Wage Structure in India under ‘The Minimum Wages Act, 1948’

Introduction
The concept of minimum wages in India is governed by minimum wages act, 1948. For
workers, Wages are the primary source of income, along with smaller sources like
governmental aid & investment income. Wages form work pay for essentials such as, rent, a
mortgage, food and utility bills. Workers who earn higher wages can afford more expensive
lifestyles than those who earn a lower wage. Minimum wage laws ensure that all workers earn
enough to pay for the basics and that the employers can not take advantage of workers. To
employers, wages are an important tool for retaining workers. Low wages will save money on
pay roll, but a more competitive wage will give workers fewer reasons to leave for a job
elsewhere. Wages are also source of tax revenue for the government. The more workers earn,
the higher their taxable income and tax rate. Wages also plays major role in the economy by
giving workers spending power. This refers not only to money that workers earn and spend on
basics, but also the money they save or use in the short term for consumer goods, travel,
investing etc.
National Wage Policy
Though it is desirable to have a National Wage Policy, it is difficult to conceive a concept of
the same. The issue of National Wage Policy has been discussed on many occasions at various
forums. Because fixation of wages depends on a number of criteria like local conditions, cost
of living and paying capacity which also varies from State to State and from industry to
industry, it would be difficult to maintain uniformity in wages. The Indian Labour Conference,
held in November, 1985 expressed the following views-
“Till such time a national wage policy does not come into being, it would be desirable to have
regional minimum wages in regard to which the Central Government may lay down the
guidelines. The Minimum Wages should be revised at regular periodicity and should be linked
with rise in the cost of living”
Accordingly, the Government issued guidelines in July, 1987 for setting up of Regional
Minimum Wages Advisory Committees. These Committees renamed subsequently as Regional
Labour Ministers’ Conference, made a number of recommendations which include reduction
in disparities in minimum wages in different states of a region, setting up of inter-state
Coordination Council, consultation with neighbouring States while fixing/revising minimum
wages etc.
Aims and Objects of Minimum Wages Act
The Act provides for fixing minimum rates of wages in certain employments to which
provisions of this Act apply. The justification for statutory fixation of minimum wages is
obvious. Such provisions which exist in more advanced countries are even more necessary in
India where workers' organizations are yet poorly developed and the workers' bargaining power
is consequently poor. The act provides for fixation by the State Government of minimum wages
for employments covered by the schedule to the Act.
The items in the schedule are those where 'sweated labour' is most prevalent or where there is
a big chance of exploitation of labour. After a time, when some experience is gained, more
categories of employments can be added and the Act provides for additions to the schedule. A
higher period is allowed for fixation of minimum wages for agricultural labour as
administrative difficulties in this case will be more than in other employments covered by the
schedule. The Act also provides for periodical revision of wages fixed.
Provision has been made for appointment of Advisory Committees and Advisory Boards, the
latter for co-ordination of the work of the Advisory Committees. The Committees and the
Boards will have equal representation of employers and workmen. Except on initial fixation of
minimum wages, consultation with the Advisory Committee will be obligatory on all occasions
of revision.
In cases where an employer pays less than the minimum wages fixed by the State Government,
a summary procedure has been provided for recovery of the balance with penalty and for
subsequent prosecution of the offending parties.
It is not ordinarily proposed to make any exemption in regard to employees of undertakings
belonging to the Central Government except that difficulties might arise where the sphere of
duty of such an employee covers more than one State, and when the rates of minimum wages
fixed by the different States may be different. For this purpose, a provision has been included
that the minimum wages fixed by the State Government will not apply to the employees in any
undertaking owned by the Central Government or employees of a Federal Railway except with
the consent of the Central Government.
The first step in the direction of fixing minimum wages was taken in April, 1946, when a Bill
to provide for fixing minimum wages in certain employments wherein sweated labour was
most prevalent or where there was a big chance of exploitation of labour was introduced in the
Central Legislative Assembly. The Bill as finally passed by the Dominion Legislature received
the assent of the Governor-General on 15th March, 1948 and it came to be known as the
Minimum Wages Act, 1948. It was passed to give effect to the resolution passed by the
Minimum Wages Fixing Machinery Convention held at Geneva in 1928. The relevant
resolutions of the convention are embodied in Articles 223 to 233 of the International Labour
Code. The object of these resolutions as stated in Article 224 was to fix minimum wages in
industries in which no arrangements exist for the effective regulation of wages by collective
agreements or otherwise and wages are exceptionally low.
Definition of Wages
The minimum wages act, 1948 defines wages as under section 2(h), which reads as under: -
Wages means all remuneration, capable of being expressed in terms of money, which accrued,
in terms of contract of employment, express or implied, were fulfilled be payable to person
employed in respect of his employment or of work done in such employment and includes
house rent allowance but does not include-
1. The value of
a. any house accommodation, supply of light, water, medical attendance or
b. any other amenity or any service excluded by general / special orders of appropriate
government

