages
According to Section 4, the appropriate government, while fixing or revising the new rate of minimum wage, must include one of the following-
- A basic rate of wages and special allowances, also known as cost of living allowances, that are provided at specific intervals by the appropriate government,
- A basic rate of wage and cash value of concessions for supplies of essential goods at a lower rate, which may or may not include cost of living allowance,
- A basic rate of wage, cost of living allowance and cash value of concessions.
Procedure for fixing and revising minimum wages
Section 5 of the Act provides two methods for fixing and revising minimum wages. They are-
By Committee: The committees and sub-committees conduct enquiries and advise the appropriate government about fixing or revising minimum wages.
The appropriate government can appoint an advisory board under Section 7 of the Act to advise committees and sub-committees on matters relating to fixing or revising the rate of minimum wages.
By Notification: The appropriate government may directly publish its proposals by notification in the official gazette. The responses to such proposals will be taken from the public. Only those responses that are within two months of the notification will be taken into consideration for fixing minimum wages.
The appropriate government may approach the committee even if the rate of the minimum wage is fixed or revised through notification.
Fixing hours for normal working days
Section 13 of the Act empowers the appropriate government to make provisions in relation-
- To fix the number of hours of work in a normal working day, which includes one or more intervals.
- To provide a day of rest to the employees every week and provide remuneration on the day of rest.
- The payment of remuneration for such a day of rest will be the payment of a normal day, not the overtime rate. The overtime rate is working more hours than specified work time.
The above-mentioned benefits will be available to the employee only if he falls within the following category:
- If the employee could not work because of any foreseen emergency or unseen work,
- If the employee is engaged in work of such a nature that he must perform outside the limits of the workplace,
- If the nature of the work of the employee is intermittent, to hold employment of an intermittent nature, the employee, during his hours of duty, must have a period of inaction. Even if the employee is on duty on such a day, he will not be mandated to perform any physical action.
- If the employee is engaged in work that must be completed for technical reasons, and;
- If the employee is involved in a work where he is not able to perform adequately due to irregular action of natural force, natural forces are those that are not within human control.
Wages of a worker who works for less than a normal working day
Section 15 states that if an employee works less than the prescribed hours of work for a day, he will be entitled to receive the full amount of remuneration as of a normal working day. However, the employee will not receive the full amount on a normal working day if his failure to work was caused by his unwillingness to work.
Claims
Section 20 of the Act provides the qualifications of ‘the authority’ to decide the claims arising from non-compliance with the provisions of the Act. They are-
- Commissioner for Workmen’s Compensation
- Any officer of the Central Government exercising duties as a Labour Commissioner for any officer of the State Government, not below the rank of Labour Commissioner.
- Any officer who has experience as a judge of a civil court or as a stipendary magistrate.
The aggrieved employee, legal practitioner, or any person on behalf of the aggrieved employee can register a complaint before the authority. The applicant should apply within six months of non-payment of the prescribed minimum wages. The applicant can apply after six months if he has sufficient reason to satisfy the authority.
The authority provides both the employer and employee with the right to be heard. The authority, if it thinks it is necessary, may call for further inquiry before making the final decision.
In the case of payment less than the rate of the minimum wage, if the payment of the minimum wage and compensation decided by the authority payable to the employee exceeds the amount of the actual minimum wage, the authority must ensure that the compensatory amount does not exceed ten times the actual minimum wage.
In the case of non-payment of wages, the authority may order compensation to the employee along with the payment of wages not exceeding ten rupees. The authority can still order compensation even if the parties have a court settlement. The decision of the authority will be deemed final.
If the application for payment of less than the minimum wage is found to be malicious or vexatious, the authority may award compensation of fifty rupees to the employer from the applicant.
Penalty for certain offences
Section 22 of the Act mentions the penalty for payment of minimum wages less the prescribed amount. If the employer pays less than the minimum rate of wages or contravenes any provision of Section 13, he shall be punished with imprisonment for the amount not exceeding six months or a fine of five hundred rupees or both.
