- As per the Indian Constitution, ‘Minimum Wage’ has been defined as the level of income for skilled and unskilled workers which ensures a sustaining standard of living while also providing for some measure of comfort. A minimum wage not just supports the bare level of employment, but also seeks viable continuous improvement. It aims at preventing the exploitation of labor.
- Under the Minimum Wages Act, 1948, both Central and State governments have dominion over fixing the wages. The State governments fix their own scheduled employments and further release the rates of Minimum Wage along with the VDA (Variable Dearness Allowance).
- Currently, the number of scheduled employments in the Central sphere is 45 whereas in the States sphere the number is 1650 (when all states are counted). In July 2015 the National Floor Level of Minimum Wage was raised to Rs 160 per day. National Floor Level Minimum Wage has been revised again to Rs 176/day. The new rates came into effect from June 1, 2017.
Scope and Applicability
Minimum Wages Act was enforced to ensure the employers did not exploit employees with insufficient wages. The Act is applicable on all establishments, factories, places of business, and industry types. Unscheduled industries are generally excluded, though a state can add a minimum wage for an occupation or specify it for a sector during a revision cycle.
The Minimum Wage Act
- The Minimum Wage Act of 1948, passed by the Indian parliament, fixes the minimum wage for certain ‘scheduled employment’ categories – which is applicable to the whole of India.
- Under the 1948 Act, a Tripartite Committee of Fair Wage was appointed that defined the minimum wage in India as a wage that must guarantee bare livelihood.
- The term ‘scheduled employment’ means an employment specified in the list appended to the Minimum Wages Act or any process or branch of work forming part of such employment.
- In India, minimum wages are not fixed for an industry in a state, if there are less than 1,000 employees working in that industry in that state.
Fixing the minimum wage
Labor law in India is a concurrent subject, meaning that it comes under the jurisdiction of both federal and state governments. As such, the ‘appropriate government’ fixes and revises the minimum wage. For some specified types of employment, the federal or ‘central’ government is responsible (for instance, under categories mentioned in the Minimum Wage Act of 1948).
In India, there are two methods for the fixation and revision of the minimum wage rate:
- Committee Method – The appropriate government sets up committees and sub-committees. These committees hold inquiries and make recommendations for the fixation and revision of minimum wages. There are five Regional Minimum Wages Advisory Committees in India.
- 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.
Calculating the minimum wage rate
The determination of minimum wage depends on many factors. These include:
- Level of income
- Paying capacity
- Prices of essential commodities
- Productivity
- Local conditions.
At least 20 percent of wages must provide for:
- Minimum food requirement: 2700 calories per adult (approximately);
- Clothing requirements: 72 yards per year per family;
- Rent: According to the minimum area provided by Government’s Industrial Housing Scheme; and
- Miscellaneous expenditure: Fuel, lighting, etc.
Other parameters that must form 25 percent of the total minimum wage are:
- Children’s education;
- Medical needs;
- Minimum recreation, that is, festivals or ceremonies;
- Provision for old age; and
- Provision for marriage.
Payment of Overtime (Section 14)
Section 14 provides that when an employee, whose minimum rate of wages is fixed under this Act by the hours, the day or by such longer wage period as may be prescribed, works on any day in excess of the number of hours constituting a normal working day, the employer shall pay him for every hour or part of an hour so worked in excess at the overtime rate fixed under this Act or under any other law of the appropriate Government for the time being in force whichever is higher.
Offences and Penalties
Section 22 of the Act provides that any employer who (a) pays to any employee less than the minimum rates of wages fixed for that employee’s class of work or less than the amount due to him under the provisions of this Act or contravenes any rule or order made under Section 13, shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to five hundred rupees or with both.
Compliances under the Act
The establishment must ensure following compliances under the Act.
- The Establishment is covered by the definition “Scheduled Employment” with effect from ___.
- The Government revised the minimum wages once/twice/ thrice during the financial year under reference and the Establishment has paid to all its employees minimum wages in accordance with the rates at respective points of time and at the respective dates specified in the notification under Section 5 of the MWA.
- The Establishment has issued wage slips to all its employees in respect of each of the wage period ____.
- Where the services of any employee were terminated for any reason whatsoever, the wages were paid within two working days from the date of such termination.
- Where the Establishment was constrained to impose any fine or deduct wages on account of damages caused by any employee, the latter was given an opportunity of being heard in the presence of a neutral person and was also communicated the amount of fine imposed or deduction made from the wages.
- The Establishment has eight working hours per day, inclusive of half an hour of interval.
- All claims under Section 20 of the MWA were paid within the time limit specified in the Order.
Maintenance of registers and records
- Register of Fines – Form 1 Rule 21(4)
- Annual Returns – Form III Rule 21(4-A)
- Register for Overtime – Form IV Rule 25
- Register of Wages – Form X, Wages Slip – Form XI, Muster Roll – Form V Rule 26
- Representation of Register – for three year Rule 26-A {Section 18}
Section 18
Apart from the payment of the minimum wages, the employer is required under Section 18 to maintain registers and records giving such particulars of employees under his employment, the work performed by them, the receipts are given by them, and such other particulars as may be prescribed. Every employee is required also to exhibit notices, in the prescribed form containing particulars in the place of work. He is also required to maintain wage books or wage-slips as may be prescribed by the appropriate Government.
Code on Wages Bill
The Code on Wages Bill proposed by the Union government earlier this month will not fix a single national level minimum wage for the whole country, but will vary across states and geographies.
Labour Ministry officials said the wage levels would vary state-wise and in some cases, may differ based on geographies – coastal, hilly or plains. “India is a vast country with the cost of living varying across states. We cannot have a single national-level minimum wage. The Code on Wages Bill combines four labour laws — Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976.
Deciding factors
- The Bill states that the state governments will fix their minimum wages keeping in mind “the skill required, arduousness of the work assigned to the worker, the cost of living of the worker, geographical location of the place of work,” among other factors.
- At present, the Centre has fixed a National Floor Level Minimum Wage – a non-statutory measure to ensure that states fix their minimum wages beyond this floor level. “This is one of the reasons why the changes to the minimum wage law assume significance as through this Bill, the minimum wages set by the Centre will become statutory,” another senior Labour Ministry official said.
- With effect from July 1 this year, the Labour Ministry announced a hike in the National Floor Level Minimum Wage from Rs. 160 per day to Rs. 176 a day and sent advisories to states for compliance. However, till April 1 this year, at least 11 states, including Andhra Pradesh, Gujarat, Arunachal Pradesh, Himachal Pradesh, Manipur, Nagaland, Tripura and Tamil Nadu, had fixed their minimum wage level below the National Floor Level Minimum Wage of Rs. 160 recommended by the Central government as on that date.
Regional Committees in India for Current Minimum Wages
Since the respective state governments have been empowered to independently fix minimum wages, disparities between wages in neighboring states are common. In order to reduce this problem and bring comparability the Central government has set up 5 regional committees (table below) for harmonization of minimum wages.
| Region | States/UTs covered |
| Eastern Region (6) | West Bengal, Orissa, Bihar, Jharkhand, Chhattisgarh and Andaman and Nicobar Islands. |
| North Eastern Region (8) | Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim. |
| Southern Region (6) | Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Puducherry and Lakshadweep. |
| Northern Region (9) | Punjab, Rajasthan, Himachal Pradesh, J&K, Haryana, Uttar Pradesh, Uttrakhand, Delhi, and Chandigarh |
| Western Region (6) | Maharashtra, Gujarat, Goa, Madhya Pradesh, Dadra and Nagar Haveli and Daman and Diu. |
