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FIXATION OF WAGES UNDER MINIMUM WAGES ACT 1948

PROJECT REPORT ON:

FIXATION OF WAGES UNDER

MINIMUM WAGES ACT 1948

TABLE OF CONTENTS

ACKNOWLEDGEMENT ……………………………..………………....………….3

RESEARCH METHODOLOGY……………………………………..…………..…4

INTRODUCTION....................................................…….…….……..

………………5

WAGE STRUCTURE AND ITS

COMPONENTS.................................................6

FIXATION OF

WAGES........................................................................................

.....10

FIXING AND REVISING OF MINIMUM

WAGES............................................14

CONCLUSION………………………………………………………………...…….18

BIBLIOGRAPHY……………………………………………………...………..…...19

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RESEARCH METHODOLOGY

The Objective of this project is to examine the concept of Fixation of Wages under the

Minimum Wages Act 1948.

This Doctrinal research is descriptive and analytical in nature. Secondary and Electronic

resources have been largely used to gather information and data about the topic.

Books and other reference as guided by Faculty of Labour Law have been primarily helpful

in giving this project a firm structure. Websites, dictionaries and articles have also been

referred.

Footnotes have been provided wherever needed, either to acknowledge the source or to point

to a particular provision of law. Uniform citation has been followed.

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INTRODUCTION

The minimum wages Act defines wages under Section 2 (h), which reads as under—

“Wages means all remuneration, capable of being expressed in terms of money, which would

be, in terms of contract of employment, express or implied were fulfilled, be payable to a

person employed in respect of his employment or of work done in such employment and

includes house rent allowance but does not include :--

(i) the value of

a) any house accommodation, supply of light, water, medical attendance ; or

b) any other amenity or any service excluded by general or specific order of the

appropriate government;

(ii) any contribution paid by the employer to any pension funds or provident fund or any

other scheme of social insurance;

(iii) any travelling allowance or the value of any travelling concession;

(iv) any sum paid to the person employed to defray special expenses entailed on him by

the nature of his employment; or

(v) any gratuity payable on discharge.”

The analysis of this section indicates that the following requirements are necessary for

wages:--

1) wages include all remuneration paid to an employee including house rent allowance;

2) wages must be capable of being expressed in terms of money;

3) wages become due when there is a contract between employer and employee.

However, the contract may be expressed or implied;

4) the terms and conditions of the contract must be fulfilled, or he must have done work

assigned to him under such employment.

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The term ‘wages’ has a composite meaning, which includes all remuneration and other

payments payable to an employee, which are not expressly excluded by the provisions of the

Act.

WAGE STRUCTURE & ITS COMPONENTS

Broadly speaking the wage structure can be divided into three categories – The basic

‘minimum wage’ which provides bare subsistence and is at poverty line level, a little above is

the ‘fair wage’ and finally the ‘living wage’ which comes at a comfort level. It is not possible

to demarcate these levels of wage structure with any precision.

Certain principles on which wages are fixed have been stated by the Supreme Court in

Kamani Metals and Alloys v. Their Workmen.1

“Broadly speaking the first principle is that there is a minimum wage which in

any event must be paid, irrespective of the extent of profits, the financial condition of the

establishment or the availability of workmen on lower wages. The minimum wages is

independent of the kind of industry and applies to all alike big or small. It sets the lowest

limit below which the 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 the earning capacity and the workload. It must,

however be realised that “fair wage” is not a “living wage” by which it means 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”.

MINIMUM WAGES--: The expression “minimum wages” is not defined in the Act

presumably because it would not be possible to lay down a uniform minimum wages for all

industries throughout the country on account of different and varying conditions prevailing

1 AIR 1976 SC 1175

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from industry to industry and from one part of the country to another.2 It was held in Hydro

(Engineers) Private Limited v. The Workmen,3 that:--

“The concept of minimum wages takes in the factor of the prevailing cost of essential

commodities whenever such minimum wage is to be fixed. Furthermore, in the right of

spiralling of prices in the 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”.

Components of a minimum wage.-- 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 minimum wage.