2. Any contribution paid by the employer to any pension fund or provident fund or under
any issuance of social insurance
3. Any traveling allowance or value of any traveling concession. Where a trip allowance
was prescribed by notification, the notification was held to be invalid because trip
allowance is meant to compensate the extra cost which an employee is likely to incur
when he moves out of his head quarter in connection with his employment; it clearly
partakes of character of traveling allowance and traveling allowance according to
definition of expression “wages” cant form a component of wages
4. Any sum paid to the person employed to defray special expenses entailed on him by
nature of his employment
5. Any gratuity payable on discharge
Thus analysis of this section indicates that the following essential requirements are necessary
for wages-
1. Wages include all remuneration paid to an employee including house rent allowance
2. Wages must be capable of being expressed in terms of money
3. Wages become due when there is a contract between employer and employee
4. The terms and conditions of contract must be fulfilled or he must have done work
assigned to him under such employment
But “wages” does not include value of “-
A. Any house accommodation, supply of water, light and medical attendance or
B. Any other amenity or service excluded by general or special orders pf appropriate
government. It doesn’t include any contribution to pension und or any payment under scheme
of social insurance, traveling allowance.
Minimum Wages
The expression “minimum wages” is not defined in the minimum wages act presumably
because it would not be possible to lay down a uniform minimum wages for all industries
throughout country on account of different and varying conditions prevailing from industry to
industry and from one part of country to another. It was held in Hydro (engineers) Pvt ltd. v.
The Workmen that “the concept of minimum wages takes in the factor for prevailing cost of
essential commodities wherever such minimum wage is to be fixed. The idea of fixing such
wages in the light of cost of living at a particular juncture of time and neutralizing the rising
prices of essential commodities by linking up scales of minimum wages with the cost of living
index cannot, therefore, be said to be alien to concept of minimum wage. Furthermore in the
light of spiralling of process in recent years, if the wage scales are to be realistic it may become
necessary to fix them so as to neutralize at least partly the price rise in essential commodities”
 The minimum wages must be defined as the lowest wages determined by lower contract, that
an employer may pay an employee for a specified job.

