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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. 1

Wages Structure in India Under the Minimum Wages Act 1948

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A complete research project on Wage Structure in India with the main focus on the Minimum Wages Act, 1948.

Text of Wages Structure in India Under the Minimum Wages Act 1948

Wage Structure in India under The Minimum Wages Act, 1948INTRODUCTIONThe 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.

The purpose of seeking employment is to sell labour to earn wages so as to attain a decent or dignified standard of living. The wage or income that a worker obtains from his /her work is therefore, what enables him /her to achieve a fair standard of living. One seeks a fair wage both to fulfil ones basic needs and to feel reassured that one receives a fair portion of the wealth in return for ones work to generate for society. Society has a duty to ensure a fair wage to every worker, to ward off starvation and poverty, to promote the growth of human resources, and to ensure social justice without which likely threats to law and order may undermine economic progress.

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The Minimum Wages Act was passed for the welfare of labourers. The Minimum Wages Act empowers the appropriate government to fix and revise minimum rates of wages payable to employees engaged in scheduled employment for work done in accordance with the contract of services, express or implied. Word scheduled employment means an employment specified in schedule or any process or branch of work forming part of such employment. Schedule is divided into two parts i.e. Part-I1 and Part-II2

The Constitution of India envisages a just and humane society and accordingly gives place to the concept of living wage in the chapter on Directive Principles of State Policy. The Minimum Wages Act, 1948 is based on Article 43 of the Constitution of India which states that, "The State shall endeavor to secure by suitable legislation or economic organization or in any other way to all workers, agricultural, industrial or otherwise, work, a living wage (emphasis added) conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities"3 A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labor. Although minimum wage laws are in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage. Supporters of the minimum wage say that it increases the standard of living of workers, reduces poverty, and forces businesses to be more efficient. Opponents say that if it is high enough to be effective, it increases unemployment, particularly among workers with very low1

Part-I includes employment in any woolen carpet making or shawl weaving establishment, in any flour mill, rice mill or Dal mill, any tobacco manufactory, any plantation, any estate which is maintained for the purpose of growing rubber, tea or coffee, any oil mill, under any local authority, on the construction, in stone breaking/crushing, in lac manufactory, in any mica works, in public motor transport, in tanneries and leather manufactory. 2 Part-II includes employment in agriculture. Example any form of farming including cultivation and tillage of soil, dairy farming, the production, cultivation, growing and harvesting of agriculture or horticulture commodity, raising of live stock, bees or poultry. 3 http://nceus.gov.in/Report_Bill_July_2007.htm

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productivity due to inexperience or handicap, thereby harming less skilled workers and possibly excluding some groups from the labor market; additionally it is less effective and more damaging to businesses than other methods of reducing poverty.1 India was one of the first developing countries to introduce a minimum wage policy. The enactment of the Minimum Wages Act in 1948 was the result of both internal and external factors. Internal factors included the increase in the number of factories and wage-earners during the first half of the 20th century, as well as the growing number of industrial unrests and strikes of workers who rebelled against their starvation wages. The most significant external factor was the adoption by the International Labour Organization (ILO) in 1928 of Article 1 of Convention No. 26 on minimum wage fixing in trades in which no effective collective bargaining takes place and where wages are exceptionally low. Until this day, the Minimum Wage Act of 1948 is still considered to be one of the most important pieces of labour legislation. But Indias system of minimum wages is also one of the most complicated in the world. The 1948 legislation determines that the appropriate government should fix minimum wage rates payable to employees in a number of listed or scheduled employments. This has at least three important implications: Firstly, minimum wages are set by different authorities in different types of companies; Secondly, the minimum wage is set only in certain employments or occupations and so not all wage-earners are covered: Thirdly, there exist now a large number of rates which sometimes differ widely across states, even for the same occupation.2

1 2

http://en.wikipedia.org/wiki/Minimum_wage http://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/--travail/documents/publication/wcms_145336.pdf

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In practice, the appropriate government is either the Central Government or the state governments. More specifically, the Act provides that the Central Government sets the minimum wage rate in state-owned enterprises, while state governments set minimum wages for any other type of companies. The Central Government is also responsible for setting the minimum wage in all companies operating under a railway administration or in relation to a mine, oilfield, or major port or any corporation established by the Central Government. The state governments and Union Territory Administration are the appropriate governments in respect of all other companies. In practice, both the Central and the state governments have appointed Advisory Boards, with the Central Advisory Board coordinating the work of all the State Advisory Boards. These Advisory Boards are usually tripartite, including representatives of government, employers and workers.1 The Constitution of India accepts the responsibility of the State to create an economic order in which every citizen finds employment and receives a fair wage. This made it necessary to quantify or lay down clear criteria to identify a fair wage. Therefore, a Central Advisory Council in its first session (November, 1948) appointed a Tripartite Committee on Fair Wages. The Committee consisted of representatives of employers, employees and the Government. Their task was to enquire into and report on the subject of fair wages to labour. A tripartite Committee Viz., "The Committee on Fair Wage" was set up in 1948 to provide guidelines for wage structures in the country. The report of this Committee was a major landmark in the history of formulation of wage policy in India. Its recommendations set out the key concepts of the 'living wage', "minimum wages and "fair wage" besides setting out guidelines for wage fixation.

Article 39 states that the State shall, in particular, direct its policy towards securing (a) that the citizen, men and women equally shall have the right to an adequate livelihood and (b) that there is equal pay for equal work for both men and women.1

http://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/--travail/documents/publication/wcms_145336.pdf

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Article 43 states that the State shall endeavor, by suitable legislation or economic organization or in any other way, to give all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure, and social and cultural opportunities. Case: Chatturam Darasanram vs. Union of India A petition for quashing a notification dated 28th may, 1976 issued by central government revising the wages of the workmen employed in the mica mines was filed. The question was whether workmen working in mines were working in scheduled employment. It was held that the item no. 10 of part 1 of schedules relate to employment in any mica works. The connotation mica works and mica mines are different from each other. So mica mines is not included in the schedule.1 Case: - Ahmadabad Panjrapole Sanstha vs. Miscellaneous Mazdoor Sabha and others2 The petitioner sanstha is engaged in activities of taking care of sick and lame cattle. It has other objects such as rising of cattle, improving the breed, run dairy farm in order to supply good milk and ghee in the interest of public and to grow grass to cut it or have it cult and to buy or sell the same. It has land in different villages and it earns rental and other income and also agricultural income besides income earned by sale of wood, wool etc. it was held that having regard to the activities of panjrapole sanstha, it is a commercial establishment attracting minimum wages act. It is not a separate establishment and the fact that the other branches have not demanded minimum wage will not affect the right of workmen.

