This article is written by Tanishka Dhingra of University of Petroleum and Energy Studies
ABSTRACT
The Minimum Wage Act of 1948 is a welfare law designed to stop employers from exploiting unorganized, uneducated, and uninformed workers by paying them unfairly low salaries. In order to prevent the possibility of labour exploitation by paying extremely low sweatshop wages, it stipulates minimum statutory salaries for scheduled employment. There are many workers in the unorganized sector who are not covered by the Minimum Wage Act because the requirement for inclusion in the list of schedule employment is that there must be 1000 workers engaged in that activity in the state. The steps and efforts made to implement minimum wages, the proposed labour reforms, the Government of India’s efforts since the act’s enactment to increase the relevance of minimum wages for different categories of workers, the problems that still exist, and the way forward are all examined in this essay.
KEYWORDS – employment, labour reforms, minimum wages, constitution, fundamental rights, blue-collar workers
INTRODUCTION
Since we have a lot of human capital to spend in our industries and other fields of employment, India is a country with a high labour intensity. Given that such a large portion of the population depends on daily salaries for subsistence, the minimum wage is an essential component of any such nation. Mr. K. G. R. Chaudhary introduced the idea of minimum wages to India in 1920.
We had saviour rights for all blue-collar employees after the International Labour Conference in 1928 when the machinery of wage-fixing was brought into practical policy development.
The minimum wage system has gained widespread acceptance as a means of reducing poverty and stabilizing the economy.
The Indian Parliament passed the Minimum Wages Act in 1948 to ensure that workers received adequate compensation and to stop employers from abusing their position. The Act establishes minimum wage rates and fixes them for both skilled and unskilled labour in an effort to give both groups of workers a respectable quality of living. The Act gives the federal and state governments the authority to control, examine, and modify the minimum wage rate paid to workers engaged in scheduled employment within their respective jurisdictions.
The existence of both an unorganized sector with a majority of self-employment and a sector that is relatively highly organized makes the Indian economy dualistic. According to the Employment -Unemployment Survey of the National Sample Survey Organisation (NSSO) for 2011-2012, out of the workforce’s total of 474.23 million workers, 92 percent are unofficial workers. More than 60% of India’s GDP growth is a result of these workers. Despite the economy expanding at an average yearly rate of 5 to 6 percent, the net increase in employment from 2004 to 2005 was only 0.2 million,according to the NSSO Employment-Unemployment Survey from 2009 to 2010.[1]
The employment that was created was primarily low-skilled and of an informal type in the construction industry.
WHAT IS THE TERM MINIMUM WAGE?
The minimum wage is the lowest amount of compensation that an employer is required to pay wage earners for the job performed during a specified period and that cannot be reduced by a collective agreement or an individual contract, according to the International Labour Organisation (ILO). The ILO’s minimum wage policy is followed by about 90 of its member states.
The goal of the minimum wage is to shield employees against unfairly low wages. It allows them to maintain a minimal level of living and earn sufficient compensation for the work they
accomplish. Additionally, it serves as a tool for eradicating both gender discrimination and poverty. The Minimum Wages Act of 1948 governs and controls the payment of minimum wages in India. Due to the fact that India has some of the most affordable labour expenses in Asia, the national minimum wage is approximately INR 176, or INR 4576 per month.
The national average wage, however, will vary depending on the geographic area and other important criteria. There are approximately 2,000 different types of jobs for unskilled employees in India, and there are over 400 different employment categories with corresponding minimum daily wages. India uses a complex system to determine the minimum wage.
TYPES OF WAGES
A tripartite commission called the “Committee on Fair Wages” was founded in 1948. The baseline for establishing India’s wage policy was the committee’s report.[2] The committee established three types of wages in addition to setting national wage standards, including
Minimum wage: This form of pay is intended to cover the most basic needs, such as food, shelter, and medical care, so that workers may maintain a respectable standard of living.
A fair wage is any compensation given to employees that is higher than the minimum wage. It is the wage that works to sustain a certain level of employment in the sector and also considers the sector’s ability to give the employees enough compensation.
Living wages: A living salary not only satisfies the employer’s minimum requirements for employees, but also enables people or families to afford enough housing, food, and other necessities. As well as these include well-being, sanity, education, and dignity.
