WAGES IN INDIA

MADE BYManjari Singh Alex Ashish Kujur

WAGE- DEFINITION
Monetary remuneration computed on hourly, daily, weekly, or piece work basis.

A fixed weekly or monthly wage is usually called a salary.

REGULATION OF WAGES
The legal framework for the payment of wages/ salaries is governed by legislations besides the guidelines for managerial remuneration and relevant provisions in the Indian Companies Act.

ONE- PAYMENT OF WAGES ACT,1936

Enacted to ensure that wages payable to employees are disbursed within the prescribed limit and no deductions other than those authorized by law are made by the employers.
Coverage Responsibility for payment of wages- employers, managers, person responsible to the employer for supervision Fixation of wage periods Time of wage payment Deductions Claims Payment of undisbursed wages

 

    

TWO- MINIMUM WAGES ACT, 1948

Principal objective is to prevent exploitation of labor through the payment of unduly low wages.
Fixing of minimum wages Minimum rate of wages Working hours Overtime Employers obligation Exemptions Different categories

      

THREE- PAYMENT OF BONUS ACT, 1965

Applies to every factory and establishment in which 20 or more persons are employed on any day during an accounting year. Every employee shall be entitled to be paid bonus provided he has worked for at least 30 working days in an year.

Disqualification for bonus Payment of minimum bonus Payment of maximum bonus Proportionate reduction in bonus Set on and set off of allocable surplus Deductions from bonus Time limit for payment of bonus

REGULATION OF MANAGERIAL REMUNERATION

Regulation of managerial remuneration is a special feature of company law in India.

Section 198 of the companies act provides for an overall ceiling of 11% of the net profits as the maximum managerial remuneration that can be paid by any company in any financial year Within ceilings, there are sub- ceilings as per section 309, on remuneration payable to managing director or whole time director To prevent directors from drawing more money in the guise of collateral benefits, section 198 explains that the remuneration shall include the following: any expenditure incurred in providing free accommodation & other amenities connected therewith; any expenditure incurred in providing any other amenity either absolutely free or at concessional rate; Any expenditure incurred in providing any obligation or service which in the absence of provision by the company would have to be incurred by that person; any expenditure incurred in providing life insurance, pension, annuity or gratuity for any such person, his spouse or child.

1.

2.

3.

4.

WAGE POLICY AT COMPANY LEVEL

Attraction and retention Internal equity External equity Personal equity Ability to pay Pay and performance Labor costs and productivity Cost of living Merit and seniority progression Motivation Integrity

PAY COMPONENTS
Basic wage Dearness allowance Allowances

ISSUES IN WAGE SYSTEM

Divergent concerns of different stakeholders Problems in ensuring legal compliance for minimum wage legislation Increasing inequality/disparity between and among employees Cost cutting compensation resulting in lowering labor standards Wage differential not based on skill differential Distortions in executive and managerial remuneration Frequent changes in tax provisions Differing preferences of old and new employees

PAY COMMISSION

A Pay Commission is a panel of members of the Union Cabinet of India for raising the salaries of government employees.

It is an administrative system/mechanism that the government of India set up in 1956 to determine the salaries of government employees.

The Sixth Pay Commission submitted its report to Finance Minister P Chidambaram on 4th April . The recommendations of the commission, when accepted, would provide a bonanza to over 4.5 million central government employees.

VARIOUS PAY COMMISSION

The First Pay Commission was established in 1956, and since then, every decade has seen the birth of a commission that decides the wages of government employees for a particular timeframe. The second Pay Commission was set up in August 1957 and gave its report in two years. The third Pay Commission, set up in April 1970, submitted its report in March 1973. The recommendations of the Fourth Pay Commission covered the period between 1986 and 1996. The Fifth Pay Commission covered the period between 1996 and this year.

SIXTH PAY COMMISSION

In July 2006, the Cabinet approved setting up of the sixth pay commission. This commission has been setup under Justice B.N.Srikrishna with a timeframe of 18 months. The cost of hikes in salaries is anticipated to be about Rs. 20,000 crore for a total of 5.5 million government employees as per media speculation on the 6th Pay Commission, the report of which is expected to be handed over in late March/early April 2008. The employees had threatened to go on a nationwide strike if the government failed to hike their salaries. Reasons for the demand of hikes include rising inflation and rising pay in the private sector due to the forces of Globalization. The Class 1 officers in India are grossly underpaid with an IAS officer with 25 years of work experience earning just Rs.55,000 as his take home pay. Pay arrears are due from January 2006 till September 2008. Almost all the Government employees received 40% of the pay arrears in the year 2008 and balance 60% arrears (as promised by Government) has also been credited in Government employees account in the year 2009. The Sixth Pay Commission mainly focused on removing ambiguity in respect of various pay scales and mainly focused on reducing number of pay scales and bring the idea of pay bands. It recommended for removal of Groupd-D cadre.

SIXTH PAY COMMISSION: ALLOWANCES AND FACILITIES

All the allowances except dearness allowance will be effective from September 1, 2008. Children education allowance has been revised as per recommendations of 6th Pay Commission and will increase with increasing DA.

An increase by 21 per cent on an average in the salaries of the government employees has been ensured in the notification. Employees will get new pay from January 1, 2006 but arrears will be paid in 2 splits i.e. 40% in 2008-09 and 60% in 2009-2010.

Fitment factor is 1.84 and annual increment at 3% Annual increment will be given at 4% to high performers in PB-3 subject to 20% of total strength.

SIXTH PAY COMMISSION:PENSION BENEFITS

Effective date for implementation of revised pension structure is January 1, 2006. Arrears of the pension will be paid in cash in two installments (40% in 2008-09 & remaining in 2009-10)

Old pensioners will get an increase of 20, 30, 40, 50 and 100% after attaining the age of 80, 85, 90, 95 and 100 years, respectively. Employee completing 20 years of service will get pension equal to 50% of either the pay last drawn or average of emoluments received during the past 10 month, whichever is more beneficial.

CONTROVERSY

Several government services, most notably the armed forces have complained bitterly of downgradation due to pay commissions exceeding their brief, and introducing anomalies in the relative scales of pay of government services. At present, the armed forces have represented to the government for the removal of anomalies which it is felt that the civil servants on the commission have deliberately introduced to upgrade themselves vis-a-vis service officers in the defence forces.

SECOND PAY COMMITTEE

Over 1.6 million employees working in the estimated 240 central public sector undertakings (PSUs) are likely to receive a 50 to 60 per cent salary increase, possibly with retrospective effect from January 2006. The second PSU pay revision committee, headed by former Supreme Court Justice M Jagannadha Rao, is in advanced stages of finalizing its award and plans to submit its report to the government soon after.

In 1997, when PSU pays were last revised, the hike in some scales was as much as 68 per cent. This time I expect a raise of 55 to 60 per cent, especially because of the overall growth in PSU profitability, a serving director of a topranked PSU said . By this reckoning, the chairman of a schedule A (top-ranked navratnas like Indian Oil, ONGC and NTPC, among others) central PSU, whose annual cost to company (CTC) works out to Rs 12 lakh to Rs 14 lakh, could earn a gross Rs 20 lakh after the award. At the bottom of the PSU pay scale, an entry level attendant in a leading power PSU has a CTC of around Rs 22,000 per month, which could go up to Rs 33,000

THANK YOU