Therefore, no addition shall be made to the components of the minimum wage, which would

take the minimum wage near the lower level of the fair wage. In Unichay v. State of Kerala,4

it was held that “the Act contemplates that minimum wage rates should be fixed in the

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 concept of the need “based minimum wage was evolved by the 15th Indian Labour

Conference, held in July, 1957. With regard to the minimum human needs of the industrial

worker, irrespective of any other considerations.” In order to calculate the minimum wage,

the Tripartite Committee of the Indian Labour Conference held in New Delhi in 1957,

accepted the following norms, and recommended that they should guide all wage-fixing

authorities, including minimum wage committees, Wage Boards, adjudicators, etc. :--

1) In calculating the minimum wage, the standard working class family should be

taken to consist of three consumption units for one earner; the earnings of women,

children and adolescents should be disregarded.

2) Minimum food requirements should be calculated on the basis of net intake of 2700

calories, as recommended by Dr. Aykroyd for an average Indian adult of moderate

activity.

2 Hydro (Engineers) Pvt. Ltd. v. The Workmen3 Ibid4 AIR 1962 SC 12

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3) Clothing requirements should be estimated as per consumption of 18 yards per

annum which would give for the average worker’s family of four, a total of 72

yards.

4) In respect of housing, the norm should be the minimum rent charged by

Government in any area for houses provided under the Subsidised Industrial

Housing Scheme for low income groups.

5) Fuel, lighting and other ‘miscellaneous’ items of expenditure should constitute 20%

of the total minimum wage.

6) Children’s education, medical requirements, minimum recreation including

festivals/ceremonies and provision for old age marriages, etc. should further

constitute 25% of the total minimum wage.5

It was further held in the above case that the wage structures which approximately answers

the above six components is nothing more than a minimum wage at subsistence level. The

employees are entitled to minimum wage at all times and under all circumstances. An

employer who can’t pay minimum wages has no right to engage labour and no justification to

run the industry.

In People’s Union for Democratic Rights v. Union of India,6 it was held by the Supreme

Court that where children below the age of 14 years are employed in violation of the

Employment of Children’s Act, 1938 and minimum wages are denied to such children or to

other persons who by reason of poverty or socially or economically disadvantageous position

are unable to approach the Court, legal redress may be sought on their behalf by any member

of the public.

FAIR WAGES:

There is a difference between minimum wages and fair wages. In case of fair wage, besides

the principle of industry-cum-region, the company’s capacity to bear the financial burden

must receive due consideration. But mere hopeful observations made in the director’s annual

report can’t be basis for awarding increased wages because such observations are sometimes

made to inspire hope and confidence in shareholders and they can’t be a substitute for actual

audited figures.7

5 Added by the Supreme Court in view of socio-economic aspect of the wage structure operating in our society today, while deciding Workmen v. Reptakos Brett & Co Ltd., 1992 SCC 2716 (1992) 2 LJ 545 (SC)7 Sangam Press v. Workmen, AIR 1975 SC 2035

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It was held in Transport Corp. of India Ltd. v. State of Maharashtra & Others,8 that it is not

for the Labour Court or Tribunal to fix the minimum rates of wage. 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

ascertain for themselves what would be the minimum rate of wages. In fact minimum rate of

wages are fixed by the Government. Courts or tribunals merely ascertain what are the

minimum rates of wages for the purpose of deciding ‘fair wages’.

LIVING WAGE:

The Fair Wage Committee in its report published by Government of India, Ministry of labour

in 1949 defined the ‘living wage’ as under:

“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 children, protection against ill health, requirements of essential

social needs, and a measure of insurance against the more important misfortunes including

old age”.

8 (1993) II LLJ (Bom)

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FIXATION OF MINIMUM WAGES

Section 3 of the act lays down that the appropriate Government shall be empowered to fix the

minimum rates of wages in the manner prescribed under this Act. It shall fix such rates of

wages payable to employees employed in an employment specified in Part I or Part II of the

Schedule and in an employment added to either part by notification under Section 27.

But the appropriate Government may in respect of employees employed in an employment

specified in part of the Schedule, instead of fixing minimum rates of wages under this clause

for the whole State, fix such rates for a part of the State or for any specified class or classes of

such employment in the whole of the state or part thereof.