NATIONAL WAGE POLICY1 2

(1980 II L.L.J. 465 (Patna)) (1987) II L.L.J. 291 (Guj)

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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 viewsTill 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 neighboring States while fixing/revising minimum wages etc.1

ACCORDING TO THE REPORT OF THE SECOND INDIAN NATIONAL LABOUR COMMISSION 2002 (i) The Commission recommends that every employer must pay each worker his onemonth's wage, as bonus before an appropriate festival, be it Diwali or Onam or Puja or Ramzan or Christmas. Any demand for bonus in excess of this up to a maximum of 20% of the wages will be subject to negotiation. The Commission also recommend that the present system of two wage ceilings for reckoning entitlement and for calculation of bonus should be suitably enhanced to Rs.7500/- and Rs.3500/- for entitlement and calculation respectively. (ii) There should be a national minimum wage that the Central Government may notify. This minimum must be revised from time to time. It should, in addition, have a1

http://labourbureau.nic.in/MW_Report_2008.pdf

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component of dearness allowance to be declared six monthly linked to the consumer price index and the minimum wage may be revised once in five years. The Commission also recommends the abolition of the present system of notifying scheduled employments and of fixing/revising the minimum rates of wages periodically for each scheduled employment, since it feels that all workers in all employments should have the benefit of a minimum wage. (iii) There is no need for any wage board, statutory or otherwise, for fixing wage rates for workers in any industry ADVANTAGES OF WAGES Wages helps in reduction of poverty because it increases the wages of the lowest paid. Wages increases the productivity because higher incentives, makes people work harder and thereby, resulting in increase of output. Giving workers the needed amount income from their work to survive and pay the bills. Preventing employers to take advantage of the employees, particularly in tough times. CONSTITUTIONAL VALIDITY OF THE ACT:A draft convention on the question of minimum wages was adopted at the international labour conference held in Geneva in 1928. Draft convention contemplated the creation of a minimum wage fixation machinery only in case traders or part of trades in which no arrangement exists for the effective regulation of wages by collective agreement otherwise and wages are exceptionally low In view of the directive principles of state policy as contained under article 43 of Indian constitution it is beyond doubt that securing of living wage to labourers which ensure not only bare physical subsistence but also the maintenance of health and decency, is conducive to general interest of the public.

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The minimum wages act was passed to fulfill the aspirations as contained in following resolution:If the labourers are to be secured the enjoyment of minimum wages and they are to be protected against exploitation by their employers, it is absolutely necessary that restraints should be imposed upon their freedom of contract and such restriction cannot in any sense be said to be unreasonable. On the other hand, the employers cannot be heard to complaint if they are compelled to any minimum wages to their laborers even though the labourers on the account of their poverty and helplessness are willing to work on lesser wages. The constitutional validity of the act is attacked on the ground that it violates the guarantee of freedom of trade and business, envisaged by article 19(1) (g) of constitution in as much as the provisions of the act are bound to effect harshly and even oppressively a particular class of employers who for purely economic reasons are unable to pay minimum rates of wages fixed by the authorities, but have absolutely no dishonest intention of exploiting their workers. The fact that employer might find difficulties to carry ob business on settled principles cannot be a sufficient reason for striking down the law itself as unreasonable. The poverty of labourers is also a factor to be taken into consideration while determining a question whether a particular provision is in the interest of general public. The appropriate government has undoubtedly has been given wide powers with regard to procedure of fixing of minimum wages. But it has to take into consideration before fixing the wages, the advice of committee or the representations on its proposals made by the persons who are likely to be affected by it. The provisions of the act constitute adequate safeguard against any hasty, arbitrary and capricious decision by appropriate government. However there is no provision regarding review of decision of the appropriate government but that by itself cannot be taken to hold the provisions of the cat as unreasonable.11

Unichay v. State of Kerela, A.I.R. 1962 SC 12

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Therefore the restrictions though they are inferred to some extent with the freedom of trade or business guaranteed under article 19(1) (g) of Indian constitution, are reasonable and are imposed in the interest of general public and as such are protected by article 19(6) of Indian constitution.

Aims and Obj ect s of Mi ni m um Wages Act The Act provides for fixing minimum rates of wages in certain employments to whichprovisions 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' o r g a n i z a t i o n s a r e y e t p o o r l y d e v e l o p e d a n d t h e w o r k e r s ' b a r g a i n i n g p o w e r i s 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 wherethere 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.

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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.1

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. 2

In view of the historical survey, it may be pointed out that the object of the Act is to prevent exploitation of the workers, and for that purpose it aims at fixation of minimum wages which the employer must pay. The legislature undoubtedly intended to apply the Act to those industries or localities in which by reason or causes such1 2

Gazette of India, 1946, Part V, p.331 Chapra and Apte, The Minimum Wages Act, 1948, (1973) p.1

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as unorganized labour or absence of machinery for regulation of wages, the wages paid to workers, were in the light of general level of wages and subsistence level, inadequate. 1 The Act was intended to apply only to industries in which the labour was unorganized to achieve the object of doing social justice to workmen employed in the scheduled employments by prescribing minimum rates of wages for them.2

In this way the pith and substance of the Act is to provide for the welfare of the labour. 3 The Supreme Court of India has observed that the object of the Act is directed against exploitation of the ignorant, less organized and less privileged members of the society by the capitalist class. This anxiety of the State for improving the general economic condition of some of its less favored members appears to be in supersession of the old principle of absolute freedom of contract and the doctrine of laissez faire and in recognition of new principles of social welfare and common good. 4 The Act contemplates certain security measures providing at least security of minimum wages to working class safeguarding them from exploitation of labour due to their less bargaining power, when they are unorganized and there is absence of machinery for regulation of wages. In 'essence what the Act purports to achieve is to prevent exploitation of labour and for the purpose it authorizes the appropriate Government to take steps to prescribe minimum rates of wages in the scheduled industries. In an underdeveloped country which faces the problem of unemployment on a very large scale, it is not unlikely that labour may offer to work even on starvation wages. The policy of the Act is to prevent employment of such sweated labour in the interest of general public and so in prescribing minimum wages rates even the capacity of the employer need not be considered 5 as the State assumes that every employer must pay the minimum wages before he employs laborer for his work.1 2

Bhikusa Yamess Kshatriya vs. Sengemmer Akola Taluka Bibi Kamgar Union, A.I.R. 1963 SC 806 M.P. Miner Industries Association vs. Regional Labor Commissioner, A.I.R. 1960 SC 1068 3 Panihatti Municipality Vs. Secretary, PMLW Union, A.I.R. 1965 Cal. 229 4 Y.A.Mamarde Vs Authority Under Minimum Wages Act, 1948 A.I.R. 1972 SC 1721, 1725 5 U.Unichoy Vs. State Of Kerala A.I.R. 1962 SC 12