Criteria for fixing the minimum wage
There are no specific criteria for fixing or revising the rate of minimum wage by the appropriate government. However, the Tripartite Committee of the Indian Labour Conference, 1957, held in New Delhi, laid down five norms for fixing the minimum wage. They are
- The minimum wage must be three consumption units per worker.
- The minimum wage must fulfil the basic food requirement of an adult of 2700 calories.
- It must fulfil the clothing requirements of the family.
- Fuel, lighting, and other items must constitute up to 20% of the minimum wage.
- With respect to housing, the rent provided by the government under the Government Industrial Housing Scheme must be taken into consideration.
Constitutional validity of the Minimum Wages Act
The principle of minimum wages is deeply ingrained in the Indian Constitution under Article 39 and Article 43 of the Directive Principles of State Policy. Article 39(a) mentions that the state can adopt laws to ensure adequate means of livelihood for men and women equally. Article 43 states that the state, through suitable legislation, ensures living wages, a decent standard of living and social and economic opportunities for all workers.
The constitutional validity of the Minimum Wages Act was raised on the grounds that it violates the freedom of free trade and occupation enshrined under Article 19(1)(g) of the constitution in the case of Bijoy Cotton Mills Ltd. v. State of Ajmer (1954).
The employers contended that the upheaval of minimum wages for workers puts unreasonable restrictions on the rights of employers, as they could not carry on trade and business under Article 19(1)(g) because the industry is not in a position to pay the minimum wage. They also argued that the Act is unreasonable as the decision of the appropriate government related to fixing the rate of the minimum wage is not reviewed.
The Supreme Court held that securing minimum and fair wages for workers is conducive to the general public interest and thus is not an unreasonable restriction on the freedom of trade and occupation. The Court further ruled that the appropriate government has to take the decision of the committee before fixing the rate of minimum wages and although the decision of the appropriate government is not subject to scrutiny, this cannot be the reason to declare the provisions of the Act unreasonable.
The Code of Wages, 2019
The Code of Wages, 2019 was enacted to align the labour laws with the present economic conditions prevalent in the country and new technological advancements. The Code of Wages, 2019 consolidates four labour laws-
- The Payment of Wages Act, 1936
- The Minimum Wages Act, 1948
- The Payment of Bonus Act, 1965
- The Equal Remuneration Act, 1976.
The draft code was prepared by employers’ and workers’ representatives, regional Labour Conferences, inter-ministerial consultations, and based on reports of the Parliamentary Standing Committee on Labour in nine tripartite meetings. The Code of Wages was passed in the Lok Sabha on July 30, 2019 and in the Rajya Sabha on August 2, 2019. The Code of Wages received presidential assent on August 8, 2019
Key changes in Code of Wages, 2019 w.r.t minimum salary
The Code introduced new changes with respect to the minimum wage. They include-
Floor wages
In the Minimum Wages Act, 1948, both the central government and the state government have the power to fix or revise the rate of minimum wages in the employments mentioned in the schedule. However, the new code changed this method of fixing minimum wages.
Section 9 of the Code empowers the central government to determine the floor wages for all employment across different geographical locations. The appropriate government has to fix the minimum wage, not less than the floor wage determined by the central government.
Wages for overtime work
Under the Minimum Wages Act, if an employee works overtime beyond the normal working hours, the employer is required to pay the amount of wages for overtime work as prescribed under the Act or by the appropriate government, whichever is higher.
The code has uniformized the wages for overtime work. Section 14 of the Code states that the employer is required to pay twice the normal rate of wages for overtime work.
Increase in penalty amount
The Code increased the amount of penalty for non-compliance with the provisions of the rate of minimum wages as prescribed by the Act. Section 54 states that if an employer pays less as prescribed by the Code, he shall be held liable with a fine up to fifty thousand.
If the employer is found violating the provisions of minimum wages under the Code more than once, he will be liable to imprisonment for a term of three months and a fine of one lakh rupees.