The appropriate Government shall review the minimum rates of wages to fix and revise the

minimum rates, if necessary at such intervals as it may think fit. The intervals as aforesaid

shall not exceed five years. But where for any reason the appropriate government has not

reviewed the minimum rates of wages fixed by it within an interval of five years, the

appropriate government shall not be with the power to review or revise after five years. Until

the minimum rates are revised, the minimum rates in force immediately before the expiry of

the said period of five years shall continue in force.

Sub-section (1-A) provides that the appropriate government may refrain from fixing

minimum level of wages in respect of any scheduled employment in which there are in the

whole state less than one thousand employees engaged in such employment. But if at any

time, the appropriate Government comes to a 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

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thousand or more. It shall fix minimum rates of wages payable to employee in such

employment as soon as may be such finding.

In Sahadeo Sahu v. State of M.P. and another9 it was held that Section 3(1-A) does not

prevent the appropriate government from fixing the minimum rates of wages even if the

number of employees in that scheduled employment is less than one thousand. The word

‘refrain’ used in Section 3(1-A) would include jurisdiction to withdraw the minimum rates of

wages fixed if the strength of the scheduled employment falls below 1000. The power to

rescind the wages once fixed without any expressed provision is that regard in Section 3(1-A)

can well be inferred with reference to Section 21 of the General Clauses Act.

Sub-section (2) provides that the government may fix—

a) a minimum rate of wages for time work (i.e., “a minimum time rate”);

b) a minimum rate of wages for piece work (i.e., “a minimum piece rate”);

When a piece rate is fixed, every worker will not earn the same amount for the day.

If the difference is due to reasons which are purely personal to the worker, no

grievance can be made, but if the difference is brought about by furnishing one with

an appreciable example providing one with a machinery and the other with a hand

mallet, there may be a possibility of injustice and an attempt must be made for

arriving at a result which may really be reasonable and just in the circumstances.10

c) a minimum of remuneration to apply in the case of employees employed in a piece

work for the purpose of securing to such employees a minimum rate of wages on a

time work basis which is known as “a guaranteed time rate”, Clause (c) of section

3(2) is intended to meet a situation where operation of minimum rate fixed by the

Government may result in worker earning less than minimum wage.11

d) a minimum rate ( whether a time rate or a piece rate ) to apply to apply in

substitution for the minimum rate which would otherwise be applicable, in respect

of overtime work done by the employees, which is known as “overtime”.

The minimum rates of wages shall not apply in the following cases during the period in

which the proceeding is pending and the award made therein is the operation or where the

notification is issued during the period of operation of an award during that period:

9 (1990) II LLJ 402 (MP)10 M.G.A. Pai & Sons v. State, AIR 1971 Mys. 46.11 Hydro (Engineers) Pvt. Ltd. v. Workmen, AIR 1969 SC 182

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(i) where in respect of an industrial dispute relating to the rates of wages payable to any

of the employees employed in a scheduled employment any proceeding is pending

before a Tribunal or a National Tribunal under the Industrial Disputes Act 1947, or

before any like authority; or

(ii) where an award made by any such authority as aforesaid in its operation; and

(iii) a notification fixing or revising the minimum rates of wages in respect of the

scheduled employment is issued during the pendency of such proceeding or the

operation of the award.

Where such proceedings or award relates to the rates of wages payable to all the employees in

the employment no minimum rates shall be fixed or revised in respect of that employment

during the said period.

In fixing or revising minimum rates of wages under Section 3:

a) different minimum rates of wages may be fixed for ---

i. different scheduled employments;

ii. different classes of work in the same scheduled employment;

iii. adults, adolescents, children and apprentices;

iv. different localities;

b) minimum rates of wages can be fixed by one or more of the following wage periods,

namely:--

i.) by the hour,

ii.) by the day,

iii.) by the month, or

iv.) by such other longer wage-period as may be prescribed.

Where such rates are fixed by the day or the month, the manner of calculating wages for a

month or for a day, as the case may be, may be indicated. Where any wage-period have been

fixed under Section 4 of the Payment of Wages Act, 1936, minimum wages shall be fixed in

accordance therewith.

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In S.F.A.L. Works v. State Industrial Court, Nagpur,12 it was held that in fixing the minimum

rates of wages, the Act also makes provisions for the special allowances to be paid along with

the basic rate of wages. The allowance is fixed by the Government to accord as nearly as

practicable with the variation in the cost of living index number applicable to such workers.