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The Act contemplates that minimum wage rates must ensure not merely the mere physical need of the worker which would keep him just above starvation but must ensure for him not only his subsistence and that of his family but also preserve his efficiency as a workman. It should, therefore, provide, not merely for the bare subsistence of his life but for the preservation of the worker and so must provide for some measure of education, medical requirements and amenities. 1 In other words, the Act contemplates that the minimum wage rates should be fixed in the scheduled industries with the dual object of providing sustenance and maintenance of the worker and his family and preserving his efficiency as a worker. 2 The schedule to the Act mentions industries where there was sweated labour or exploitation of laborer. 3 Part I of the schedule contains employment (1) Carpet making or Shawl weaving, (2) Rice Mill, Flour Mill or Dal Mill, (3) Tobacco (including Bidi making) Manufactory, (4) Plantation that is to say, any estate which is maintained for the purpose of growing cinchona, rubber, tea or coffee, (5) Oil Mills, (6) Employment under Local Authority, (7) Road Construction and Building Operations, (8) Stone breaking or Stone Crushing, (9) Lac Manufactory, (10) Mica Works, (11) Public Motor Transport (12) Tanneries and Leather Manufactory, (13) Agriculture, (14) Mines such as Fire clay mines, copper mines, China clay mines, etc. (15) Employment in loading and unloading in Railways goods sheds, docks, and ports, (16) Employment in Ashprit cleaning on railways. In 1998 some other industries have been added, namely Employment in (i) lignite mines (ii) gravel mines (iii) slate mines and (iv) Laying of underground cables, electric lines, water supply and sewerage pipe line.4

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Crown Aluminum Works Vs. Their Workmen, A.I.R. 1958 SC 30; U.Unichoy Vs. State Of Kerala A.I.R. 1962 SC 12;M/S Hydro Engineers Pvt Ltd Vs Their Workmen, A.I.R. 1969 SC 182 2 Airfreight Ltd. Vs. State Of Karnataka And Others, 1999 SCC (L&S) 1185; U.Unichoy Vs. State Of Kerala A.I.R. 1962 SC 12, 17 Relied On 3 Chandra Bhawan Boarding And Lodging, Bangalore Vs. State Of Mysore 1970 II LLJ 403 SC 4 Added By So 439 (E) Dated 20.5.1998

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Part II of the schedule contains employment in Agriculture.

It may be noted that in respect of the employment in agriculture, instead of fixing the minimum rates of wages for whole of the State, the Appropriate Government has been given the power to fix such rates for a part of the State or for any specified class or classes of such employment in the whole State or part thereof. It may be observed that the list of employments specified in the schedule is not exhaustive and therefore power is given to the State Government to add to the schedule more employments. It has been held by the Supreme Court of India that this power given to the State Government is not ultra vires.

The Supreme Court has observed: "Conditions of labour vary under different circumstances and from State to State and the expediency of including a particular trade or industry within the schedule depends t upon a variety of facts which are by no means uniform and which can best be ascertained by the person who is placed in charge of the administration of a particular State. It is to carry out effectively the purpose of this enactment that power has been given to the Appropriate Government to decide, with reference to local conditions, whether it is desirable that minimum wages should be fixed in regard to a particular trade or industry which is not already included in the list. We do not think that in enacting Section 27 of the Minimum Wages Act, the Legislature has in no way stripped itself of its essential powers or assigned to the administrative authority anything but an accessory or subordinate power which was deemed necessary to carry out the purpose and the policy of the Act."1 Accordingly various employments have been added to the schedule in different States from time to time.

Rationalization of Wages In Marathwada Agricultural University (Marathwada Agricultural University V. Marathwada Kirshi Videyapith, M.S.K.S,2

1 2

Edward Mills Co. vs. State of Ajmer, AIR 1955 SC 25 (2007) III L.L.J 768 : AIR 2007 SC 2969

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Union espousing cause of daily rated workers of appellant university succeeded in their writ petition in which they sought direction of parity of wages paid to permanent labourers. The primary grievance was that qualification, nature of work, duties and responsibility of works of daily rated labourers are same as that of permanent labourers employed by university. Even then the daily rated workers were getting far less wages which were being paid to permanent labourers. It was also submitted that Maharashtra Mumbai wages commission constituted under the minimum wages act, 1948, had fixed rate of wages depending upon zones in marathwada region. But the university paid these daily rated workers far less. The high court held that denial of appropriate wages to daily rated workers amounted to exploitation of worker. In appeal against the high court direction, the appellant submitted that the workers were seasonal workers and the question of regularization does not arise in view of supreme court decision in secretary, state of Karnataka v. Uma Devi1 , the supreme court considered that considering the peculiar nature of controversy a committee should be constituted for the purpose of rationalization of wages to be paid to concerned workers. Then on the basis of report the state government should take necessary action after obtaining the view of the university and after giving all concerned an opportunity of stating the views. Case: - Haryana Unrecognized School Association vs. State of Haryana2 That the teachers of educational institution cannot be brought within the purview of minimum wages act. The state government in exercise of its power under the act was not entitled to fix minimum wages for this segment of employees. Since the teachers of educational institution are not employed to do any skilled or unskilled or manual or clerical work, they cannot be said to be employees under section 2(i).

DEFINITION OF WAGESThe 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,1 2

(2006) 4 SCC 1 : (2006) ii LLJ 722 (1996) 2 LLJ 639: A.I.R. 1996 SC 2108. To The Same Effect, Hari Vidya Mandir Vs. State Of UP, (1998)LLJ 1126

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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 wages1 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 allowance1

Mahender Chandra v. State , A.I.R. 1971 Tri 32

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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 doesnt include any contribution to pension und or any payment under scheme of social insurance, traveling allowance. In Prerna Sahyaog v. Authority under Minimum Wages Act and Others1 On receiving a complaint of non payment of wages, the authority under Minimum Wages Act, 1948 ordered payment of 8times of wages as compensation. The Supreme Court held that the award of compensation was too excessive and hence it was reduced to equivalent of wages awarded to the workman. In Titagarh Paper Mills Co. Ltd. vs. Its Workmen 2 the Supreme Court held that the payment of production bonus is in the nature of an incentive and it is in addition to he wages. It cannot be treated as part of minimum wages fixed under Minimum Wages Act, 1948.

TYPOLOGY OF WAGESBroadly speaking the wage structure can be divided into three categories viz. the basic minimum wage which provides bare subsistence and is at poverty line level, a little1 2

(2002) L.L.J 205 (S.C) A.I.R. 1959 SC 1095

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above is fair wage and the finally living wage which comes at the comfort level. It is not possible to demarcate these levels of wage structure with any precision. Principles on which wages are fixed have been laid down by Supreme Court in Kamani Metals and Alloys vs. Their Workmen1 that there is a minimum wage which, in any event must be paid irrespective of the extent of profits, the financial conditions of the establishment or the availability of workmen on lower wages. The minimum wage is independent of the kind of industry and applies to all alike big or small. It sets the lowest limits below which wages cannot be allowed to sink in all humanity. The second principle is that wages must be fair , that is to say, sufficiently high to provide a standard family with food , shelter, clothing, medical care and education of children appropriate for the workmen but not at a rate exceeding his wage earning capacity in the class of establishment to which he belongs. A fair wage is thus related to earning capacity and the workload. It must ,however, be realized that fair wage is not a living wage by which is meant a wage which is sufficient to provide not only the essential above mentioned but a fair measure of frugal comfort with an ability to provide for old age and evil days. Fair wage lies between minimum wage which must be paid in any event and the living wage which is the goal

In order to understand the concept of minimum wages it would be desirable to know the meaning as such. Wage is remuneration to labour for the work done or the service rendered by it to the employer. Of all the problems that face the worker .that of wage is the most vital and important to him. For, wages constitute the earnings for the workman, which in turn, determine his standard of living and that of his family. They also determine the standard of his efficiency and consequently, the level of productivity. It is1

