Minimum Wages in India — State and Skill-Wise

Table of Content:

• The Minimum Wages Act, 1948
• Objectives of the Minimum wages Act
• Duties of an employer under Minimum Wages Act 1948
• Minimum Wage Calculation in India
• Minimum wages state-wise
• Pros and Cons of Raising the Minimum Wage
• Non-compliance of Code on Wages Act

As stated by the ILO and decided upon by a committee of experts, “Minimum wages have been decided as the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract.”

Irrespective of the method of deciding a minimum wage, the above definition states their binding nature. It can be established by a resolution or regulation decided upon by a relevant authority, councils or boards dealing with wages, or courts and tribunals dealing with industries or labour. Minimum wages set by collective agreements can also carry the power of the law.

The minimum wage system can be utilised to strengthen other existent social and employment policies. They can act as an added aspect in policies to overcome financial inequality, poverty and gender bias in remuneration.

The Minimum Wages Act, 1948

The Minimum Wages Act of 1948 was established after the end of the British’s exploitative rule. During British rule, wages were extremely low and different for every part of the country. The act sought to bring due equality and fairness of pay to the working class.

A fair wage committee was set up who defined the term, minimum wages, issued standards to settle the wage disputes in organized industries. Though they conceptually defined what “minimum wage” stood for, they did not provide a way to calculate it. Later on, the Indian Labour Conference, in its 15th session, defined the required physical necessities and healthy maintenance of labour laws.

Section 3 of the Act states that the relevant government (Central, State or Local) will have the authority to fix the minimum wages. It also specifies the rate based on the prescribed time. Hence, the rates vary for different areas and zones.

The minimum wage in India is fixed following certain criteria:

1. Timely Rate
   Here, the minimum wage is set according to the duration of the work done
2. Piece Rate
   This wage is set by calculating the total number of pieces manufactured in a factory
3. Overtime Rate
   This is set by the overtime work done by the labour excluding the time or piece rateAdditionally

• A wage committee formed by the relevant government must consist of members from both the employee and the employer side.
• The Minimum Wages Act also states that an advisory board can be formed. This board provides recommendations and changes to be made to the labour and minimum wages laws.
• Non-compliance of this act and violating fixed hours are punishable by a maximum of five years imprisonment and a fine of INR 10,000.INR 146.00 per day was the average amount of minimum wage between 1965 and 2014, with INR 272.19 per day being the highest. INR 3.87 in 1965 was the lowest recorded in Indian Minimum Wage history. In 2014, the rate increased to INR 272.19 per day in 2014.The Code on Wages Act came into being in the year of 2019, effectively replacing four previous labour regulations – Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965, and Equal Remuneration Act, 1976.The minimum wages were set under the regulations stated in the Minimum Wages Act, 1948 till now. The new code does not allow employers to pay their workers less than the minimum wage. It also stipulates that the minimum wages should be reviewed and revised by the respective state and the central governments every five years and not later than that.The new code also sets a National Floor Level Minimum Wage (NFLMW). The state governments have to make sure to fix their respective minimum wages the same as NFLMW or more but not below it.

Objectives of the Minimum wages Act

The scope of the Minimum Wages Act is to prevent employers from exploiting the employees. It ensures the worker is sufficiently paid to provide enough for his/her basic needs such as food, shelter and clothing. The core objectives of the Act are listed below.

• Provide minimum wages to employees in the organized sector.
• Prevent exploitation of employees.
• Empower the government to fix and revise minimum wages promptly.
• Apply this order for most of the sections in the organized sector.

Duties of an employer under Minimum Wages Act 1948

Every employer must pay wages that meet the minimum wage guidelines put forth by the government.

• Wages should be paid in cash, cheque or bank transfer.
• In order to fix the minimum wages, the employment should be in Schedule originally or must be added to the Schedule by notification under Section 27 of the act.
• Employers should double the pay for excess work hours considering 9 hours per day and 48 hours per week as the standard.
• Under the provisions of the act, every employer should assure the minimum wage as prescribed by the class-wise minimum wages notifications.
• Employer should fix the wage period at intervals not exceeding one month or as prescribed by the authorities
• If less than 1000 personnel are employed, the wages should be paid by the 7th day of the following month. For employers having more than 1000 workers, this can exceed till the 10th day of the following month.
• For discharged employees, wage settlement should be done within the 2nd working day after the discharge.
• Every employer should maintain a wages register specifying the following particulars for each worker.
  • Minimum payable wages
  • Days with overtime work
  • Gross wages
  • Wages paid and date of payment
• Employers should manage to get the signature or thumb impression of every worker on the wage register and wage slips.
• Employers should exhibit a notice in English and local language at the main entrance of the establishment or offices depicting the following attributes.
  • Minimum wage rates
  • Abstracts of applied acts and rules
  • Name and details of the Labour Inspector/ Asst. Commissioner of Labour etc.