So far as the provisions of the act relating to the minimum wages and special allowances are

concerned they are fixed without any reference to the paying capacity of the employer, but

when a dearness allowance is fixed as a part of the fair wage, it will have to depend upon the

paying capacity of the employer. It has been held though the dearness allowance is given to

compensate for the rise of the cost of living, cent per cent neutralisation is not given as it may

tend to inflation.

In Jyothi Home Industries v. State of Karnataka,13 the question for consideration was

whether the appropriate government can fix guaranteed remuneration under this Act, for the

day on which the employer in unable to give the work. It was held that the appropriate

government under Section 3 can fix minimum wages for hours actually worked by the

employee and if he is not in the position to fulfil his part of the contracts on account of the

facts that the employer does not offer him necessary raw materials required for his job, he

would be entitled to remuneration under Section 3(2)(c). This view is supported by the other

provisions like section 13 and 20 of the Act also. Thus the Government can fix guaranteed

remuneration.

12 AIR 1978 SC 1113

13 (1983) 1 LLJ 201 (Karnataka)

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FIXING AND REVISING OF MINIMUM WAGES.

Irrelevant considerations in fixation of minimum wages.

The following considerations are not relevant in fixation of wages:-

a) The fact that an employer may find it difficult to carry on his business on the basis of

minimum wages14

b) The financial capacity of the employee i.e., his capacity to pay15

c) The fact of the employer-company having incurred losses during the previous years.

d) Employer’s difficulties in importing raw materials and

e) 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.16 Minimum wages must be paid irrespective of the extent of the profits, the

financial condition of the establishment or the availability of workmen, on lower wages.17

The minimum wages are independent of the kind of industry and applies to all alike, big or

small. It sets the lowest limit below which wages cannot be allowed to sink in all humanity.

PROCEDURE

14 Supra 1115 Sangam Press v. Workmen AIR 1969 SC 203516 Supra 1417 Supra 1

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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

b) By notification in the Official Gazette, publish its proposals for the 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 in consideration.

After considering the advice of the committees appointed, and all representations received by

it before the date specified in the gazette notification, the appropriate government may by

notification in the Official Gazette, fix or revise the minimum wages in respect of the each

scheduled employment, which shall come into force after the expiry of three months unless

otherwise provided in the notification.

When the appropriate Government proposes to revise the minimum rates of wages, by the

mode specified in section 5(1) (b), the appropriate government shall consult the advisory

board also.

If the advisory board approves the notification, regarding revision of wages without

discussing the objections made, the action of the board would be arbitrary because it amounts

to non-application of mind in granting approval.18

The exercise of power to fix or revise the minimum wages under sub-section (2) of section 5

is limited to employment specified in the schedule. Under Section 27 of the Act, the

appropriate government may add any employment to the schedule. The nature and extent of

the power of the appropriate Government under Section 27 and Section 5 (2) is separate and

distinct and what can be done by the appropriate government in exercise of its power under

Section 27 cannot be done by it in exercise of its powers under Section 5 (2) of the Act.19

The power conferred upon the appropriate Government under Section 5(1) is neither arbitrary

nor unguided. Therefore, sub-section (1) does not offend Article of the Constitution.20 In the

matter of fixing minimum wages, the economic capacity of the trade or industry is irrelevant,

18 H B Verma v. Union of India, (1993) 1 LLJ 39 Del19 Madhya Pradesh Mineral Industrial Association v. The Regional Labour Commissioner, AIR 1950 SC 106820 Chandra Bhavan Boarding and Lodging, Bangalore v. State of Mysore, AIR 1970 SC 2042.

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for, what alone is germane, is, the wage required by the employees to survive. 21 The fixation

of wages depend upon the prevailing economic conditions, the cost of living in a place, the

nature of the work to be performed and the conditions in which the work is performed.

Where a notification is issued by the Government authorising 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 the employer and does not impose an

obligation upon him.22

In Muruga Home Industries v. Government of Tamil Nadu & Anr.23 minimum wages of

beedi-workers were revised by the State Government revised by the State Government by a

notification issued after consultation with the Advisory Board. It was the notification fixing

minimum wages should not be interfered with in writ proceedings except on most substantial

grounds. Advisory Board is well balanced since representation is given to employers and

employees. Work in Beedi industry is unorganised sector and condition of work and wages of

beedi workers are below subsistence level and minimum wages fixed is fair and just and not

arbitrary.