NEED FOR MINIMUM WAGES ACT, 1948
The Indian Legislature passed the Minimum Wages Act in 1948 to address issues connected to paying workers the minimum wage so that they can meet their basic necessities and maintain a respectable level of living. The Act also ensures that all labourers receive a safe and sufficient living wage, as well as a guarantee that an employee makes enough money to support his family.
The Act gives the federal government and state governments the authority to set the minimum wage. In order to adjust minimum wages for changes in the pricing of essential commodities, the Minimum Wages Act of 1948 also established a provision for minimum pay revision.
By creating advisory committees to settle any disputes between the employer and employee over the payment of minimum wage to the employees, the Act aims to improve the protection of employees’ rights. The Act also names a Commissioner for Workmen’s Compensation or another Central Government official with experience as a judge to serve as a Labour Commissioner for any region and hear cases involving the failure to pay employees the minimum wage or the payment of less than the minimum wage. The Act also contains provisions for punishing any employer who violates any rule or order established under the Act by failing to pay their employees the required minimum wage.
Because it attempts to extend the concept of social justice to workers in scheduled employment and also provides them with the rates of minimum wages set by law, it can be claimed that the passage of this Act was exceedingly important. Additionally, it defends the rights and interests of employees and stops them from being unfairly exploited by their employers.
BACKGROUND OF MINIMUM WAGES ACT, 1948
The Minimum Wages Act of 1948 is a piece of legislation that applies to workers in the unorganized sector who lack collective bargaining rights and are therefore more vulnerable to exploitation. Other than the Minimum Wages Act of 1948, there are other pertinent laws that have an impact on the wage structure and level for the unorganized sector workforce. The laws that directly affect wages in the unorganized sector are listed in Table -1. It provides for the establishment of minimum salaries by the competent government at the Centre and the state for the various scheduled employments under their respective domains for different periods in order to prevent sweatshop labour or labour exploitation.
The act outlines a schedule of occupations where minimum salaries are required and are, respectively, announced by the federal and state governments. The schedule is divided into two parts: Part 1 deals with non-agricultural employment, and Part 2 deals with employment in the agricultural sector. Currently, there are 45 scheduled positions at the center and up to 1679 positions at the state level (Annexure-1). Only if there are more than 1000 workers employed in the state for a specific job can the states announce minimum wages.
Only if there are more than 1000 workers employed in the state for a specific job can the states announce minimum wages. The Act requires that the wages be revised by the respective governments every five years. The central government has established a Variable Dearness Allowance (VDA) connected to the Consumer Price Index, which is changed twice a year starting in April and October, in
order to defend the minimum wage against inflation. VDA is now a part of the minimum wage in 24 states and union territories, as well as the federal government.
There has frequently been a need for a national wage policy to be developed. However, maintaining wage homogeneity is challenging since wage fixation is dependent on a number of factors, including local circumstances, cost of living, and paying capacity, which differs from state to state and from industry to industry. But in order to bring some consistency to the minimum wage fixes across states and occupations, the central government introduced the Five Regional Minimum Wages Advisory Committee, the idea of National Floor Level Minimum Wages, which is only advisory in nature, and finally, the National Rural Employment Guarantee Act, later known as the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), in 2005, which calls for the provision of at least 100 days of guaranteed wage employment in every fiscal year to every household whose adult members volunteer to perform unskilled manual labour. This measure aims to increase the livelihood security of households in rural areas of the nation. However, it is highly unlikely that an increase in the minimum wage in developing nations with two labour markets will result in an increase in unemployment rather than a transfer of labour from one sector to another (Belsar and Rani).
New Labour Code on Wages Bill, 2015
The Payment of Wages Act of 1936, the Minimum Wages Act of 1948, the Payment of Bonus Act of 1965, and the Equal Remuneration Act of 1976 will all be combined into one law under the Labour Code on Wages Bill of 2015.
Important adjustments to the Wages Code would be: A uniform, comprehensive definition of “wages” is introduced for use in determining remuneration and benefits. b. The elimination of labour “inspectors” in favour of “facilitators” who advise firms on how to follow the law and c. The outlawing of discrimination against transgender people when it comes to wage distribution. These changes are meant to simplify employer compliance with the current regulations governing employee remuneration.
OBJECTIVES OF THE MINIMUM WAGES ACT
Following is a description of the 1948 Minimum Wages Act’s significance:
- establishing the minimum wages that must be paid to employees and reviewing those amounts every five years.
- to ensure that all workers receive a living wage in the public interest.
