PROCEDURE OF “FIXING MINIMUM WAGES” UNDER MINIMUM WAGES ACT, 1948 AND ITS COMPARISON WITH NEW WAGE CODE, 2019
A potential objective of wages is the regulation and fixation on the quantum of wages. Earlier free bargaining power between individual and workmen and their employers would result in fixation of such wages rates which would satisfy both. It was found that small-scale industries where women and children worked, were exploited. Such industries didn’t have organizations to protect them against the excesses of employers.
In the year 1896 State of Victoria (Australia) adopted legislation to protect their workers employed in certain sweated trades requiring special effort and hard work. Similarly, Great Britain enacted the Trade Boards Act, 1909. After 1912 United States of America adopted legislation for women and minors employed in different occupations and trades.
The purpose of minimum wages was to prevent exploitation of laborers and payment of unduly low wages to those employed in those industries where workers are unorganized. It was realized that the wages paid were so low that even they were not enough to meet even the bare necessities of life.
Another objective of laws regulating the quantum of wages was to fix just and fair wages, considering the circumstances in the prevailing industries and economy as a whole to endure industrial peace.
MINIMUM WAGES ACT 1948
The necessity of fixing the minimum wage in India was at the beginning of the twentieth century but no measures were adopted. In the year 1928, International Labour Conference of ILO adopted a draft convention on minimum wages requiring member countries to create and maintain machinery whereby minimum rates of wages can be fixed for workers employed in industries in which no arrangement exists for effective regulation of wages and where wages are exceptionally low.
In the light of the recommendations by the Standing Labour Committee and the Indian Labour conference a draft of the Minimum Wages Bill in the legislature and it was later passed by both the houses of Parliament and enacted in the year 1948.
The Minimum Wages Act, 1948 provides for fixation and enforcement of minimum wages in respect of scheduled employments to prevent sweating or exploitation of labor through payment of low wages. The objective of the Act is to ensure a minimum subsistence wage for workers.
The Minimum Wages Act, 1948 is based on Article 43 of the Constitution of India which states that “The State shall endeavor to secure by suitable legislation or economic organization or in any other way to all workers, agricultural, industrial or otherwise, work, a
living wage (emphasis added) conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities”.
FIXATION OF MINIMUM RATES OF WAGES
The Act empowers the appropriate government- State and Central Government to fix the minimum rate of wages in respect of employment in their respective jurisdictions. As per Section 3(2) of the Act, the Government may fix the minimum rate of wages for time work, piece work, guaranteed Time Rate, and Over Time Rate.
Different minimum rates of wages may be fixed for different scheduled employments, different classes of work in the same scheduled employment, adults, adolescents, children, and apprentices, and different localities. Rates of wages may also be fixed by the hour, day, month, or by any other large wage periods as may be prescribed.
The fixation of minimum wage in India depends upon various factors like socio-economic and agro-climatic conditions, prices of essential commodities, paying capacity, and the local factors influencing the wage rate. It is for this reason that the minimum wages vary across the country. In the absence of any criteria stipulated for fixing the minimum wage in the Minimum Wages Act, the Indian Labour Conference in 1957 had said that the following norms should be taken into account while fixing the minimum wage.
norms for fixing the minimum wages
The norms for fixing the minimum wage rate are
(a) three consumption units per earner,
(b) minimum food requirement of 2700 calories per average Indian adult,
(c) cloth requirement of 72 yards per annum per family,
(d) rent corresponding to the minimum area provided under the government’s Industrial Housing Scheme
(e) fuel, lighting and other miscellaneous items of expenditure to constitute 20 percent of the total minimum wage
(f) Fuel, lighting and other miscellaneous items of expenditure to constitute 20% of the total Minimum Wages,
(g) children education, medical requirement, minimum recreation including festivals/ceremonies and provision for old age, marriage, etc. should further constitute 25% of the total minimum wage.
Section 3 of the Act was challenged in the landmark case of Bijoy Cotton Mills v. the State of Ajmer where the Supreme Court held that the restrictions imposed upon the freedom of contract by the fixation of the minimum rate of wages, though they interfere to some extent with freedom of trade or business guaranteed under Article 19(1)(g) of the Constitution of India, are not unreasonable and being imposed and in the interest of the general public and to carry out one of the Directive Principles of the State Policy as embodied in Article 43 of the Constitution, are protected by the terms of Clause (6) of Article 9.
The formula of industry-cum-region is used for fixing wage structure in industrial establishments. The basic idea behind this principle is to maintain uniformity in conditions of service in comparable concerns in the industry in the region so that there is no imbalance in the conditions of service between workmen of similar establishments. The supreme court applied this principle in Express Newspaper vs Union of India, the capacity to pay must be considered on an industry-cum-region basis after taking a fair cross-section of the industry.
PROCEDURE FOR FIXING MINIMUM WAGES
The minimum wage act provides for two distinct procedures for the fixation of the minimum rate of wages. In fixing minimum rates of wages in respect of any scheduled employment for the first time or in revising minimum rates of wages, the appropriate Government can follow either of the two methods described below.
A) First Method [Section 5(1)(a)] This method is known as the ‘Committee Method’.
The appropriate Government may appoint as many committees and subcommittees as it considers necessary to hold inquiries and advise it in respect of such fixation or revision. Upon receipt of recommendations of the committee, the appropriate Government is required to fix the minimum rate of wages in respect of the employees concerned and notify the same in the Official Gazette to fix or revise the minimum rates of wages.
The wage rates will come into force from such date as may be specified in the notification. If no date is specified, the wage rates shall come into force on the expiry of three months from the date of the issue of the notification.
In the case of Edward Mills Co Case, it was that Committee appointed under Section 5 is only an advisory body and that Government is not bound to accept its recommendations.
Composition of Committee and sub-committee
As regards the composition of the Committee and subcommittee, shall consist of persons representing employers and employees in the scheduled employment. who shall be equal in number and independent persons not exceeding 1/3rd of its total number of members to be nominated by the appropriate Government, one of such independent persons shall be appointed as the Chairman of the Committee by the appropriate Government.
B) Second Method [Section 5(1)(b)] The method is known as the ‘Notification Method’
When fixing minimum wages under Section 5(1)(b), the appropriate Government may by notification, in the Official Gazette publish its proposals of minimum rates of wages proposals for the information of persons likely to be affected thereby and specify a date not less than 2 months from the date of notification, on which the proposals will be taken into consideration.
The representations received by the appropriate Government received will be considered then. It will also consult the Advisory Board constituted under Section 7 and thereafter will fix or revise the minimum rates of wages by notification in the Official Gazette. The new wage rates shall come into force from such date as may be specified in the notification.
The minimum rate of wages fixed under either of the procedure is to come into force on the expiry of three months from the date of its issue from the date of notification unless the date specifies a particular date.