In North Bihar Chamber of Commerce and Industries, Muzzaffarpur and others v. State of

Bihar and others,24 a notification was issued revising the minimum rates of wages on the

advice of the Advisory Board. It was contended that the composition of the Advisory Board

was defective. The revised rates of minimum wages were impugned in these petitions.

Dismissing the petitions the High Court observed that the petitioner had neither pleaded nor

advanced arguments that any prejudice was caused by an alleged defect in the composition of

the Advisory Board would not per se vitiate the decision.

In Andhra Pradesh Hotels Association v. Government of Andhra Pradesh & Anr25, the

Government of Andhra Pradesh issued a Gazette notification on March 1999 proposing

revision of minimum wages in Hotel industry under Section 5(2) of the Minimum Wages

Act, 1948. On October 17, 2000 the Government of Andhra Pradesh in consultation with the

State Advisory Board issued another G.O. revising the minimum wages in exercise of powers

conferred by Sections 3(1) and 5(2) of the Act in Hotels and Restaurants etc. Being aggrieved

21 Arbunda Bhuvan Tea Shop & Ors. v. State of Maharashtra & Ors., 1992 I LLJ 807 (Bom)22 Supra 2023 (1996) I LLJ 598 (Madras)24 (2002) I LLJ 488 (Pat.)25 (2002) III LLJ 623 (AP.

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by the said notification the petitioner association filed the present writ petition. Dismissing

the appeal the High Court made following observations:--

1) Fixation of minimum wages was an administrative act and the quantum fixed on

humanitarian ground was not subject to judicial review, unless the fixation was ultra

vires, the Minimum Wages Act, 1948.

2) Minimum wages must provide not merely for bare subsistence but for the preservation

of worker’s efficiency also, and so the capacity of the employer to pay such wages

was treated as irrelevant.

3) The High Court while reviewing a notification fixing minimum wages could not

assume the role of an appellate authority and reappreciate each and every factor.

4) It could not be said that under no circumstances the rate of neutralisation of variable

D.A. should not exceed 100%.

5) The Minimum Wages Act, 1948 was a beneficial piece of social legislation and in

fixing the wages under it, the consideration was that workmen should receive their

proper share of the National income which they help to produce.

6) The appellant had not made out any permissible ground to quash the impugned

Government order.

The further part of the Act talks about the authorities under the Act, their composition and

process of working. The later Sections also enlist the penalties for different offences under

the Act and also the power of the Government to make and validate rules under the Act.

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CONCLUSION

This Act provides the workers with a weapon to defend themselves in case undue advantage

of their services is sought to be taken by the employers. It empowers the workmen to demand

for special allowances in addition to the minimum wages. The fixation of minimum wages

for every sort of work ensures that a basic standard of living is enjoyed by the workers and

that they are properly rewarded for their labour.

However, minimum wage provides not merely for the bare subsistence of life but for the

preservation of the efficiency of the worker. Therefore, provisions for some measure of

education, medical requirements and amenities are also enunciated in the Act. The idea of

fixing such wages in the light of cost of living at a particular juncture of time and neutralising

the rising prices of essential commodities by linking up scales of minimum wages with the

cost of living index can’t, therefore, be said to be alien to the concept of minimum wage.

The concerned Act also provides for a fair procedure for determination of minimum wages as

well as remedies that could be sought in case the workers are deprived of their much deserved

minimum wages. This legislation specifically aims at securing livelihood for the unskilled

workers who lack the ability to raise a demand for their services or labour.

This project has brought to light the need for fixing of such minimum wages, the procedure

for determination of minimum wages for different industries, the reasons which the

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appropriate government takes into account before determination of minimum wages as well

as the remedies available to the workmen.

BIBLIOGRAPHY

Books referred:

Labour Law & Labour Relations (Cases & Materials), The Indian Law Institute

Publications, 2002

Industrial Relations & Labour Laws, S.C. Srivastava, Vikas Publishing House, 2006

Labour & Industrial Law, S.N. Mishra, Central Law Publications, 2009