File Copyright Online - File mutual Divorce in Delhi - Online Legal Advice - Lawyers in India

Remuneration for Labour and Minimum Wages

On August 8, 2019, the Ministry of Law and Justice of the Government of India notified the Code on Wages, 2019 (the "Code"), which seeks to amend and consolidate the laws relating to wages and bonuses, as well as matters related to or customary to them, and incorporates the provisions of the Payment of Wages Act, 1936 ("Payment of Wages Act"), the Minimum Wages Act, 1948 ("Minimum Wages Act"), the Payment of Bonus Act, 1965 ("Payment of Bonus Act ("Equal Remuneration Act").

However unlike Payment of Wages Act, which applies to employees earning less than the statutory minimum wage, and the Minimum Wages Act, which applies to employees working in scheduled establishments, the Code envisions the provisions of timely payment of wages and minimum wages being applied uniformly to all employees, regardless of wage ceiling or sector.
Chapter II of the Code on Wages Act talks about Minimum Wages.

Minimum wage is the wage set that employer must pay his worker as per law. In every state minimum wage is different. Minimum wage is set by appropriate government.
 Minimum wage was not defined in Minimum Wages Act, 1948. It is defined in code of wages act, 2019 under section 2 (s) as wage fixed under section 6 of the act. It is not defined in clear terms, it is only said that it is defined under section 6 of the act.

Section 6 says that appropriate government will set minimum wages.
  • Paying minimum wages is non-negotiable. If any employer does not pay minimum wages, then he is charged with penalty of Rs. 50,000. And even after this subsequently he has committed the same thing again, then he is charged with penalty of upto Rs. 1 Lakh or 3 months of imprisonment. It is a criminal offence.
  • Code of Wages is applied to both sectors
As per the Code  (i) basic pay, (ii) dearness allowance and (iii) retaining allowance have been included as components of wages.

Further, the Code excludes the following components from the definition of wages:
  1. Bonus payments;
  2. value of the house-accommodation, supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by an order of the appropriate Government;
  3. Employer contributions to any pension or provident fund;
  4. Conveyance allowances;
  5. Sums paid to the employee to defray special expenses on him by the nature of his employment;
  6. House rent allowance;
  7. Remuneration payable under award or settlement between the parties or order of court or tribunal
  8. Overtime allowance;
  9. Commission payable to employee;
  10. Gratuity payments; and,
  11. Retrenchment compensation or other retirement benefit payable to the employee or any ex-gratia payment made to the employee on the termination of his employment.

Employers exploited the notion of basic wage as a loophole to reduce EPF payments, hence contradicting the objective of the EPF Act. The Supreme Court addressed this issue in the case of The Regional Provident Fund Commissioner (II) West Bengal Versus Vivekananda Vidyamandir And Others[1], holding that all allowances that are universally, uniformly, necessarily, and ordinarily paid to all employees would form a part of the basic wage, which would be used for provident fund contribution.

When an allowance is shown to be either a variable, or was linked to any incentive for production resulting in a higher output, or the allowance in question is not paid across the board, or paid especially to those who take advantage of the opportunity, the allowance can be excluded from the basic wage.

Any action taken under the repealed enactments, including any notification, nomination, appointment, order or direction made there under, or any amount of wages paid, shall be deemed to have been done, taken, or provided for such purpose under the corresponding provisions of the Code to the extent that they are not contrary to the provisions of the Code and until they are repealed under the corresponding provisions of the Code.[2]

Need Of Minimum Wage In India

Despite the large number of employees in the unorganised sector and their significant contribution to the national economy, they are among India's poorest citizens. As a result, it is critical that immediate action be done to ameliorate their situation. Minimum wages in India have a history of infrequent changes and insufficient cost-of-living increases. The minimum wage rates, which are set in a few states, are insufficient to cover even two meals a day, let alone the basic demands of health, education, and shelter.

Workers are poor and illiterate. Most of the workers belong to unorganised sector. So, workers are exploited. To protect the interests of workers, mainly in unorganised sector. Because organised sectors at least have Trade Union to protect the workers' rights. In particular, the issues and problems of wage policy in both the organised and unorganised sectors concern elements such as a need-based minimum wage, real wage protection through compensation for rising costs of living, incentives for increased productivity, allowances for occupational hazards, wage differentials for skills, and so on.