Though the Code of Wages was passed in 2019 itself, it is not yet in force. On December 18, 2020, the central government, by notification in the official gazette, enforces certain provisions of the Code to the extent they relate to the central government. They include-
The Central Advisory Board
Section 42 of the Code states that the central advisory board consists of members nominated by the central government. They include-
- Persons representing employees
- Persons representing employers
- Independent persons not exceeding one-third of the total members of the board
- Five representatives from the state governments
One-third of the members of the board shall be women and the chairman will be appointed by the central government from among the individual persons.
The Central Advisory Board shall provide suggestions to the central government with regard to fixing or revising the rate of minimum wages. The central government may issue directions to the state government regarding the matters dealt with by the board.
The Central Advisory Board is empowered to regulate its procedures, which include committee and sub-committee meetings. The Act shall prescribe the term of office for the members of the board.
With Section 42 of the Code coming into force, Section 8 of the Minimum Wages Act, which dealt with the Central Advisory Board, is repealed.
Power of the appropriate government to make rules
Section 67 empowers the central government to make rules regarding the procedure of the Central Advisory Board and the term of office of the members of the board, as mentioned in Section 42.
Components of minimum wage
Section 7 of the Code mentions that the minimum wage may include any one of the following components-
- The basic rate of wages and allowance provided by the appropriate government at specific intervals is also known as the cost of living index.
- The basic rate of wages and cash value of concessions with or without the cost of living index.
- The basic rate of wages includes the cash value of concessions and cost of living index.
Procedure for fixing or revising the minimum wage
Section 8 specifies that the appropriate government for fixing or revising the minimum wage rate may follow the committee method or notification method.
The committee includes the following categories of people:
- Persons representing employees
- Persons representing employers
- Individual persons not exceeding one-third of the total members of the board
The appropriate government fixing or revising the minimum rate of wages shall consult the advisory board under Section 42. The appropriate government is required to revise the rate of minimum wages every five-year period.
The power of the central government to fix floor wage
Section 9 empowers the central government to determine the floor wage for all employment across all the states. The appropriate government has to fix the rate of minimum wage not less than the floor wage specified by the central government.
If the appropriate government has already fixed the minimum wage, which is higher than the floor wage, then the appropriate government shall not reduce the rate of the minimum wage.
Components of minimum wage
The minimum wage must not only include the mere remuneration that covers the basic survival of life but must also provide for the preservation and betterment of the worker These utilities must be incorporated into the minimum wage of the worker, regardless of the financial status of the employer. Therefore, nothing more will be added to the components of the minimum wage that will bring it next to the fair wage.
The International Labour Organisation states that the minimum wage should possess the following components:
- Basic pay
- Annual bonus
- Tips
- In-kind benefits (Educational and medical insurance, pension and retirement plans, and travel benefits)
- Productivity and performance pay
- Allowances and premiums for non-standard work hours or dangerous work.
Section 4 of the Minimum Wages Act of 1948 deals with the components of the minimum wage.
How is the wage calculated in India
The minimum wage is not uniform in all states in India. The rate of the minimum wage is fixed by the appropriate government. To determine the minimum wages, the workers are broadly classified into three categories: unskilled, skilled, and highly skilled.
Unskilled worker: An unskilled worker does not require any training or skills for the work. Such a worker will not be required to use their intellectual or reasoning abilities in the work. Unskilled workers are generally required for manual labour.
Skilled worker: A skilled worker possesses high qualifications, training, and other skills and is capable of making independent judgements in their work.
Highly skilled worker: A highly skilled worker receives the highest wage of them all. A worker with the most qualifications, leadership qualities, and interpersonal interactions will be deemed to be a highly skilled worker.