Minimum Wage Calculation in India

The central minimum wages are calculated differently based on the skill and nature of the labour. Labour in India is broadly categorised as highly skilled, skilled, semi-skilled and unskilled. The guidelines of the Indian Labour Conference of 1957 are being used to compute the minimum wage.

Indian labour conference held in 1957 suggested several norms to calculate the minimum wage for employees in any sector. They are:

 (i) 3 consumption units per earner

(ii) Least food requirements of 2700 calories per average adult.

(iii) Clothing provisions of 72 yards per family per annum

(iv) Rent compared to the minimum area given under Government’s Industrial Housing Scheme.

(v) Fuel and other miscellaneous stuff of expenditure to aggregate 20% of the total minimum wage.

Minimum wages state-wise

The state governments have the power to exclusively set the minimum wages along with variable dearness allowance (VDA) in their respective territories. Hence, there are disparities in the minimum wages state-wise. Certain states also have wage rate variations in specific zones. Some states revise their labour minimum wage rates every six months and some every five years. The following are the minimum wages of some states:

Why does India have no national minimum wage?

In accordance with the Wages Act 2019, should receive minimum wages fixed by the ruling state government. Labour and its welfare can be considered as state and central subject so regulations concerning the same would be multi jurisdictional. For a better understanding of the worker lifecycle and expenditures, state-wise minimum determination is apt than a nationwide one.

State governments are empowered to fix minimum wages independently. Although this is the case, arising disparities among neighbouring states is common and drives certain disputes. To minimize similar disputes, the Central government has introduced 5 regional committees for harmonizing minimum wages in India.

Pros and Cons of Raising the Minimum Wage

Raising the minimum wages is a contradictory topic. Many are supporting the cause considering the current economic scenarios and deflation. In a developing country like India, raising the minimum wages rapidly could result in economic disorders and complications. Although raising the minimum wages might help to reduce the income inequality, experts are pointing out various other disadvantages too. Let us explore the pros and cons of raising minimum wages.

Non-compliance of Code on Wages Act

The Code on Wages Act states that the government should appoint inspectors/facilitators to see if the organisations are following the rules. The penalty is dependent on the essence of the non-compliance. The maximum punishment is three months imprisonment and/or fine up to 1,00,000 INR.

In case the labour minimum wage is lower than the government’s declared rates, a complaint can be registered with the labour inspector either by the worker alone or via a registered trade union or a lawyer.

According to the new act of 2019, minimum wages are fixed by the concerned state governments. Labour and their welfare are on the concurrent list making it a part of both the central and state lists. There hasn’t been any significant development in implementing a central minimum wage applicable for all Indian workers yet.

Setting and following minimum wages is a step toward social reform. This provision mandated by the constitution has ensured the livelihood of many workers to be better. The effect it has brought on is clearly visible in Delhi, where employers pay the fixed minimum wages to workers. The implementation of this regulation is still not prominent in other states and no results to say otherwise.

More effort should be made by the government and the relevant authorities to study the effects of minimum wage on different aspects like unemployment, informality, gender pay gaps, wages, hours of work, etc. Attempts should be made to raise the bare minimum wage range. Raising the minimum wages of the working class strengthens their purchasing power and also provides a boost to the country’s economy.

Minimum Wage FAQs:

1. What is Minimum Wage ?

It is the wages fixed and revised — on a periodic basis — by the Government of India and the governments of various States and UTs for all scheduled employment. The wages are made up of the basic and variable dearness allowance.

2. What is Variable Dearness Allowance ?

In 1988, the Labour Ministers’ Conference suggested the wages mechanism be amended by linking it to the rise in Consumer Price Index in order to protect it against inflation. As a result, the idea of Variable Dearness Allowance was brought to the fore in the year 1991.

The Variable Dearness Allowance is revised twice a year; on the 1st of April and then again on the 1st of October. As of today, 26 UTs and States of India have provisions for Variable Dearness Allowance.

3. Under the Minimum Wages Act who are the Inspectors?

Assistant Commissioners of Labour, Deputy Commissioners of Labour, Assistant Labour Officers and belong to the rank of Inspectors under the Minimum Wages Act.

4. Who, according to the Minimum Wages Act, can file claims ?

As per the Minimum Wages Act, a trade union, an individual employee, or the inspectors can file the claims in a prescribed format in the presence of the authorities.

5. For a scheduled employment, what is the number of working hours in a day ?

The total number of hours considered as a normal working day is equivalent to nine hours in the case of an adult. These 9 hours include a 1-hour break for lunch. As per the law, the employer must compensate the worker with wages every week and also provide a day of rest for every 6 days worked. In the event where work done exceeds 4 hours but is less than 8 hours, the worker is entitled to receive full day’s wages.

6. When is the workman entitled to overtime wages ?

If any worker works for more than the hours prescribed for work is entitled to receive double the wages as overtime compensation. However, in the case of agriculture, the overtime compensation is 1.5 times the daily wage.