Constitutionality Of Minimum Wage In India

  1. Bijoy Cotton Mills Ltd. V. State of Ajmer, 1953[3]
    In this case, the provisions of the act were challenged claiming that they were violating the freedom of trade or business guaranteed under Article 19 [1](g)[4] of the Constitution. Some of the employers claimed that they did not have the financial capacity to pay minimum wages and if they do not pay the minimum wages, they are charged with penalty and ultimately due to financial issues, they would have to shut their industries. Thus, their fundamental right to practise any profession, or to carry on any occupation, trade or businessunder article 19 [1](g) is being infringed.

    The Court held that every Fundamental Right is not absolute in nature. It has its own reasonable restrictions. Minimum wage act is passed in the favour of general public. Also, DPSP (Article 43) allows the state to come up with certain measures for public welfare in order to improve living standards, maintain health and decency. Thus, it is not at all violating Article 19[1](g) and this restriction is reasonable and in interest of general public.
  2. PUDR V. Union of India, 1983[5]
    In this case, it was held that if an employer pays less than the minimum wage then it amounts to "forced labour". The right to a minimum wage was incorporated in the right against forced labour, according to the Court. Migrant and contract workers frequently have "little option but to take any employment that comes way, even if the pay given... is less than the minimum wage," according to the report. As a result, the Court determined that "the necessity of economic condition which leaves a person in need with no option but to supply labour or service" was no less a kind of forced labour than any other, and that the only remedy was a constitutional guarantee of the minimum wage.
  3. M/S Crown Aluminium Work v. Their Workmen[6]
    In this case, it was held that if a particular industry cannot pay minimum wage, then it has no right to exist. The states the motivation of the legislature for enactment of the minimum wages Act, 1948, in the following words, "In developing country like ours which faces the problem of unemployment on a very large scale, it is not unlikely that labour may offer to work even on starvation wages. The policy of the Act, therefore, is to prevent employment of sweated labour in general interest and, so in prescribing the minimum wage rates, the capacity of the employer need not be considered as the state assumes that every employer must pay minimum wages for the employee's labour".

Important Definitions In The Code

  1. Establishment
    The preamble of the code says that the code applies to establishment. The previous act was only applicable on scheduled employments. Scheduled employments are those employments that are stated in the act itself. Now, all the establishments are covered. Establishment is defined under section 2(m) of the act. "establishment" means any place where any industry, trade, business, manufacture or occupation is carried on and includes Government establishment".

    All the establishments have to provide minimum wages. Establishments also include unorganised sectors. Government Establishments are also defined under Code on Wages act, it is said that any local authority or any place/ department carried out under local authority is a Government Establishment.
  2. Appropriate government
    Appropriate Government is defined under section 2(d) of the Act. "appropriate Government" means:
    1. In relation to, an establishment carried on by or under the authority of the Central Government or the establishment of railways, mines, oil field, major ports, air transport service, telecommunication, banking and insurance company or a corporation or other authority established by a Central Act or a central public sector undertaking or subsidiary companies set up by central public sector undertakings or autonomous bodies owned or controlled by the Central Government, including establishment of contractors for the purposes of such establishment, corporation or other authority, central public sector undertakings, subsidiary companies or autonomous bodies, as the case may be, the Central Government;
    2. In relation to any other establishment, the State Government;
      If any establishment is under the direct control of Central Government, then the appropriate government is Central government and if any establishment is under the direct control of State Government, then the appropriate government is State Government. For Private Establishments/ Companies, the appropriate government is State Government.
  3. Employer
    It is defined under Section 2(l) of the Act. ""employer" means a person who employs, whether directly or through any person, or on his behalf or on behalf of any person, one or more employees in his establishment and where the establishment is carried on by any department of the Central Government or the State Government, the authority specified, by the head of such department, in this behalf or where no authority, is so specified the head of the department and in relation to an establishment carried on by a local authority, the chief executive of that authority, and includes:
    1. in relation to an establishment which is a factory, the occupier of the factory as defined in clause (n) of section 2 of the Factories Act, 1948 and, where a person has been named as a manager of the factory under clause (f) of sub-section (1) of section 7 of the said Act, the person so named;
    2. in relation to any other establishment, the person who, or the authority which, has ultimate control over the affairs of the establishment and where the said affairs is entrusted to a manager or managing director, such manager or managing director;
    3. contractor; and
    4. legal representative of a deceased employer;
    Any person is an employer who employs directly or indirectly (through another person) 1 or more employees. If the establishment is any department of a Central or State Government, then the employer will be the head of the Department. A Contractor can be also considered as an Employer. If the employer dies, then his deceased/ representative will be considered as Employer.
  4. Employee:
    Section 2(k) defines employee as ""employee" means, any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union;
  5. Worker:
    Section 2(z) defines worker as ""worker" means any person (except an apprentice as defined under clause (aa) of section 2 of the Apprentices Act, 1961) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes:
    1. working journalists as defined in clause (f) of section 2 of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955; and
    2. sales promotion employees as defined in clause (d) of section 2 of the Sales Promotion Employees (Conditions of Service) Act, 1976, and for the purposes of any proceeding under this Code in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched or otherwise terminated in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person:
      1. who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957; or
      2. who is employed in the police service or as an officer or other employee of a prison; or
      3. who is employed mainly in a managerial or administrative capacity; or
      4. who is employed in a supervisory capacity drawing wage of exceeding fifteen thousand rupees per month or an amount as may be notified by the Central Government from time to time.
      • A worker does not include a person with supervisory, administrative or managerial capacity or a person who is semi-skilled.
      • A worker does not include aperson with supervisory authority with wage exceeding 15,000 rupees per month.
      • If a semi- skilled employee, supervisory, administrative or managerial employee cannot be considered a worker.
      • A worker does not include a personwho is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957
      • A worker does not include a personwho is employed in the police service or as an officer or other employee of a prison