A.I.R. 1967 SC 1175

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accepted by all those interested in the advancement of industry and the well-being of labour that a well-paid labour is an asset to the industry which helps in increasing the efficiency and the productivity in the industry. The International Labour Organization, which has since its inception given inspiration impetus to numerous measures of social justice and social security in several countries including India, recognized the importance of the problem of wages and provisions of an adequate living wage, and recognition of the principle of equal remuneration for equal work, figure prominently amongst the objectives of that organization. A number of conventions adopted by the ILO will testify this. For example the Minimum Wages Fixing Convention casts upon the members who ratify the convention, the obligation to create machinery the wage fixation and enforcement of the minimum rates of wages in certain trades or parts of trade in which no machinery exists for collective bargaining or where the wages are exceptionally low.1 The fair wages committee formulated the concepts of living wage, fair wage and the minimum wage. The fair wages committee report published by the government of India 1949 has been broadly approved by Supreme Court in Express Newspaper (p) ltd. v. Union of India2 and Standard Vacuum Refining Co. of India v. Its Workmen 3 living wage is at the apex a political aim and in view of the level of national income a distant goal to be achieved in course of years, at bottom is the minimum wage which must provide not merely for the bare subsistence of life but for preservation of efficiency of worker. For this purpose, minimum wage must also provide for some measures of education, medical requirement and amenities on the basis of decided cases, the concept of minimum wages may be simplified. As a matter of fact there are three concepts in this regard, i.e., living wage, fair wage and minimum wage. 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 industries1 2

GM Kothari, A Study of Industrial Law, pp. 39-40 A.I.R. 1958 SC 578 3 A.I.R. 1961 SC 895, followed in Workmen v. Reptakas Brett & Co. Ltd. A.I.R. 1992 SC 504

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throughout country on account of different and varying conditions prevailing from industry to industry and from one part of country to another 1. It was held in Hydro (engineers) Pvt ltd. v. The Workmen2 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 can not, therefore, be said to be alien to concept of minimum wage. Furthermore in the light of spiraling 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.3 According to Columbia encyclopedia lowest wage legally permitted in an industry or in government or any other organization is minimum wages. The goal in establishing minimum wages has been to assure wage earners a standard of living above the lowest permitted by health and decency.4 The Committee was of the view that a minimum wage must provide for not merely the bare sustenance of life, but for the preservation of the efficiency of the worker. For this purpose, the minimum wage must also provide for some measure of education, medical requirements and amenities. The statutory Minimum Wage is the wage determined according to the procedure prescribed by the relevant provisions of the Minimum Wages Act, 1948. The question of establishing statutory wage fixing machinery in India was, therefore, discussed at the third and fourth meetings of the Standing Labour Committee held in 1943 and 1944 respectively and at successive sessions of the Tripartite Labour Conference in 1943, 1944 and 1945. The last of these approved the enactment of minimum wages legislation in principle. On April 11, 1946, a Minimum Wages Bill was

1 2

Hydro (engineers) Pvt. Ltd. v. The Workmen, A.I.R. 1969 SC 182 Ibid 3 Hydro Engineers Pvt Ltd. vs. The Workmen, A.I.R. 1969 SC 182 4 www.encyclopedia.com/doc/1E1-minimumw.html

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introduced in Parliament but the passage of the Bill was considerably delayed by the constitutional changes in India. It was, however, passed into an Act in March, 1948.1

In Sandeep Kumar and others v. State of U.P 2 where five persons were working as Junior Engineers in a project placed under the control of Executive Officer, City Board, Ghaziabad engaged in the work of slum clearance. The project was financed by the State of U.P. and World Bank funds. They were working on daily rate basis and on an average received Rs. 1000 per month. No other benefits were given even they did not get any payment for the holidays. However, similarly qualified engineers when employed for similar work on regular basis are paid a minimum grade pay of Rs.1400. The Supreme Court held that there is no justification to discriminate between the two categories and directed to pay Rs. 1400 per month instead of Rs. 1000. The Supreme Court further held that they are not entitled to be regularized in service as there is no permanent need for the work in such projects which are for a particular purpose. But they would be entitled to regularization of their service by recruitment through the Public Service Commission for vacancies other than employment under the project as and when such vacancies arise and are duly notified subject to their satisfying the requisite qualifications prescribed therefore under the rules and the employer would not stand in the way of regularization of their service.

In Ram Naresh Shah vs. Union of India where dispute was for equal pay for equal work. In U.P. Bridge Corporation Diploma Holder regular employees were paid Rs. 1400 while Diploma Holder employees engaged on casual basis were getting only Rs. 1280 per month at relevant time and no payment was made for holidays. On the other hand, daily rated degree 'holder junior engineers were paid at the same rate as the regular degree holders. The Supreme Court held that there is no reason to make distinction between1 2

http://labourbureau.nic.in/MW_Report_2008.pdf 1993 SCC (L&S) 290

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petitioner diploma holders and the regular diploma holders. Besides even under the Minimum Wages Act a paid day of rest in every period of seven days is mandatory. The Diploma Holders among the petitioners should therefore be paid Rs. 1400 per month. On the issue of regularization it was observed that all such vacancies which would occur henceforth shall ordinarily be filled up by regularizing the employees like the petitioners who are directly employed by the corporation and as and when that is not possible for some reasons, on temporary basis deputationist may be accepted so as to ensure that no deputations functions for more than six months.

NATIONAL FLOOR LEVEL MINIMUM WAGE In order to have a uniform wage structure and to reduce disparity in minimum wage across the country, concept of national floor level minimum wage was mooted on the basis of recommendations of the national commission on rural labour, in 1991. Keeping in view the recommendation of national commission and subsequent rises in price, the national floor level minimum wage was fixed a rs. 35 per day in 1996 which was revised ay with effect from upwards to rs. 66 per day with an effect from 1/2/2004. The national floor level minimum wage has no statutory backing. The state governments are persuaded to fix minimum wages such that in none of the scheduled employments, the minimum wage is less than the national floor level minimum wage. This method has helped in reducing disparity among different rates of minimum wages to some extent.1

The National Commission on Labor was required under its terms of reference to report on the need of fixation of a national minimum wage. Several State Governments have been of general view that a national minimum wage could be an alluring concept and they I feel that a start should be made by fixing 'regional minima'. Workers' organizations, on the other hand, have suggested a national minimum below which no employer should be allowed to hire labour. Some apprehended that the minimum so fixed will tend to be the maximum.1

labour.nic.in

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With this national minimum, there should also be regional minima worked out with special reference to the ways of living in different areas. The employers suggested fixation of a national minimum taking into account national per capita income and it should be applicable to industrial as well as non-industrial employments. However, some felt that a national minimum only for selected industries may be fixed.1

The advocates of a national minimum wage claim that such a minimum would have more extensive coverage and would make implementation easier and effective because of its simplicity. The National Commission on Labour felt that far from leading to ease and effectiveness of administration, fixing of a national minimum with a necessarily wider coverage may bring in its train a number of difficulties. Because of the vastness of the country and wide differences in the levels of development in industries and regions, a uniform national minimum wage will be untenable.