- to establish the employees’ daily work schedules.
- to stop employers from abusing their employees.
- to guarantee the laborers’ ability to maintain a respectable standard of living.
- to provide the staff’s fundamental physical demands and to maintain their health and degree of comfort.
- to impose penalties on firms that fail to pay employees the legal minimum wage.
- to set up advisory committees to control and oversee how the Act’s rules are applied.
CONSTITUTIONAL VALIDITY OF THE MINIMUM WAGES ACT
In numerous situations, the constitutionality of this Act was contested in court. The judiciary, however, was crucial in determining that the Act was constitutionally valid and that it safeguards the rights of the employees by providing them with access to things like food, shelter, clothing, education, and medical care. The judiciary further declared that refusal to pay at least the legal minimum constitutes forced labour. [3]
NOT VIOLATIVE OF ARTICLE 19 OF THE CONSTITUTION
The Minimum Wages Act of 1948 was initially contested as being unconstitutional in the 1954 case of Bijay Cotton Mills Ltd. v. The State of Ajmer.[4] In this instance, there was a labour dispute between the employer and the employees over raising salaries.
The company claimed in court that the Act’s provisions are unconstitutional because they impose unjustified restrictions on the employer, preventing him from restarting his trade or business until he is prepared to pay the workers’ minimum wages. The employees’ rights are also constrained because they are prohibited from engaging in any type of employment unless specific conditions are agreed upon by them and their employers.
Article 19(1)(g) of the Indian Constitution, which guarantees freedom of trade and enterprise, is thereby violated by the Act. However, the Supreme Court of India ruled that Article 19 of the Indian Constitution permits the Act’s provisions and that it has also been imposed for the benefit of the general public in accordance with Article 43[5] of the Constitution, which embodies the Directive Principles of State Policy. Therefore, it may be claimed that the Act’s provisions may make it difficult for employers to operate or launch a business, but they are implemented to safeguard the public’s overall interests, so the Act cannot be viewed as being irrational or unworkable.
Similar to this, in the case Bhikusa Yamasa Kshatriya v. Sangamner Akola Bidi Kamgar Union,1958,[6] the Bombay High Court ruled that the Minimum Wages Act, 1948’s provisions for committees and advisory boards did not violate the statutory requirements of the designated legislature. Additionally, it was noted that Section 3(3)(iv)[7] of the Act does not violate
Article 19(1)[8] of the Indian Constitution nor does it violate equal protection under the law.
NOT VIOLATIVE OF ARTICLE 14 OF THE CONSTITUTION
Equal protection under the law is guaranteed under Article 14[9] of the Constitution, which the Act does not violate. According to India’s Union Labour and Employment Minister Shri Mallikarjuna Kharage, the variation in the minimum wages of workers in different states is caused by various socio-economic factors, including the cost of living, the price of goods, the ability to pay workers
and productivity. All of these factors have an impact on the wage rate paid to the workers in a particular state.
In the case of N.M. Wadia Charitable Hospital v. State of Maharashtra, 1986,[10] the Bombay High Court determined that because the Constitution and national labour laws permit different minimum wage rates to be set for different localities, doing so is not discriminatory and does not violate the Constitution.
Fixation of minimum rates of wages [section 3]
The appropriate government must set the minimum wages that must be paid to workers who perform the jobs listed in Parts I and II of the Schedule.The minimum pay rates for any employment falling under Part I must be established for the entire State, with no regions being left out. The minimum wage rates for the jobs listed in Part II may not be established for the entire State. It’s possible to completely omit some areas of the State. The appropriate government is not allowed to set minimum pay rates for scheduled employment when there are fewer than 1000 employees across the entire state. However, when the population reaches 1,000 or more, the appropriate government must set the minimum wage rate.[11] [section 3(1A)]. The set rates do not have to be identical. For various zones or localities, different tariffs might be set, Basti Ram v. State of AP[12]. In Bijoy Cotton Mills v. State of Ajmer 1955 [13], Section 3’s constitutionality was contested. The Supreme Court ruled that the restrictions on contract freedom imposed by the fixing of minimum wage rates are not unreasonable and are being imposed in the interest of the general public as well as with a view to carrying out one of the Directive Principles of the State Policy as embodied in Article 43 of the Constitution, even though they infringe to some extent on the freedom of trade or business guarantee under Article 19(1)(g) of the Constitution.
