Factors influencing minimum wage in India

Every other month we see news on the topic of unjust treatment of labourers and strikes by workers for raise in the minimum wage threshold. Since 2017, various states in India like Karnataka and Delhi have taken measures to bring about amendments to existing minimum wage laws in their respective states.

The Minimum Wages Act, 1948 (‘the Act’) is based on Article 43 of the Constitution in the chapter on Directive Principles of State Policy, which states that, “The State shall endeavour to secure by suitable legislation or economic organization or in any other way to 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.”

The fixation of the minimum wage in India depends upon various factors like socio-economic and agro-climatic conditions, prices of essential commodities, paying capacity and the local factors influencing the wage rate. It is for this reason that the minimum wage varies across the country.

Q. What is the definition of wage and what constitutes minimum wage?

Wages as per the Act is defined as “remuneration, capable of being expressed in terms of money, which would, if the terms of the 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, 1* [and includes house rent allowance], but does not include…”

As per International Labour Organisation (ILO), minimum wages have been defined as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract.”^[1]

Q. What is the criteria for determining the level of minimum wages?

At the 15th Session of the Indian Labour Conference held at New Delhi in July 1957, a resolution was passed that the minimum wage should be need-based and should ensure the minimum human needs of the industrial worker and proposed the following norms as a guide for all wage-fixing authorities –

In calculating the minimum wage, the standard working class family should be counted as three consumption units for one earner, the earnings of women, children and adolescents being disregarded.
Minimum food requirements should be calculated on the basis of a net intake of 2700 calories as recommended for an average Indian adult of moderate activity.
Clothing requirements should be estimated on the basis of a per capita consumption of 16.45 meter per annum, which would give for the average workers family of four a total of 65.83 meters.
In respect of housing, the norm is according to the minimum rent charged by the government in any area for houses provided under the Subsidised Industrial Housing Scheme for low-income groups; and
Fuel, lighting and other miscellaneous items of expenditure should constitute 20% of the total minimum wage.
In 1991, the Supreme Court in its judgment in Workmen Represented By Secretary v. Management of Reptakos Brett & Anr., AIR 1992 SC 504, added the 6th point which is – Children’s education, medical requirement, minimum recreation, including festivals ceremonies, provision for old age and marriage should further constitute 25% of the wage.

Q. Who fixes the minimum wage in India?

Labor law in India being a concurrent subject, meaning that it comes under the jurisdiction of both the central and state governments. For some specific types of employment, the Central Government is responsible, e.g., categories mentioned in the Act. In all other areas of employment, it is the respective state governments that establish the minimum wage. But once the Wage Code Bill 2017 is passed, the Central Government will be the sole authority to fix the minimum wages.

As per the 2013 Report^[2] on the Working of the Act, amongst the States, the average highest minimum wage reported is Rs. 382.50/day in Kerala. The scheduled employment of River Sand Collection, its loading and unloading in the state of Kerala fetches the highest minimum wages @ Rs. 532.50/day and the lowest minimum wage of Rs. 55.00/day are being paid in the scheduled employment of Agriculture (Yanam region) in Puducherry. The link to area wise rates of minimum wages for Scheduled employments in the central sphere as on April 1, 2017.

Governments fix/revise the minimum wage as per the following two methods as per the Act –

Committee Method

The government sets up committees and subcommittees and these committees hold inquiries and make recommendations for the fixation and revision of minimum wages. There are five Regional Minimum Wages Advisory Committees covering all the States in India whose aim is to bring uniformity in minimum wages of different scheduled employments.

Notification Method

The appropriate government publishes proposals in the official gazette to inform the persons who may be affected. The notification specifies a date that is at least two months away from the date of the notification. This is the date on which the proposals will be due for consideration. Before publishing these notifications, the government consults various committees and sub-committees.

Q. How to sue for minimum wages in the court?

The appropriate government may, by notification in the Official Gazette, appoint other officers with experience as a Judge of a Civil Court or as a Magistrate to be the authority to hear and decide for any specified area and all claims arising out of the payment of less than the minimum rates of wages. A person aggrieved under this Act can approach the court as per Section 20 of the Act and demand for the payment due.

The legal remedy for the violations in the payment of minimum wages is available under the Section 12 of the Act, coupled with Section 21 of Contract Labour (Regulation and Abolition) Act, 1970 wherein the aggrieved can move against a contractor registered as per the Act. In a case where there are discriminatory practices between male and female workers, Article 14 of the Constitution of India and Equal Remuneration Act, 1976 can be invoked.

The Supreme Court of India provides precedents in cases such as People’s Union For Democratic Rights & Ors. v. Union of India, AIR 1982 SC 1473 and Sanjit Roy v. State of Rajasthan, AIR 1983 SC 328 where it states that any wage below the prescribed rate breaches Article 23 of the Constitution reiterating that a worker cannot be forced to work for a wage that is less than the minimum rate as decided by the central or state government. If anyone forces him/her to work at a lower wage, it will be considered as forced labor under Article 23 of the Constitution.

Q. What are some of the recent amendments with regards to minimum wages?

As quoted in First Post^[3], ILO’s India Wage Report said that the country’s economy in the past two decades has seen an annual average GDP rate of 7 % but low pay and inequality persist. The economy still faces informality and segmentation, the Report said.

Government, with the Draft Wages Code Bill, 2017, has attempted to initiate labour reforms with the purpose of enabling itself to set up a benchmark minimum wage according to different regions of India.

The Bill strives to introduce the following –

Combine Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965, and Equal Remuneration Act, 1976.
Timely payment of wages to be made mandatory for all workers irrespective of the sector in which they are working.
Central Government will fix minimum wages for certain employments including railways and mines and remaining by the State Government and it will be revised every five years.
The national minimum wage will be decided by the central Government which cannot be lowered by State Governments
The overtime rate would be compensated with minimum double the amount of salary.
An appellate authority will be created between the claim authority and the judicial forum to ensure that the grievances and claims are settled in a proper way along with penalties for a variety of violations.

This Bill, is controversial as it takes the States’ power to decide the minimum wages in their region. It is set to be introduced in the monsoon session of Parliament after Parliamentary Standing Committee has finalised its report on first labour code and pave way for Wage Code Bill 2017.

Conclusion

The Draft Wages Code Bill promises major changes to minimum wages legislation after a long time. Merging the four existing statutes on wages will assist in easing governance and possibly improve compliance, however, we have to wait and see if the latter will be effective.

Let’s hope that passing of these recent bills will bring inequality in wages thereby benefiting the labourers in turn leading to better productivity and also hoping will help curb bonded labour in India.

DISCLAIMER: The information provided in this article is for educational purposes only. The same cannot be construed as legal advice.

^[1] ILO home: Minimum wages-Definition

^[2] Government of India, Report on the working of the The Minimum Wages Act, 1948 for the year 2013 http://labourbureaunew.gov.in/ (2015), http://labourbureaunew.gov.in/UserContent/MW_2013_final_revised_web.pdf (last visited Oct 27, 2018).

^[3] International Labour Organisation for stronger implementation of wage law in India; cites low pay, inequality, Firstpost (2018), https://www.firstpost.com/business/international-labour-organisation-for-stronger-implementation-of-wage-law-in-india-cites-low-pay-inequality-5001211.html (last visited Oct 27, 2018).