Experience in other countries also does not encourage us to recommend a national minimum. It was concludingly remarked that a national minimum wage in the sense of a uniform minimum monetary remuneration for the country as a whole, is neither feasible nor desirable.

If that is fixed, the dangers are that there will be areas which will not afford the minimum if the minimum is worked out somewhat optimistically and if calculations are allowed to be influenced by what a poorer region or industry can pay, the national minimum will not be worth enforcing. It may be possible, however, that in different homogeneous regions in each State regional minima could be notified. In due course, the region itself could be widened to

1

http://labourbureau.nic.in/MW_Report_2008.pdf

22

cover the whole State. But, widening of the area beyond a State may be impracticable and also not in the best interest of workers.1 On account of all these difficulties the Minimum Wages Act permits fixation of different rates of minimum wages for different localities.

COMPONENTS OF MINIMUM WAGE A minimum wage must provide not merely for the bare subsistence of life but for the preservation for the efficiency of the worker, and, so it must also provide for some measures of education, medical assistance, requirements and amenities. The concept of minimum wage does not mean a wage that enables the worker to cover his bare physical need and keep himself just above starvation. The capacity of the employer to pay is irrelevant in fixing the minimum wage. Therefore, no addition shall be made to the components of minimum wage, which would take minimum wage near the lower level of fair wage. In Unichay v. State of Kerela2, it was held that the Act contemplates that minimum wage rate should be fixed in scheduled industries with the dual object of providing subsistence and maintenance of the worker and his family and preserving his efficiency as a worker. The Tripartite Committee of the Indian Labour Conference (1957) accepted the following five norms for fixing the minimum wages:1. In calculating the minimum wage, the standard working class family should be taken to consist of 3 consumption units for one earner, the earnings of the women, children and adolescents should be disregarded.

1 2

Report of the National Commission on Labour (1969), pp. 233-234 A.I.R. 1962 SC 12

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2. Minimum food requirement should be calculated on the basis of net intake of calories, as recommended by Dr. Aykroyd for an average Indian adult of moderate activity. 3. Clothing requirements should be estimated as per capita consumption of 18yards per annum which would give for the average workers family of four, a total of 72 yards. 4. In respect of housing, the rent corresponding to minimum area provided for under Government Industrial Housing scheme should be taken into consideration in fixing the minimum wage. 5. Fuel, lightning and other miscellaneous items of expenditure should constitute 20% of total minimum wage. It was held in Workmen of Reptakos Brett & Co. Ltd v. Management1, that a workers wage is no longer a contract between employer and employee. It has the force of collective bargaining under the labour laws. Each category of wage structure has to be tested at the anvil of social justice which is the live fiber of our society today. Keeping in view the socio economic aspect of the wage structure one more component to minimum wage should be added, namely, children education, medical requirement, minimum recreation including festivals/ceremonies and provisions for old age, marriages etc. should further constitute 25% of total minimum wage. It was further held that the wage structure which approximately answers the above six components is nothing more than a minimum wage at subsistence level. The employees are entitling to minimum wage at all times and under all circumstances. An employer who can not pay the minimum wage has no right to engage labour and no justification to run the industry. In Peoples Union for Democratic Rights v. Union of India2, it was held by the Supreme Court that where children below age of 14 years are employed in violation of the Employment of Children Act, 1938 and minimum wages are denied either to such children or to other persons who by reason of poverty or socially or economically

1 2

(1992) I L.L.J. 340 (SC) (1992) I LJ 545 (SC)

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disadvantageous position are unable to approach the court, legal redress may be sought on their behalf by any member of public. In Ahmad Nagar Zilla Slieth Mazdoor Union v. Dinkar Rao KaIyan Rao Jagdale,1 It has been held by the Supreme Court that mere continuance every year of seasonal work obviously during the period when work was available, does not constitute a permanent status unless there exist posts and regularization is done. Under these circumstances the Tribunal and the High Court are not right in holding, that the respondents are entitled to be absorbed on regular basis as regular employees. Therefore, their orders were set aside. However the Supreme Court made it clear that the appellant shall take the services of all the workmen existing as on date as and when the work is available and during the period of seasonal operation. As and when the vacancies arise, regularization of the employees should be made in order of their seniority and till the employees are regularized, they are not to be retrenched.

In State of Haryana v. Tilakraj and others, 2 where 35 daily wagers filed petition in the High Court claiming that they were entitled to regularization in view of their long period of service put in by them and also claimed same salary as paid to regular employees since the nature of work done by them was similar. The petition was allowed by the High Court with the following observations: "the petitioners would be entitled to the relief, but again not the regular pay scale which their regular counterparts are receiving. The petitioners would be entitled to the minimum of the pay scale with D.A. alone". In appeal the Supreme Court observed that the principle of equal pay for equal work is not always easy to apply. There are inherent difficulties in comparing and evaluating the work done by different persons in different organizations, or even in the same organization. This is a concept which requires for its applicability complete and wholesale identity between group of employees claiming identical pay scales and the other group of1 2

2001 SCC (L&S) 1180 Chandigarh Administration V. Rajni Vali, 2000 SCC (L&S) 247 Followed 2003 SCC (L&S) 828; State Of Orissa V. Balaram Sahu; 2003 SCC (L&S) 250 Relied On. State Of Haryana V. Fastner Singh, 1997 SCC (L&S) 210; Ghaziabad Development Authority V. Vikram Chaudhary, 1995 SCC (L&S) 1226; Harbans Lal V. State Of H. P. 1990 SCC (L&S) 71;

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employees who have already earned such pay scales. The problem about equal pay cannot always be translated into a mathematical formula. 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 companys capacity to bear the financial burden must receive due consideration. But mere hopeful observations made in directors 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 figures1 The Fair Wages Committee also recommended that the fair wage should be related with the productivity of labour. In this connection, it may be said that in India since the existing level of wages is unable to maintain the workers on subsistence plus standard, it is essential that the workers must be first assured a living wage and only after this minimum has been done, the wages should be related to the productivity. The Committee further recommended that the fair wage should be related with the prevailing rates of the wages, though in view of unduly low wages prevailing even in organized industries in the country, it laid that the wage fixing machinery should, therefore, make due allowance for any depression of wages caused by unequal bargaining. S.A.F.L. Works v. State Industrial Court, Nagpur 2, is a leading case on the point. In this case Supreme Court observed that in fixing the paying capacity the tribunal will have to fix the income as well as permitted deductions and allowances properly incurred. There can be no dispute that express incurred for purchase of raw material, maintenance for factory, expenses incurred towards rent, public charges, maintenance of establishment and expenses incurred in marketing of the produce should be deducted. These items are not exhaustive. As to whether a particular item of expenditure is liable to be deducted or1 2

Sangam Press v. Workmen, A.I.R. 1975 SC 2035 A.I.R. 1978 SC 1113

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not have to be determined on the facts of the case. No deduction should be allowed for the payment of income tax or for allowances made for depreciation or making provisions for reserve. So far as expenses incurred towards payment of wage bill inclusive of dearness allowances, bonus, gratuity, etc. are concerned they will have to be deducted. After properly determining the paying capacity of the industry the tribunal will have to proceed to fix fair wages which would include the fitment, scale of wages and dearness allowances, period during which retrospective effect is to be given will have to be determined afresh.

