The Minimum Wages Act 1948 was enacted on 15th March 1948. This act was enacted to ensure a minimum wage for skilled and unskilled workers used in industries, factories, any place of business, or other establishments. The act ensures that employers do not exploit their employees in any establishment or industry.
The central government is empowered to make rules related to the minimum wages for the scheduled employment under this act. The least amount of remuneration required to be paid to an employee by an employer for a given period cannot be reduced by collective agreement or by an individual contract.
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Scope and applicability of the Minimum Wages Act
The act is applicable throughout India and applicable to all industries, places of business, business establishments, factories. Unscheduled employment is generally excluded from the purview of this act but a state government is empowered to add employment in its schedule of employment. The act is applicable to any established employing a minimum of 1000 employees in that particular state.
The act does not apply to employees under any undertaking owned by the central government or federal railway.
What is India’s Minimum Wage 2021?
States fix minimum wages in India by considering economic factors, working conditions, living standards of labourers, cost of living, nature of work, among other factors. Therefore, the amount differs according to states.
These wages paid to labourers are combined with variable dearness allowance (VDA).
The VDA is the amount of remuneration required to be paid to an unorganised sector employee after increasing or decreasing the consumer price index (CPI).
Currently, the average minimum wage in India is Rs 176/day for an 8-hour workday.
All workers, that is, unskilled, semi-skilled, or skilled are entitled to wages.
How is the minimum wage calculated in India?
The Minimum Wage Act in India can achieve a particular target and ensure that workers are provided with wages to satisfy their basic needs.
Minimum wage is termed as the living wage, which allows him to meet the basic needs of life such as hygienic and standard living, food, education for kids, access to basic healthcare facilities, dignified and comfortable living, and provide for them any contingency.
Minimum wages in India can be fixed on the following criteria:
- Minimum time rate: A minimum rate of wages according to the time duration of work
- Minimum piece-rate: A minimum rate of wages based on the number of pieces manufactured
- Guaranteed time rate: A minimum rate of remuneration based on timely work done
- Overtime rate: A minimum rate to apply in respect of overtime work by employees
Minimum wages in India are calculated based on norms suggested in the 15th labour commission meeting held in 1957 headed by Gulzari Lal Nanda.
These norms are as follows:
- Three consumption units per year
- Minimum food requirement of 2700 calories per average adult
- Clothing provision of 72 yards per annum
- Rent according to the minimum area given under the government’s industrial housing scheme
- Fuel and other miscellaneous expenditure accumulates to 20% of the total minimum wage
In 2019, a new panel suggested new criteria for calculating minimum wage in India. However, these recommendations are yet to be implemented:
- The new minimum consumption unit can be increased to 3.6 units.
- The minimum calorie requirement should be reduced to 2400 calories per average adult concerning the reduction in the proportion of workers in hazardous work and the increase in the number of workers in moderate occupations.
- Keeping in mind all these criteria, the committee suggested the new national minimum wage should be increased to Rs 375/day or Rs 9750/month from the previous 176/day.
Why does India not have a national minimum wage?
The welfare of labourers in all employment categories, regardless of whether the labour is skilled, semi-skilled, or unskilled, is a state or central government subject. Therefore, their welfare is a multi-jurisdictional issue.
According to the code of the Wages Act, 2019, minimum wages should be determined by state governments.
A state government can better understand the cost of living, expenditure, working conditions, and living conditions in scheduled employment.
State governments are empowered to fix this base pay independently within their jurisdiction.
Different states have different economic conditions and infrastructure and government policies regarding the welfare of workers. The base pay continuously varies as per states.
Implementing a national minimum wage is not possible for all workers throughout the country. Therefore, India does not have a national minimum wage.
Penalty for non-compliance
As per the Minimum Wages Act, if a worker is underpaid or not paid minimum wages, he can complain to the labour commission. If the employer is guilty of the offence, he is punished with imprisonment up to 6 months and/or with a fine extending to 500 Rs or both (Section 22).
Such violations are punishable with a fine extending to Rs. 500 (Section 22A).
Although the new code on wages, 2019, is yet to be implemented, the maximum punishment for non-compliance is prescribed to be imprisonment for 3 months with a fine of up to one lakh rupees.
Minimum wages across Indian states / union territories
The state governments / UT can fix and revise these wages along with VDA for Scheduled employment in their respective areas of jurisdiction.
Some states/UTs have varying minimum waged in specific zones, and these wages differ from state to state.
Some examples of minimum wages along with VDA in different states and Union territories are as follows:
|Class of Employment||Class of workers||Basic Per Month||VDA Per Month||Total Per Day||Total Per Month|
|Clerical And Supervisory Staff||Non-Matriculates||16341||1196||675||17537.00|
|Clerical And Supervisory Staff||Matriculates But Not graduates||17991||1300||742||19291.00|
|Clerical And Supervisory Staff||Graduates And Above||19
|Class of Employment||Basic Per Day||Basic Per Month||VDA Per Day||VDA Per Month||Total Per Day||Total Per Month|
Economists from SBI found that agricultural wages under MGNREGA are lower than the agricultural wages in some states.
Even after enacting legislation for enforcement in payment of base pay to workers to ensure a standard life for them, the government is not adequately equipped to enforce the act in many sectors to ensure workers with adequate wages and provide them for any contingency or any basic needs.
The penalty under the act is also trivial with fewer penalties. Therefore, the Government of India implemented a new reform with a code on wages, 2019.
The code on wages, 2019, is an optimistic step for the payment of minimum wages in India by providing them statutory backing and removing confusion by focusing on this code rather than having so many labour laws to ensure the welfare of labourers.
What is the standard for working hours in a day for scheduled employment?
The standard working hours for scheduled employment are 9 hours per day, including one-hour lunchtime. If the person exceeds the work time beyond 4 hours and less than 8 hours, the worker will receive full wages.
Who persons are entitled to file claims under this act?
An individual employee, trade unions, or labour inspectors can file claims in the presence of authorities.
When VDA got introduced and why?
VDA was introduced in 1991 to safeguard wages against inflation by linking them to the cost of living index.
In which case did the apex court laid the rule that if an employee is paid wages more than the minimum wages as fixed, they are not required to pay VDA separately?
This law was set by the apex court in Airfreight Ltd. v. State of Karnataka (1999) LLR 1008 SC.