Fair Wage
Fair wage is a wage between “minimum wage” and a “living wage”. There is a difference
between minimum wages and fair wages. In case of fair wage besides the principle of industry-
cum-region, the company’s capacity to bear the financial burden must receive due
consideration. But mere hopeful observations made in director’s annual report cannot be basis
for awarding increased wages because such observations are sometimes made to inspire hope
and confidence in shareholders and the cannot be substituted for actual audited figures
Living Wage
The term living wage has not been defined under the provisions of the Minimum Wages Act.
However, “an instance of statutory definition of living wage is provided in south Australian
Act of 1912 which states the “living wage” means a sum sufficient for the normal and
reasonable needs of average employee living in a locality where the work under consideration
is done or is to be done”
Classification of Living Wages
1) Poverty Level - According to Rowntree where it is not sufficient to obtain minimum
necessities for the maintenance of mere physical efficiency. This is also known as
Poverty Line.
2) Minimum Subsistence Level - This is secondary poverty line where a family living
upon the scale allowed for in this estimate must never spend a penny on railway fare,
or omnibus, such persons must never purchase newspapers. They must write no letter
to absent children for they cannot afford to pay the postage. The children must have no
pocket money for dolls, etc.
3) Minimum Health and Decency Level - In this case, income is sufficient not only for
physiological existence but also for some elementary social necessities, such as medical
attention, car fare, insurance, clothing compatible with self-respect, elementary
education for children, etc.
4) Comfort Level - It represents (attainment of) the highest class of wage earners an e
cynosure of the rest. At this level, the family is to live in a decent house, modestly
equipped and decorated. It has reasonably adequate funds available for such items as:
Insurance, education, recreation, etc.
Fixation of Minimum Rates Of Wages
The “appropriate government” shall be empowered to fix the minimum rates of wages in the
manner prescribed in the Minimum Wages Act. It shall fix the minimum rates of wages payable
to the employees employed in an employment specified in Part-I or Part-II of the schedule or
review at such intervals, as it may think fit, such intervals not exceeding five years, the
minimum rates of wages so fixed and revise the minimum rates, if necessary.
The Act does not set out a minimum wage in rupee terms, but just stipulates that the wage be
a living wage which is to be decided by labour department in each state. Certain norms have
been laid out including that of calorie requirements, yards of cloth per family and so on. The
Act also stipulates that minimum wage rates are to be revised keeping in mind inflation.
Additionally, the guidelines laid down for the minimum wage by the 15th Indian Labour
Conference (ILC) and the Supreme Court suggest that a minimum wage for 8 hours of work
should be high enough to cover all the basic needs of the worker, his/her spouse and two
children. However, in many states while fixing the minimum wages, they are not linked to the
payment of dearness allowance. As a result, real wages of workers keep eroding due to
inflation, pushing them below the poverty line.
The main objective to be considered while fixing or revising the minimum wage rate should be
two-fold –
1) Social objective: that is, by providing sufficient purchasing power to the worker, enable
him/her to have a basic standard of living. In long run such a step would help in abolishing
labour exploitation and poverty.
2) Economic objective: The rate of minimum wage should be fixed at such a level which would
motivate workers and enable them to enjoy the benefits of economic growth, and thereby
contribute to the economy.
Fixation can be done in two ways-
• Fixation on committee report basis
After considering the advice of the committee or the representations submitted on proposals
contained in the notification, the government shall by notification in gazette fix the minimum
rates of wages and unless the notification otherwise provides, the rates so fixed shall come into
force on expiry of three months from the date of notification.
For the purpose of co-coordinating the work of committee and sub-committee appointed under
section 5 of the minimum wages act, 1948 for holding enquiry and advising government
generally in the matter of fixing and revising minimum rates of wages, the state government
has to appoint an advisory board for the purpose of advising central government and state
government in the matter of fixation and revision of minimum wages and other matters under
this act. For coordinating the work of the advisory board, central government has to appoint
central advisory board.
In case the appropriate government proposes to revise the minimum rates of wages by mode of
giving notification in the official gazette, the appropriate government has to consult the
advisory board also.
• Fixation on basis of consideration of proposals
Under this second method, government publishes the proposals for information of persons
likely to be affected.
It specifies date not less than two months from the date of notification, on which the proposal
will b taken into consideration. Thereafter, the government takes into consideration either the
advice of the committee or sub-committee appointed or consider all representations received
by it and thereby after notification fixes or as the case may be revises the minimum rates of
wages which would come into force on the expiry of three months from the date of its issue
unless it is specified that it will come into force on some other date.
The Supreme Court has held that the act is valid because of provisions, among others, which
required the state government, before fixing minimum wages, to take into account advice of
committee or representations on its proposals. If this provision and similar other provisions
relating to consultation with advisory bodies have not been made obligatory, the act in all
probability would have been struck down. Therefore, obtaining the advice of committee or
considerations on representation of proposals of the state government is “sine qua non” of
fixation of minimum rates of wages by the state government. If the state governments were to
proceed to revise and fix the minimum rates of wages without appointing a committee or
without publishing its proposals and inviting the representations and considering them, the
notification fixing minimum rates of wages or revising them would be clearly against the basic
provisions of the act and would have no force and validity.
Power of government in wage fixation-
If it is not shown that the appropriate government in issuing notification has acted mala fide or
in excess of its jurisdiction or in defiance of natural justice, the notification cannot be declared
invalid. The appropriate government is not bound to act judicially or even quasi-judicially. The
government may seek the view of labour commission even after consulting the advisory board.
The state government is bound to consider the advice of the committee and to fix by notification
in the official gazette the minimum rates of wages applicable to scheduled employment.
The object of this provision is to enable the government to collect data required for fixing the
minimum rates of wages. The committee appointed is only an advisory body and government
is not bound to accept any of its recommendation.
Power confined to class of employments and not individuals
The power of fixing wages can only be exercised in respect of class of employments
In fixing such wages it is also open to the state government to fix different minimum rates of
wages for different scheduled employments as well as different classes of workers under the
same scheduled employment. But having fixed the minimum rates of wages, there is nothing
in the cat which authorizes the state government to provide by notification the procedure for
deciding which of the employees fall within which particular category of employment whose
rates of minimum wages has been fixed under such notification.
The appropriate government may fix –
a. A minimum rate of wages for time work (referred to as ‘a minimum time rate’)
b. A minimum rate of wages for piece work (referred as ‘a minimum piece rate’)
c. A minimum rate of remuneration to apply in case of employees employed on piece
work for the purposes of securing to such employees a minimum rate of wages on a
time work basis (referred as ‘a guaranteed time rate’)
d. A minimum rate (whether a time rate or piece rate) to apply in substitution for the
minimum rate which would otherwise be applicable, in respect of overtime work done
by employees (referred to as ‘overtime rate’)