It was held in Transport Corp. Of India Ltd. V. State of Maharashtra and others1 That it is not for the labour court or a tribunal to fix minimum rates of wages. While fixing fair rates of wages the courts or tribunals take into consideration the minimum rates of wages and where the government has not fixed the minimum rates of wages then the courts or tribunals ascertains for them what would be the minimum rate of wages. In fact the minimum rates of wages are fixed by the government. Courts or tribunals merely ascertain as to what are the minimum rates of wages for the purpose of deciding fair wages.

In Express newspapers ltd v. union of India, Bhagwati, J. observed that Marshall would consider the rates of wages prevailing, in an occupation as fair if it is about one level with the average payment of task in other trades which are of equal difficulty and disagreeableness which requires equally rare natural abilities and equally expensive training. Prof. Pigon would apply two degrees of fairness in judging a wage rate, viz. fair in the narrower sense and fair in the wider sense; when it is equal to the rate current for similar workman in the same trade and

1

(1993) II L.L.J. 365 (Bom.)

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neighborhood, and fair in the wider sense when it is equal to the predominant rate for similar work throughout the country and in generality of trades.1 Prof. Kothari has rightly remarked that a wage level lower than living wages but higher than minimum is fair wage. In the light of these concepts of minimum wage and the living wage the committee considered what should be the principle for the fair wage contemplated by the Industrial Truce Resolution and stated that the fair wage was something between minimum wage and a living wage. While lower limit of fair wage must be the minimum wage, the upper limit is broadly set out by what may be called, the capacity of industry to pay. This will depend not only on the present economic condition of the industry but on its future prospects also. Between these two limits the actual wage will be fixed on consideration of the following factors:1. The productivity of labour; 2. The prevailing rates of wages in the same industry for similar occupations in the same neighboring locality; 3. The level of national income and its distribution; 4. The place of industry in the economy of country.

Regarding the capacity of industry to pay the fair wages committee was of the opinion that in determining the capacity of an industry to pay, it would be wrong to take the capacity of the particular unit or the capacity of a particular industry in the country. The relevant criterion should be the capacity of the particular industry in specified region and, as far as possible; the same wages should be prescribed for all units of that industry in that region. It will not be possible for the wages fixing board to measure the capacity of all units in a region and the only practicable method is to take a fair cross-section of that industry.21 2

D.S. Chopra and S.A. Apte, The Minimum Wages Act, 1948 (1973), p. 14 G.M. Kothari, Loc, cit. p. 43

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In Novex Dry Cleaners v. Workmen1, it has been observed that it is now a well settled principle that fixing a minimum wage, the capacity of industry to pay is not relevant, but in fixing a fair wage, the capacity of the industry to bear the burden of the said wage is very relevant and important factor. Where wage structure is being fixed with reference to those in other similar industries in the region, the standing of industries, strength of labour employed, extent of customers, profits and loss must be taken into account. It is also necessary to assess whether the employer would be able to meet the additional liability. In Wenger & Company vs. Its Workmen 2, the Supreme Court observed that in constructing the wage structure, industrial adjudication has to take into account the overall financial position of the employer because a scheme of wage structure including scale of increment is a long term scheme, and before it is framed, the tribunal must be satisfied that the burden imposed by the scheme would not be beyond the means of employer. In regard to minimum wage no such consideration arises because it is the duty of industrial employer to pay the basic minimum wages to his employees.

In Workmen vs. Reptakos Brett and Co. Ltd , 3where a similar question of revision of wage structure to the prejudice of workmen on the ground of financial stringency was involved. The Supreme Court reviewed all the above cases leading to the ratio that the management can revise the wage-structure to the prejudice of the workmen in a case where due to financial stringency it is unable to bear the burden of the existing wage. But in an industry or employment where the wage-structure is at the level of minimum wage, no such revision at all is permissible not even on the ground of financial stringency. It is therefore, for the management, which is seeking restructuring of D.A. scheme to the disadvantage of the workmen to prove to the satisfaction of the1 2

(1962) I L.L.J 271 (1968) II L.L.J 403 3 A.I.R. 1992 SC 504 : 1992 SCC 271

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Tribunal that the wage-structure in the industry concerned is well above minimum level and the management is financially not in a position to bear the burden of the existing wage-structure. It was held that the Tribunal was not justified in abolishing the slab system of D.A. which was operating in the company for almost thirty years.

The above dictum was reiterated by the Supreme Court in Ahmadabad Mills Owners Association v. Textile Labour Association 1 in clear terms. It was observed that in dealing with question whether the additional burden which an award would impose would not be beyond the financial capacity of the employer, there are two general considerations which cannot be ignored. The First consideration is that the task of constructing a wage structure of industrial employees is a very responsible task and it presents several difficult and delicate problems. The claim of the employees for a fair and higher wage is undoubtedly based on the concept of social justice and it inevitably plays a major part in the construction of a wage structure. There can be little doubt that if the employees are paid a better wage which would enable them to live in fair comfort and discharge their obligations to the members of their families in a responsible way, they would be encouraged to work whole-heartedly and their work would show appreciable increase in efficiency. In Crown Aluminum Works vs. Their Workmen, 2 the question posed before the Supreme Court was: Can the wage structure fixed in a given industry be never revised to the prejudice of its workmen? The Court speaking through Gajendragadkar, J. held: "We do not think it would be correct to say that in no conceivable- circumstances can the wage structure be revised to the prejudice of workmen. When we make this observation, we must add that even theoretically no wage structure can or should be revised to prejudice of workmen if the structure in question falls in the category of the bare subsistence or the minimum wage. If the wage structure in question falls in a higher category, then it would be open to the employer to claim its revision even to the prejudice of the workmen provided a case for such revision is made out on the merits to the1 2

A.I.R. 1966 SC 497 A.I.R. 1958 SC 30

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satisfaction of the tribunal. After considering all the relevant facts, if the tribunal is satisfied that a case for reduction in the wages structure has been established then it would be open to the tribunal to accede to the request of employer to make appropriate reduction in the wage structure, subject to such conditions as to time or otherwise that the tribunal may deem fit or expedient to impose.

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 In the famous Harvester case, the commonwealth arbitration court has visualized a living wage as a sum which is adequate to satisfy the normal needs of the average employee regarded as human being in a civilized community. Another example is found in the Queensland industrial conciliation and arbitration act which states that the basic (i.e. living) wage paid to an adult male employee shall not be less that what is sufficient to maintain a well conducted employee of average health, strength and competence and his wife and a family of three children in a affair and average standard or comfort, having regard to conditions of living prevailing among employees in the calling in respect of which such wage is fixed, and provided that in fixing such basic wage the earnings of children or wife of such employee shall not be taken it to account. Living wage consists of amount of necessaries, comforts and luxuries, the quantum of goods and services which an individual considers necessary for decent existence.