Procedure And Fixation Of Minimum Wages

Under Section 6 of the code, the appropriate government (central or state) shall fix a minimum rate of wages based on time work or piece work. While fixing the minimum wages, the governments may take into account factors such as, skill of workers, and difficulty of work. Also by Section 8 of the code, the minimum wages shall be revised and reviewed by the central or state governments at intervals of not more than five years.

The Government shall determine the minimum rates of wages payable to employees in the course of employment, according to Section 6 of the Code on Wages 2019. It directs the appropriate authority to fix the following, taking into account all relevant factors in the design of policies that are Minimum piece rate, Minimum time rate, Overtime rate, System of guaranteed time rates.

According to Section 7 the government may evaluate and amend the minimum wage rate which may consist of a basic salary rate and an allowance that will be adjusted at such intervals and in such a manner as the appropriate government may prescribe to correspond as closely as possible to the variation in the cost of living index number applicable to such workers a base pay with or without a cost-of-living allowance, and the monetary value of concessions in respect of deliveries of necessary commodities at concession prices, if such concessions are authorized.
[Section 8(1)(a)] First Method Committee Method

The competent government may appoint as many committees and subcommittees as it deems necessary to conduct investigations and advise it on any necessary fixes or revisions. The competent Government shall determine or adjust the minimum wage rates by announcement in the Official Gazette after considering the advice of the committee or committees. The wage rates will become effective on the date mentioned in the notification. If no date is stated, wage rates will take effect three months after the notification is issued.

In Edward Mills Co. v. State of Ajmer, it was determined that the chosen committee is just an advisory body, and that the government is not obligated to follow its recommendations. Section 9 of the Act stipulates that the Committee shall be composed of persons nominated by the appropriate Government to represent employers and employees in the scheduled employment, who shall be equal in number and independent persons not exceeding 1/3rd of its total membership. The appropriate government will choose one of these independent individuals as the Committee's Chairman.

[Section 8(1)(b)] Second Method - Notification Method

When determining minimum wages under Section 8(1)(b), the appropriate Government shall publish its proposals in the Official Gazette by notification for the information of persons who are likely to be affected, and specify a date not less than 2 months from the date of notification on which the proposals will be considered.

The competent government will take into account the comments received. It will also contact the Advisory Board established under Section 7 before fixing or revising the minimum wage rates through announcement in the Official Gazette. The revised wage rates will be effective as of the date mentioned in the notification. If no date is indicated, the notification will take effect three months after it is sent. Revisions to minimum wage rates can be made retroactively.

Equal Remuneration

The Code includes rules forbidding discrimination on the basis of gender I in pay by employers, (ii) in same job or work of a similar type done by workers, and (ii) in recruitment of employees for same work or work of a similar nature. Furthermore, the definition of payment under the Equal Remuneration Act was broad, including a basic wage or salary, as well as any extra emoluments provided in cash or kind to a person engaged in relation of employment or labour performed. The Code, on the other hand, specifies the components that shall form earnings for the purpose of equitable recompense regardless of gender, leaving minimal space for interpretation.[7]

Changes Bought By The Code For Wages

  1. As per Code of Wages, in every 5 years, Revision has to be done of the Minimum Wage. It is Mandatory. This was not given in the previous act.
  2. Fixing of National floor wage is made mandatory under this code.

