Work and Wages

Minimum Wage

Minimum wage rates in India are fixed under the Minimum Wages Act, 1948. Since labour is a concurrent subject under the Indian Constitution, minimum wage rates are determined both by the Central Government and the Provincial Governments. Minimum wage rates in India are declared at the national, state, sectoral and skill/occupational levels. Minimum wage rates may be established for any region, occupation and sector. Also, minimum wage is established for trainees, youth and piece-rate workers.  Minimum wage is determined by considering the cost of living.

Minimum rate of wages may consist of a basic rate of wages and a cost of living allowance; or a basic rate of wages, with or without the cost of living allowance, and the cash value of concessions in respect of the supply of essential commodities at concession rates (if authorized); or an all-inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of the concessions (if any).

While fixing or revising minimum rates of wages, 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. The minimum wage rates may be fixed by hour, day, month or any such other larger wage period as may be prescribed.

Under the Minimum Wages Act, both the Central and State Governments may notify the scheduled employments and fix/revise minimum wage rates for these scheduled employments. The scheduled employments include both the agricultural and non-agricultural employments. Both the Central and State Governments are empowered to notify any employment (industry/sector) in the schedule where the number of employees is 1000 or more and fix the rates of minimum wages in respect of the employees employed therein.

Minimum wage is announced for 45 scheduled employments in the Central Sphere while the State level minimum wage is determined by every state keeping in view the sectors more dominant in the State. Minimum wage is revised while considering the following five elements: three consumption units per earner; minimum food requirement of 2700 calories per average adult; cloth requirement of 72 yards per annum per family; house rent corresponding to the minimum area provided under the Government's Industrial Housing Scheme; fuel, lighting and other miscellaneous items of expenditure to constitute 20% of the total minimum wage; and 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 (the last component added by the Supreme Court in Reptakos Brett Vs Workmen case in 1991). Minimum wages may be reviewed at different intervals however such intervals cannot exceed five years.

The Minimum Wages Act provides for two methods of fixation/revision of minimum wages. Under the Committee Method, committees and sub-committees are set up by the Government to hold inquiries and make recommendations with regard to fixation and revision of minimum wages. Under the Notification method, government proposals are published in the Official Gazette for information of the persons likely to be affected and specify a date (not less than two months from the date of the notification) on which the proposals will be taken into consideration.

After considering advice of the Committees/Sub-committees (Committee method) and all the representations received by the specified date (Notification method), the appropriate Government, by notification in the Official Gazette, fixes/revises the minimum wage in respect of the concerned scheduled employment which come into force on expiry of three months from the date of its issue.

In protecting the real wages against inflationary effects, the Central government provides for linking of Variable Dearness Allowance to the Consumer Price Index for industrial workers (CPI-IW). Most states provide for variable dearness allowance in revising the minimum wage. VDA is revised periodically twice a year effective from 1st April and 1st October.  

Source: § 3-5, 27 & 28 of Minimum Wages Act 1948

Regular Pay

Wages means all remuneration capable of being expressed in terms of money, which would, if the terms of the contract of employment express or implied were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment. It however does not include  the value of any house-accommodation, supply of light, water, medical attendance, or any other prescribed amenity or service; any pension or provident fund, or social insurance scheme, contributions paid by the employer; travelling allowances or concessions; reimbursement for special expenses incurred by the employee; or gratuity payable on discharge. 

In accordance with the Minimum Wage Act, the employer is obliged to pay wages on regular and timely basis at least once a month.  Wage period may be fixed on hourly, daily, weekly or monthly basis. The employer is under obligation to pay wages in cash on a working day before the expiry of the 7th day after the last day of the wage period (in establishments with less than 1000 workers). In other establishment, i.e., those hiring more than 1,000 workers, wages must be paid before expiry of 10th day after the last day of the wage period. If the employment of a worker is terminated by or on behalf of the employer, the outstanding wages are paid within two days of employment termination. Wage periods can't be fixed for duration longer than one month.

Minimum wages are generally payable in cash however if it is customary to pay wages wholly or partly in kind, the appropriate Government may authorize the payment of minimum wages either wholly or partly in kind.

Payment of Wages Act 1936 required that all wages be paid in current coin or currency notes or in both (in legal tender). An employer may, after obtaining the written authorization by the worker, pay worker the wages either by cheque or by crediting the wages in bank account. A 2017 amendment in the 1936 Act, applicable from 28 December 2016, now allows the employer to pay wages in coins or currency notes; or by check; or by crediting the wages in worker’s account. The amended Act has withdrawn the requirement of taking prior authorization from worker about mode of wage payment. The relevant (central or state) government may however specify certain industrial or other establishments requiring those to pay either by check or bank transfer.

Workers are entitled to the wages without any kind of deduction except in cases prescribed by the Payment of Wages Act 1936. It may include deductions as fine; for absence; for damage or loss of goods or money; for house accommodation supplied by employer; for recovery of advances or loans; for income-tax; and any other kind of deduction that is made by order of a Court or other authority competent to make such order.

 Source: §3-6 & 11 of Minimum Wages Act 1948; §3-7 of the Payment of Wages Act 1936, amended in 2017

Regulations on Work and Wages

  • Minimum Wages Act 1948
  • Payment of Wages Act 1936
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