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In India there is no statutory definition of living wage. However, it may be pointed out that Fair wage committee in its report observed that it was not possible to fix a living wage as contemplated by various authorities, in the context of present low level of our national income. It has been observed that at the bottom of the ladder there is a minimum wage rate which the employer of any industrial labour must pay in order to be allowed to continue an industry. Above this is the fair wage, which may be said to approximate to the need based minimum, in the sense of a wage which is adequate to cover the normal needs of the average employee regarded as a human being in a civilized society. Above the fair wage is the living wage. It is the wage which will maintain the workmen in the highest state of industrial efficiency, which will enable him to provide his family with all material things which are needed for their health and physical well-being, and will be enough to enable him to qualify to discharge his duties as a citizen.1 Better living conditions for workmen can only be possible by giving them a living wage. This will tend to increase the nations wealth and income, but if it makes unreasonable inroads on the profits of the capitalists, it might have a tendency to drive capital away from fruitful employment and even effect prejudicially the capital formation itself.2 The amount of living wages in term of money will vary from trade to trade and locality to locality. But the idea is that every workman shall have a wage which will maintain him in the highest state of industrial efficiency which will enable him to provide his family with all material things which are needed for their health and physical well being, enough to enable him to qualify to discharge his duty as a citizen.3

The living wage should enable the male earner to provide for himself and his family not merely the bare essentials of food, clothing and shelter but a measure of frugal comfort including education for the children, protection against ill-health, requirements of essential social needs and a measure of insurance against the more important misfortunes including old age.1 2 3

Hindustan Times Ltd. vs. Their Workmen, A.I.R. 1963 SC 1332 Ibid. Standard Vacuum Refinery Co. vs. Its Workmen, A.I.R. 1961 SC 895

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It has been remarked by Supreme Court in Workmen v. Peptakos Brett & Co. ltd.1, that a living wage has been promised to the workers under the constitution. A socialists framework to enable working people a decent standard of life has further been promised by 42nd amendment.

Living wage is a political ideal to be achieved and it means and includes salary, pay or remuneration for the work done, which is quite essential for providing necessities of life, such as, food, cloth and shelter including maintenance of health, education, frugal comforts and certain means of recreation which are quite essential for a person to lead his life in a society as a human being. The concept of living wage may vary from place to place, because it depends upon the price level of necessaries of life, and it is determined by socio-economic conditions of a particular country

Classification of Living Wages1) 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 livingupon 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.

1

1992 SCC (L&S) 271

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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 f r children, etc.

4) Comfort Level - It represents (attainment of) the highest class of wage earners an ecynosure 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 WAGESThe appropriate government1 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 2 or PartII3 of the schedule or review at such intervals, as it may think fit, such intervals not

1

As per the Act, the appropriate government means (i) In relation to any scheduled employment carried on by or under the authority of the Central Government or a railway administration or in relation to a mine, oilfield or major port or any corporation established by a Central Act, the Central Government and (ii) In relation to any other scheduled employment, the State Government. 2 Part-I includes employment in any woolen carpet making or shawl weaving establishment, in any flour mill, rice mill or Dal mill, any tobacco manufactory, any plantation, any estate which is maintained for the purpose of growing rubber, tea or coffee, any oil mill, under any local authority, on the construction, in stone breaking/crushing, in lac manufactory, in any mica works, in public motor transport, in tanneries and leather manufactory. 3 Part-II includes employment in agriculture. Example any form of farming including cultivation and tillage of soil, dairy farming, the production, cultivation, growing and harvesting of agriculture or horticulture commodity, raising of live stock, bees or poultry.

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exceeding five years, the minimum rates of wages so fixed and revise the minimum rates, if necessary.1 The Act does not set out a minimum wage in rupee terms, but just stipulates that the wage be a living wage2 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 appropriate government may refrain from fixing minimum rates of wages in respect of any scheduled employment in which there are in whole state less than one thousand employees engaged in such employment, but if any time, the appropriate government comes to finding after such enquiry, as it may make or cause to be made in this behalf, that the number of employees in any scheduled employment in respect of which it has refrained from fixing minimum rates of wages has risen to one thousand or more, it shall fix minimum rates of wages payable to employees in such employment, as soon as after such finding.3 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.1 2

Section 3, of The Minimum Wages Act, 1948 A "living wage" is the level of income sufficient to allow workers to support their families. 3 Section 3(1-A) of The Minimum Wages Act, 1948

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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.4 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 as4

http://www.amrc.org.hk

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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 Court1 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.2 Where the provisions of section 5 have not been followed at all, it is not open to the state government to fix minimum wages, and any order fixing minimum rates of wages without following the provisions of section 5 is of no force and effect. Compliance with procedure must be real and not in name. In N.K. Jain v. Labour Commissioner, Rajasthan3, the state government composed a committee consisting of six of its officers. There was no representation of employers or the employees in scheduled employment on the committee. On the advice of committee the state government issued a notification fixing minimum wages. It was held that though there was in name a committee, in reality there was none. The state governments notification fixing minimum rates of wages was in effect made without consulting the committee and without publishing its proposal and obtaining representation on them. In these

1 2

Gulamahommed Tarasaheb V. Bidi Factory By Its Proprietor Shamrao, A.I.R. 1955 SC 33 VKS v. State, (1971) 2 LLJ 252 (Kerala) : 1972 lic 398 3 1957 Raj 35

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circumstances, the notification fixing minimum rates of wages in certain scheduled employments was of no force and effect.

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 jurisdiction1 or in defiance of natural justice, the notification cannot be declared invalid2. 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.3 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.4 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.5 Power confined to class of employments and not individuals:The power of fixing wages can only be exercised in respect of class of employments6 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.7

1 2

1975 Lic 429 Edwards Mills Co. Ltd. V. State Of Ajmer,1953 Ajmer 65 3 Tourist Hotel Case, 1975 I LLJ 211 (AP) 4 Ibid 5 Jaswant Rai Berry V. State Of Punjab, 1958 Punj. 425 6 G.P. Stewart V. Jogendra Nath, 1939 Cal. 628 7 Prafulla Chandra Chakravarty V. Manager, Dawan Tea Estate, 1958 Assam 12

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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)1

In fixing or revising minimum rates of wages under this sectiona) Different minimum rates of wages may be fixed fori. ii. iii. iv. Different scheduled employments; Different classes of work in the same scheduled employment; Adults, adolescents, children and apprentices; Different localities;

b) Minimum rates of wages may be fixed by any one or more of the following wage-periods, namelyi. ii. iii. iv. By the hour, By the day, By the month, or 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

1

Section 3(2) of The Minimum Wages Act, 1948

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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.1 Any minimum rates of wages fixed or revised by the appropriate government in respect of scheduled employments under section 3 may consist ofi. 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 any2 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.3

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.4

In Kerela Hotel and Restaurant Assoc. vs. State of Kerela, 5 it was held that for fixation of minimum wages for employees in hospitals, minimum wages fixed for employees n dispensaries can be taken into consideration.1 2

Section 3 (3) of The Minimum Wages Act, 1948 Section 4 (1) of The Minimum Wages Act, 1948 3 Section 4 (2) of The Minimum Wages Act, 1948 4 Sakshi vs. Presiding Officer, labour court, north Bihar, Muzaffarpur, A.I.R. 1966 Patna 495 (db) 5 1989, labour court 1920 (Bombay)

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Case: - Karnataka Film Chamber of Commerce vs. State of Karnataka1 The language of section 4 doesnt lend itself to the interpretation that a minimum wage under section 4(1) necessarily should consist of basic wages and dearness allowances. Minimum wages may consist of basic rate of wages and a special allowance at a rate adjusted at such intervals in such a manner as appropriate government may direct to accord as nearly practicable with a variation in cost of living index applicable to such workers, or a basic rate of wages with or without cost of living allowance and cash value concessions with respect of supply of essential commodities at concessional rates or all inclusive rate allowing basic , the cost of living allowance and cash value of concessions.