National Floor Wage (Section 9):
It is the Uniform minimum wage for the nation. Minimum wage cannot be less than the National Floor Wage. National Floor Wage is provided to all the states by the Central Government and then the appropriate government has to fix their minimum wage which must be above the National Floor Wage. In the year 1996, the first National floor wage was set which was Rupees 35 per day. However, it was not mandatory. In 2017, the National floor wage was increased. Yet, it was not mandatory. It was made mandatory in the section 9 of the COW. And an advisory committee is also made which decides that what should be the National floor wage.

Section 9 Priviso says that Provided that different floor wage may be fixed for different geographical areas. (2) The minimum rates of wages fixed by the appropriate Government under section 6 shall not be less than the floor wage and if the minimum rates of wages fixed by the appropriate Government earlier is more than the floor wage, then, the appropriate Government shall not reduce such minimum rates of wages fixed by it earlier.
It empowers the central government to set the regional level floor wage on the basis of geographical level.

The Code tries to harmonise the meaning of 'wages,' which is a step in the right direction. However, the Code's establishment of different definitions for 'worker' and 'employee,' as well as their usage, creates ambiguity. Furthermore, the Code aims to transform the notion of the 'Inspector Raj' in connection to the government's labour regulation by introducing inspectors-cum-facilitators rather than just inspectors.

In terms of offences and sanctions, the Code has ushered in a sea change. The punitive provisions show significant rationalisation and proportionality, with the goal of assisting rather than hindering economic action.

The goal of minimum wages is to safeguard workers from receiving inequitably low compensation. They contribute to ensuring that everyone receives a fair and equal share of the benefits of progress, as well as a minimum living wage for those who are working and in need of such protection. Minimum wages can also be part of a policy to combat poverty and eliminate inequality, particularly between men and women, by advocating the right to equal pay for equal work.

Minimum wages are described as the bare minimum of remuneration that an employer is compelled to pay wage earners for labour completed during a certain period, which cannot be reduced by collective bargaining or individual contracts. Its purpose is to protect workers against exploitation due to disproportionality of the payment to the amount and character of the work done. Minimum wages are a key element of any government's wage policy and generally operate to find a balance between socio-economic objectives and industrial growth.

In addition to the prevention of exploitation, a minimum wage policy should also aim to regularize employment and shift unorganized classes of the workforce into more formal modes of employment. The recently enacted Code on Wages replaced the Minimum Wages Act of 1948 and established a uniform, complete definition of 'wages,' which is divided into three sections: inclusions, specific exclusions, and conditions that limit the number of exclusions.

A basic rate of wages and a cost of living allowance, or a basic rate of wages with/without the cost of living allowance and the cash value of concessions in respect of supplies of essential commodities, or an all-inclusive rate consisting of the basic rate, the cost of living allowance, and the cash value of concessions, are the components of the Code's minimum wage rate.

  1. Civil Appeal No(s) 6221 of 2011
  2. Clause 69(2) of the Code on Wages, 2019
  3. (1955) AIR 33
  4. Art. 19 (1)(g)- to practise any profession, or to carry on any occupation, trade or business
  5. AIR 1982 SC 1473
  6. AIR 1958 SC 30
  7. Clause 3 of Code on Wages, 2019

Law Article in India

Ask A Lawyers

You May Like

Legal Question & Answers

Lawyers in India - Search By City

Copyright Filing
Online Copyright Registration


How To File For Mutual Divorce In Delhi


How To File For Mutual Divorce In Delhi Mutual Consent Divorce is the Simplest Way to Obtain a D...

Increased Age For Girls Marriage


It is hoped that the Prohibition of Child Marriage (Amendment) Bill, 2021, which intends to inc...

Facade of Social Media


One may very easily get absorbed in the lives of others as one scrolls through a Facebook news ...

Section 482 CrPc - Quashing Of FIR: Guid...


The Inherent power under Section 482 in The Code Of Criminal Procedure, 1973 (37th Chapter of t...

The Uniform Civil Code (UCC) in India: A...


The Uniform Civil Code (UCC) is a concept that proposes the unification of personal laws across...

Role Of Artificial Intelligence In Legal...


Artificial intelligence (AI) is revolutionizing various sectors of the economy, and the legal i...

Lawyers Registration
Lawyers Membership - Get Clients Online

File caveat In Supreme Court Instantly