Performance Appraisal Tutorial | Wage Policy in India

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Wage Policy in India

The term ‘wage policy’ refers to all systematic efforts of the Government in relation to a national wage and salary system. The policy lays down guidelines concerning the level and structure of wages.

The guiding principles of national wage policy are as follows.

  • Serves the national objective of economic growth with social justice.
  • Promote employment, productivity and capital formation.
  • Remove sectorial imbalances and wage differentials.
  • Promote price stability.
  • Avoid automatic double linkages.

Pay structure in a company depends upon several factors. They are wage settlements, labor market situation, company’s nature and size, etc. Pay structure consists of certain grades, scale and range of pay in each scale. Each scale has a minimum and a maximum limit. Jobs placed within a particular grade carry the same value though the actual pay in a grade depends upon length of service and or performance of the employee.

Pay structure in India generally consists of the following components.

  • Basic wage/salary.
  • Dearness allowance (D.A.) and other allowances.
  • Bonus and other incentives.
  • Fringe benefits or perquisites.

Basic Wage

The basic wage is the foundation of a pay packet. It is a price for services rendered. In India, basic wage has been influenced by statutory minimum wage, wage settlements, and awards of wage boards, tribunals, pay commissions, etc.

Minimum Wage

Minimum wage is that wage which is sufficient to cover the bare physical needs of a worker and his family. The minimum wage should provide not merely for the base subsistence or sustenance of life but for the preservation of the health, efficiency and well-being of the worker by some measure of education, medical facilities and other amenities. Minimum wage has got to be paid to every worker. If an enterprise is unable to pay its workers at least a bare minimum, it has no right to exist.. The Conference laid down the following criterion for the calculation of minimum wage.

Fair Wage

A fair wage is something more than the minimum wage providing the bare necessities of life. While the lower limit of the fair wage is set by the minimum wage, the upper limit should be the capacity of the industry to pay. Between minimum wage and fair wage, fair wage should depend on several factors like,

  • The productivity of labor
  • The prevailing rates of wages in the same or similar occupations in the same region or neighboring regions,
  • Level of national income and its distribution,
  • The place of the industry in the economy of the country
  • The employer’s capacity to pay

Living Wage

It provides certain amenities considered necessary for the well-being of the worker in a particular society. Living wage should ensure a normal standard of life to the average employee regarded as human beings living in a civilized community. Its concept is dynamic related with the level of economic development in a country. There should be progressive improvement in the wage with improvements in the economic life of the nation.

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