In fixing or revising minimum rates of wages under this section-

a) Different minimum rates of wages may be fixed for-
i. Different scheduled employments;
ii. Different classes of work in the same scheduled employment;
iii. Adults, adolescents, children and apprentices;
iv. Different localities;
b) Minimum rates of wages may be fixed by any one or more of the following wage-
periods, namely-
i. By the hour,
ii. By the day,
iii. By the month, or
iv. By such other larger wage period as may be prescribed,
And where such rates are fixed by the day or month, the manner of calculating wages for a
month or for a day, as the case may be, may be indicated
Provided that where any wage-periods have been fixed under section 4 of the Payment of
Wages Act, 1936 (4 of 1936) minimum wages shall be fixed in accordance herewith.
Any minimum rates of wages fixed or revised by the appropriate government in respect of
scheduled employments under section 3 may consist of-
i. A basic rate of wages and a special allowance at a rate to be adjusted, at such intervals
and in such a manner as the appropriate government may direct, to accord as nearly as
practicable with the variation in cost of living index number applicable to such workers;
or
ii. A basic rate of wages with or without the cost of living allowance, and the cash value
of concessions in respect of supplies of essential commodities at concession rates,
where so authorized; or
iii. An all inclusive rate allowing for the basic rate, the cost of living allowance and the
cash value of concessions, if any
The cost of living allowance and the cash value of concessions in respect of supplies of
commodities at concession rates shall be computed by the competent authority at such intervals
and in accordance with such directions as may be specified or given by the appropriate
government.
Tribunal can fix minimum rates of wages at a figure higher than those fixed by government.
Tribunal can take into account the minimum wages fixed in several awards in city as a criteria
for fixation.
The two methods have been provided for fixation/revision of minimum wages. They are the
Committee method and Notification method.

(i) COMMITTEE METHOD

Under this method, committees and sub-committees are set up by the appropriate Governments
to hold enquiries and make recommendations with regard to fixation and revision of minimum
wages, as the case may be.
(ii) NOTIFICATION METHOD
In this method, Government proposals are published in the Official Gazette for information of
the persons likely to be affected thereby and specify a date not less than two months from the
date of the notification on which the proposals will be taken into consideration. After
considering advice of the Committees/Sub-committees and all the representations received by
the specified date in Notification method, the appropriate Government shall, by notification in
the Official Gazette, fix/revise the minimum wages in respect of the concerned scheduled
employment and it shall come into force on expiry of three months from the date of its issue.
PAYMENT OF MINIMUM RATES OF WAGES
The employer is required to pay to every employee, engaged in a scheduled employment under
him, wages at a rate not less than the minimum rate of wages notified for that class of
employees without any deduction except as may be authorized.
FIXING HOURS FOR NORMAL WORKING DAY
In regard to any scheduled employment, minimum rates of wages in respect of which have
been fixed under this Act, the appropriate Government may
(a) Fix the number of hours of work which shall constitute a normal working day, inclusive of
one or more specified intervals;
(b) Provide for a day of rest in every period of seven days which shall be allowed to all
employees or to any specified class of employees and for the payment of remuneration in
respect of such days of rest;
(c) Provide for payment for work on a day of rest at a rate not less than the overtime rate.
Overtime
Where an employee whose minimum rates of wages is fixed under the act by the hour, by the
day or by such a longer wage period as may be prescribed, works on any day in excess of
number of hours constituting normal working day, the employer shall pay him for every hour
or part of an hour so worked in excess at the overtime rate fixed under the act or under any law
of the appropriate government for the time being in force, whichever is higher.
Maintenance of Registers and Records
Every employer is required to maintain registers and records giving particulars of employees,
the work performed by them, the wages paid to them, the receipts given by them and any other
required particulars.

Inspections
The appropriate Government may, by notification in the Official Gazette, appoint inspectors
for this purpose under the Act and define the local limits for their functions.
Claims
The appropriate Government may, by notification in the Official Gazette, appoint Labour
Commissioner or Commissioner for Workmen’s Compensation or any officer not below the
rank of Labour Commissioner or any other officer with experience as a judge of a civil court
or as a Stipendiary Magistrate, to hear and decide for any specified area, all claims arising out
of the payment of less than the minimum rates of wages as well as payment for days of rest or
for work done.
Authorised Deductions
The deductions can be made on account of:
(a) Fines
(b) Damage or Loss
(c) Breach of Contract
Wages in kind
(1) Minimum wages payable under this Act shall be paid in cash.
(2) Where it has been the custom to pay wages wholly or partly in kind, the appropriate
Government being of the opinion that it is necessary in the circumstances of the case may, by
notification in the Official Gazette, authorize the payment of minimum wages either wholly or
partly in kind.
(3) If the appropriate Government is of the opinion that provision should be made for the supply
of essential commodities at concession rates, the appropriate Government may, by notification
in the Official Gazette, authorize the provision of such supplies at concession rates.
(4) The cash value of wages in kind and of concessions in respect of supplies of essential
commodities at concession rates authorized under sub- sections (2) and (3) shall be estimated
in the prescribed manner.