Jaswant Rai Berry vs. State of Punjab2 Where an inclusive rate has been fixed including a basic rate of wages and cost of living allowance, this is in accordance with law. Whether rate is fixed under clause (2) or (3), the fixation of an all inclusive rate of minimum wage is legal.

V.A. Mamarde vs. Authority Under Minimum Wages Act3 The phrase double the ordinary rate of wages means double the remuneration which an employee in fact ordinarily receives during the casual requisites and other advantages. Irrelevant considerations while fixing of minimum wages: The fact that an employer may find it difficult to carry on his business on the basis of minimum wages. The financial capacity of the employee

1 2

1987 I l.l.j. 182 (karn.) A.I.R. 1958 Punjab 405 3 A.I.R. 1972 SC 1721

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The fact of the employer- company having incurred losses during the previous year. Employers difficulty in importing raw materials and The region- cum- industry principles.

However in fixing fair wages the financial capacity of the employer and the wages scale prevailing in the comparable industries in the region are some of the relevant considerations.1 Minimum wages must be paid irrespective of extent of profits, financial condition of establishment or availability of workmen on lower wages. The minimum wage is independent of kind of industry and applies to all alike big or small. It sets the lowest limits below which wages cannot be allowed to sink in all humanity.2 Case: - Sri Ram and Co. V. State of Tamil Nadu,3 The government issued a notification fixing minimum wages of the employees of a rice mill in Tripura. The notification was issued on recommendation of a committee. One representative of an employer was the member of the committee but he was not given notice about committee meetings. The question was whether non issue of notice of meeting to one of the members would vitiate the notification issued by the government. No notice was issued to personnel officer of century flour mills ltd. On account of chairmans misapprehension cannot obliterate the fact that one of the representatives of the employer was not given an opportunity to participate in the meetings. The notification was bad because the committee was not properly constituted and did not function in accordance with the provisions of the act. The legislature has attached an importance to equality of representation to the employers and employees in advisory committee, when equality is not available and the balance sought o be maintained by legislature is disturbed, that will constitute a disregard to the provision of the act.1 2

Hydro (engineers) Pvt ltd vs. the workmen A.I.R. 1969 SC 182 Kamani Metals and Alloys ltd v. Workmen A.I.R. 1967 SC 1175 3 1979 ii LLJ 418 mad

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In HMT Ltd. v. HMT Head Office Employees Association and others,1 where there existed two settlements dated 1.9.1978 and 2.9.1978 reiterating Term No 1 of settlement dated 25.5.1978 postulating the union's acceptance of the pay and D.A. offered by the management without prejudice to the Union's right to take up with the Government of India the issue of revision of minimum wages and rate of neutralization of D.A. beyond the specified point; and the managements, in case of Government agreed to an improvement therein, agreeing to revise the minimum wages and the rate of neutralization of D.A. in consultation with the unions. The terms of settlement were considered and held by the Supreme Court that the Term No. 1 in the agreement dated 25.5.1978 does not postulate revision of pay scales in the event of higher wages being paid to the employees of BHEL or employees of any other public sector undertaking. This clause gives to the union only a right to take up the issue regarding the minimum wages and enhancement of rate of neutralization of D.A. with the Government of India if the Government agrees to the improvement in the minimum wages or the D.A. neutralization rate. At best, this clause only gives a right to the union to make a reference to the Government of India for revision of minimum wages but does not give any vested right of enhancement of wages or pay scales in the event of their being a revision in any other public sector undertaking. PROCEDURE FOR FIXING AND REVISING MINIMUM WAGES Section 5 lays down that in fixing minimum rates of wages in respect of any scheduled employment for the first time under this act or in revising minimum rates of wages so fixed, the appropriate government shall either:a. Appoint as many committees and sub-committees as it considers necessary to hold enquiries and advise it in respect of such fixation or revision, as the case may be; or

1

1997 SCC (L&S) 228

43

b. By the notification in the official gazette, publish its proposals for the information of persons likely to be affected thereby and specify a date not less than two months from the date of notification on which the proposals will be taken into consideration. After consideration the advice of committees appointed, and all representations received by it before the date specified in gazette notification, the appropriate government may by notification in the official gazette, fix or revise the minimum rates of wages in respect of each such employment, which shall come into force after the expiry of 3 months unless otherwise provided in the notification. Where the appropriate government proposes to revise it shall consult the advisory board. If the advisory board approves the notification regarding revision of wages without discussing the objections raised, the action of the board would be arbitrary because it amounts to non application of mind in granting approval.1 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/Subcommittees 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

1

H.B. Verma v. Union of India, (1993) I L.L.J. 39 (Delhi)

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scheduled employment and it shall come into force on expiry of three months from the date of its issue.

Case: - Chandra Bhawan boarding and lodging, Bangalore v. state of Mysore1 Power conferred upon appropriate government under section 5(1) is neither arbitrary nor unguided. Therefore it does not offend article 14 of Indian constitution. The fixation of wages depends upon the prevailing condition the cost of living in place, the nature of work to be performed and the conditions in which work is performed. Where the notification is issued by the govt authorizing the employer to deduct the sum mentioned in the notification towards the cost of free meals supplied to the workers by him, it was held that the notification gives only an option to employer and does not impose an obligation to the employer and does not impose any obligation upon him.2 Revision of Wages By The Central Government:The central government in exercise of power conferred on it under section 3, 4 and 5 of the act has a revised the minimum rates of wages in (1) marble and calcite mines, (2) hematite mines, (3) rock phosphate mines, (4) chromite mines, (5) wolflam mines, (6) iron ore mines, (7) laterite mines, (8) dolomite mines, (9) graphite mines, (10) bauxide mines, (11) manganese mines, (12) china clay, (13) red oxide mines, (14) felsfar mines, (15) silica mines, (16) construction or maintainance of roads or buildings, stone breaking or stone crushing, maintainance of buildings and construction and maintainance of runways.3 Under section 5 of the act both central and state government responded to fix and revise wages for such employment under their respective jurisdiction. It is stipulated that review and revision of minimum wage in scheduled employment are to be done at intervals not exceeding 5 years.

1 2

A.I.R. 1970 SC 2042 Chandra Bhawan boarding and lodging, Banga