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MINIMUM WAGES ACT -1948

Updated: 5 days ago

Author: Jasmin kaur kohli, IV year of B.A.,LLB From New Law College, Pune.


INTRODUCTION

The Minimum Wages Act, 1948 is a Central legislation aimed at statutory fixation of minimum rates of wages in the employments where sweated labor is prevalent with possibility for exploitation of unorganized labor. The provisions of the Act are intended to achieve the object of doing social justice to workmen employed in the scheduled employments by prescribing minimum rates of wages for them. The Act aims at statutory fixation of minimum wages with a view to prevent exploitation of labour.


SCOPE

Scope and Objective of the Minimum Wages Act are as follow;

  1. To safeguard that the employee has a basic physical necessity, proper health, and comfort.

  2. Ensure that the labor gets fair wages.

  3. To ensure that the labor lives a decent life and have a respectable name in society.


DEFINATION

As per the definition given by the 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”.


PURPOSE

The purpose of minimum wages is to

  1. protect workers against unduly low pay.

  2. ensure a just and equitable share of the fruits of progress to all, and a minimum living wage to all.

  3. To ensure employed and in need of such protection.

  4. 4- Minimum wages can also be one element of a policy to overcome poverty and reduce inequality, including those between men and women, by promoting the right to equal remuneration for work of equal value.

  5. To set a floor, should also be distinguished from collective bargaining, which can be used to set wages above an existing floor.

Section 3 of the Minimum Wages Act 1948 provides that “The Appropriate Government” will fix minimum wages. Appropriate Government can include local, State and Central Government.  This section sets the rate according to hours, days, months or any other wage period may be prescribed.


The rates to be fixed need not be uniform. Diverse rates can be fixed for various zones or areas. If the wages are fixed according to section 4 of the Payment of the Wages Act, 1936, the fixing will be done according to the Act.

Minimum Wages are fixed according to the following criteria

  • Time Rate – The minimum rate is fixed according to the duration of the work done by the labor.

  • Piece Rate – Here the minimum wage is fixed by the total number of pieces manufactured in the factory.

  • Overtime Rate – Here the minimum rate is fixed by the overtime done by the labor regardless of the time or piece rate.

Wage Committee

A wage committee shall be formed by the appropriate government, which shall consist of members from both the employer and employee side. Therefore, an independent person with having no interest in the employment scheme shall be appointed as the chairman of the wage committee. The appointment process in the Minimum Wages Act is made in this way so that there is no scope of discrimination to the labors. 


Advisory Board

Section 7 of the Minimum Wages Act, the Advisory Board, which proposes recommendations and changes to be brought in labor laws. The advisory board proposes a recommendation to the State and Central Government in fixing the minimum wages.


According to Section 9 of the Act, it talks about the appointment of committees and subcommittees. The included members are:

  • A person appointed by the Appropriate Government.

  • Employers and employees, who belong to the scheduled employment and they shall be equal in number.

Independent persons and they shall not exceed one-third of the total number of members. An independent person will be appointed as chairman of the committee.


Wages in Kind

Section 11 says that the wages shall be paid in cash. If somewhere, the payment is done either wholly or partly and if it is a customary process, then in that the case, the government through a notification in the official gazette shall enforce the payment partly or wholly.


Consequences of Non – Compliance

Non- compliance of the Minimum wages act, i.e. not paying minimum wages is a culpable offense.  Hence, violation of fixing hours also attracts the penal provision.

Imprisonment up to 5 years and a fine up to 10,000 is the maximum punishment that can be awarded. Section 22 of the Act defines the sanctions.


Significance of the Act

Minimum wages are accepted globally to be a vital means to both combating poverty and, equally crucially, ensuring the vibrancy of any economy. In the aftermath of the 2008 global financial crisis and the erosion of purchasing power worldwide, the International Labour Conference’s Global Jobs Pact of 2009 identified “the regular adjustment of wages, in consultation with the social partners” as a means of reducing inequality, increasing demand, and contributing to economic stability.

It aim is to set the floor wage is to ensure “minimum living standards” for workers and the draft rules incorporate criteria declared in a landmark judgment of the Supreme Court in 1992 as well as recommendations of the 15th Indian Labour Conference. These include the net calorific needs for a working-class family (defined as the earning worker, spouse and two children or the equivalent of three adult consumption units) set at 2,700 calories per day per consumption unit, their annual clothing requirements at 66 meters per family, house rent expenses assumed at 10% of food and clothing expenditure, as well as expenses on children’s education, medical needs, recreation and contingencies.

The rules, similarly, cover almost the entire gamut of wage-related norms including the number of hours of work that would constitute a normal working day (set at nine hours), time interval for revision of dearness allowance, night shifts and overtime and criteria for making deductions. A separate chapter of the draft rules also deals with the payment of bonus while another lays down the guidelines for the formation of the Central Advisory Board as well as its functioning

RELEVANCE IN ECONOMICS

Employment is one of the major elements in an economic situation and labour being one of the prime factor of an economy, so to know the where about of an economy is essential.

The Finance Ministry’s Economic Survey, in July, had in a chapter titled ‘Redesigning a Minimum Wage System in India for Inclusive Growth’ stressed the importance of establishing an effective minimum wage system.

National minimum wage would have multiple impacts including helping lift wage levels and reducing wage inequality, thus furthering inclusive growth, according to the survey.

CONCLUSION

Firstly government should Increase base wages

Although this new indexation is critical, it will have a sizeable impact on increase in rural incomes only if the base NREGA wages are high. For example, let’s assume a 10% increase in wages due to the new indexation. Then NREGA wages in Kerala at ₹271 per day, one of the highest, would become ₹298. However, if NREGA wages were equal to the State minimum wages, the wages in Kerala would increase from ₹490 to about ₹540. A substantial increase in NREGA wages and subsequent indexation with CPI-R would be meaningful for the workers and the economy. But barring three States/UTs, NREGA wages are still lower than the State minimum wages elsewhere, in violation of the law.

Last but not the least Increase inequality

The current corporate tax cut will only widen economic inequality. According to the Oxfam Inequality Report 2018, in one year, the wealth of the richest 1% in India grew by ₹20.91 lakh crore, which is equivalent to the 2017-18 Budget. According to estimates by CRISIL, due to the recent tax cut, 1,000 companies would have annual savings of around ₹37,000 crore. In comparison, the last annual NREGA budget is ₹60,000 crore. So the estimated gains of just 1,000 companies would be equivalent to the annual earnings of around 7.2 crore NREGA laborer’s. What is worse is that the budget allocation for NREGA gets exhausted by October of each financial year, leading to delays in payment of wages. These are all legal violations.

References

https://www.ilo.org/newdelhi/aboutus/WCMS_166809/lang--en/index.htm. n.d.