The minimum rate of wages [section 4] –
Any minimum wage may be made up of either the basic rate of pay plus a cost-of-living supplement, or the basic rate of pay plus a cost-of-living supplement. (iii) All-inclusive rate, which includes the basic rate, the cost of living allowance, and the cash value of the concessions.
(+) the cash value of the concession for supplies of necessities at discounted rates. The Competent Authority must compute the cost of living allowance and the monetary value of the concessions in relation to the provision of necessities at reduced prices at predetermined intervals in accordance with guidelines established by the Appropriate Government.
Procedure for fixing and revising minimum wages [section 5]
According to Section 5, the competent government may form as many committees and subcommittees as necessary to conduct investigations into issues pertaining to the fixing and adjustment of the minimum wage for employees. The appropriate government also specifies the date that will be taken into consideration, which must not be less than two months from the date of notification of the proposals, and publishes its proposal for the information of those who are likely to be affected by such information by notification to the Official Gazette.
The Appropriate Government can follow either of the two methods described below :
(1) Committee Method: The appropriate government may create a committee to conduct investigations and provide recommendations regarding such minimum wage setting or adjustment. The appropriate government shall determine or adjust the minimum rates of pay by the announcement in the Official Gazette after taking the committee’s recommendations into consideration.
(2) Notification method: In accordance with this approach, the appropriate government shall publish its plans via notification in the official gazette for the information of persons who are likely to be impacted and provide two months for interested parties to submit comments. The appropriate government shall determine or adjust the minimum rates of salaries by the announcement in the Official Gazette after taking into account all submissions and conferring with the Advisory Board.
The minimum wage rates are going to start being enforced on the day that the notification specifies. In the absence of a deadline, wage rates are to take effect three months after the notification’s release date.
According to Edward Mills Co. Ltd. vs. State of Ajmer,[14] the Committee formed under Section 5 is just an advisory body, and the Government is not required to follow its recommendations. Rates of the minimum wage may be changed with a retrospective effect. [15]
CONCLUSION
The Minimum Wages Act of 1948 was passed to protect the rights and interests of employees who are employed in one of the Act’s specified scheduled classes of work. The Act aims to offer workers fair employment opportunities and sufficient compensation to sustain a respectable quality of living. The Act’s provisions, which include establishing working hours in a typical working day and revising salaries every five years, show how it protects workers from unfair exploitation. The Act also creates advisory committees and boards that employees may approach to request remedy in circumstances involving the nonpayment or delayed payment of wages by their employers. The Act also gives the inspectors sufficient authority to oversee the wellbeing of the workers. As a result, this Act is essential for meeting the basic needs of employees in a scheduled category of employment, for providing them with adequate wages to support themselves, and for advancing the Directive Principles of State Policy outlined in Article 43 of the Indian Constitution.
[1] Shivangi Singh, IMPACT OF MINIMUM WAGE ACT, 1948 IN REFERENCE TO WORKLIFE IN UNORGANISED SECTOR, Volume VIII, Special Issue, September 2017, Indian Journal of Commerce & Management Studies,52,(2017)
[2] Ibid
[3] Minimum Wages Act, 1948, Ipleaders,https://blog.ipleaders.in/minimum-wages-act-1948-2/, 19/05/2022.
[4] 1955 AIR 33
[5] Article 43, Constitution of India 1950, Constitution of India, https://www.constitutionofindia.net/articles/article-43-living-wage-etc-for-workers/#:~:text=of%20India%201948-,The%20State%20shall%20endeavour%20to%20secure%2C%20by%20suitable%20legislation%20or,and%20social%20and%20cultural%20opportunities.
[6] (1959) IILLJ 578 Bom
[7] Section 3(3) in The Minimum Wages Act, 1948, Indian Kanoon , https://indiankanoon.org/doc/732437/
[8] Article 19 in The Constitution Of India 1949, Indian Kanoon, https://indiankanoon.org/doc/1218090/
[9] Article 14 in The Constitution Of India 1949, Indian Kanoon, https://indiankanoon.org/doc/367586/
[10] (1993) IIILLJ 536 Bom
[11] The Minimum Wages Act,1948 , Taxmann, https://www.taxmann.com/bookstore/bookshop/bookfiles/chapter1minimumwages.pdf
[12] AIR 1969 A.P. 227
[13] 1955 SCR (1) 752
[14] AIR 1955 SC 25
[15] 1996 II LLJ 267 Kar.
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