Minimum wages for states across India (Per Month) (in Indian Rupees)
| State | Unskilled | Skilled | Highly Skilled |
| Andaman and Nicobar Islands | 13,988 | 17,680 | 19188 |
| Andhra Pradesh | 12,344 | 13,844 | 14,844 |
| Arunachal Pradesh | 6,600 | 7,200 | NA |
| Assam | 9,246.10 | 13,430.85 | 17,265.55 |
| Bihar | 10,270 | 13,000 | 15,886 |
| Chandigarh | 12,623 | 13,298 | 13,698 |
| Chattisgarh | 10,480 | 11,910 | 12,690 |
| Dadra and Nagar Haveli | 9,237.80 | 9,653.80 | NA |
| Daman and Diu | 9,237.80 | 9,653.80 | NA |
| Delhi | 17,494 | 21,215 | NA |
| Goa | 10,790 | 13,728 | NA |
| Gujarat | 12,012 – 12,298 | 12,558 – 12,870 | NA |
| Haryana | 10,532.84 | 12,802.69 | 13,442.82 |
| Himachal Pradesh | 11,250 | 13,062 | 13,592 |
| Jammu and Kasmir | 8,086 | 12,558 | 14,352 |
| Jharkhand | 8,996.34 | 12,423.87 | 14,351.39 |
| Karnataka | 14,424.63 | 16,858.07 | 18,260.20 |
| Madhya Pradesh | 9,825 | 12,060 | 13,360 |
| Maharashtra | 12,699 | 14,310 | NA |
| Nagaland | 5,280 | 7,050 | NA |
| Punjab | 10,353.77 | 12,030.77 | 13,062.77 |
| Rajasthan | 6,734 | 7,358 | 8,658 |
| Tripura | 7,277 | 8,928 | NA |
| Uttar Pradesh | 10,275 | 12,661 | NA |
| Uttarakhand | 9,913 – 10,031 | 11,070 – 11,218 | NA |
| West Bengal | 9,784 | 11,804 | 13,023 |
Conclusion
The minimum wage is the minimum amount of remuneration that an employee or worker is paid for their performance. India, being a welfare nation, embraced the principle of minimum wages and enacted the Minimum Wages Act, 1948, to prevent exploitation at the workplace and ensure financial stability. The Act enables the state to fix and revise the rate of minimum wages, appoint advisory boards to guide the appropriate government and provide penalties for non-compliance with the provisions of the Act. Along with these positive aspects of the Act, there are a few drawbacks that diminish the integrity of the object for which the Act was enforced.
Since the enactment of the Act in 1948, the country has witnessed many economic changes, making the Act slightly out of touch. The Act only provides minimum wages for the employments mentioned in the schedule of the Act and which have more than 1,000 employees in the state; thus, many activities do not receive the benefits of the Act. One of the major challenges is the lack of knowledge among workers with regard to the existence of the Act. The Code of Wages, 2019 noticed these issues and made modifications to the previous Act. However, only certain provisions of the code were enforced. The government must take the necessary steps to create awareness among the workers about the rights provided under labour laws.
Frequently Asked Questions (FAQs)
Is Code of Wages, 2019 in force?
The Code of Wages was enacted on August 8, 2019 but the Code is not in force. Only certain provisions of the Code that relate to the central government came into force by notification in the official gazette.
Does the Minimum Wages Act, 1948, apply to all kinds of employment?
The Minimum Wages Act, 1948, applies to both skilled and unskilled work mentioned in the schedule mentioned under the Act. The provisions of the Act do not apply to other employments not mentioned in the schedule.
Is the minimum wage the same as the basic salary?
The basic salary is the base salary an employer receives before any additions or deductions to the original amount. On the other hand, the minimum wage includes a basic salary, allowances, or cash amounts for concessions for basic amenities.
References
- Labour and Industrial Laws, Central Law Publications, S.N. Misra, 29th edition,
- https://www.staffnews.in/2019/11/central-sphere-and-state-wise-minimum-wages-rate-list-for-skilled-semi-skilled-and-unskilled-workers-w-e-f-01-oct-2019.html
- https://www.indiabudget.gov.in/budget2019-20/economicsurvey/doc/vol1chapter/echap11_Vol1.pdf
- https://www.ilo.org/public/libdoc/ilo/1981/81B09_266_engl_1993.pdf
- https://pib.gov.in/PressReleasePage.aspx?PRID=1844649
