Minimum Wages Act, 1948

Minimum Wages Act, 1948


Introduction
In developing countries like India where the problem of unemployment is great, there is a chance of exploitation of labourers being poor and having no bargaining capacity. In such circumstances, the employer may offer the labourer wages even below the subsistence level resulting thereby into starvation of labour, Therefore, the legislature thought fit to control the unfair practices of the employer of paying wages below the subsistence level to the employees. As per the Minimum Wages Act, 1948 every employer is bound to pay the minimum wages to his employees. These wages are said to be statutory wages. Even public works ostensibly initiated by the government for the sole purpose of providing employment are subject to this Act.

The Validity of the Act
In the case of Shamrao v. State of Bombay, the constitutionality of the Act was challenged by the employers to be violative of fundamental freedom under Article 19(1)(g) of the Constitution of India. But the Supreme Court held that the Act is constitutional as per the provisions of Directive Principle of State Policy embodied under Article 43 of the Constitution of India. The same was held in the V. Unichonoy v. State of Kerala, and Golmohammad Tatyasaheb v. State of Bombay
It was argued that this Act is violative of Article 14 as the provision in question, that is, section 3(3)(iv) of this Act was not in contravention to the equal protection clause of the constitution. This was decided in the case of Bhikusa Yamasa Kshatriya v. Sangamner Akola Bidi Kamgar Union.
In the case of N.M. Wadia Charitable Hospital v. State of Maharashtra, it was held that fixing different minimum wages for different localities is permitted under the constitution and under the labour laws. 

Object and Scope
To provide for fixing minimum rates of wages in certain employments. The employments are those which are included in the schedule and are referred to as ‘Scheduled Employments’. The Act extends to the whole of India.
Purports to achieve is to prevent exploitation of labour and for that purpose empowers the appropriate Government to take steps to prescribe minimum rates of wages in the scheduled industries.  In an underdeveloped country 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 is to prevent the employment of such sweated labour in the interest of the general public and so in prescribing the minimum rates, the capacity of the employer need not be considered. 
What is being prescribed is minimum wage rates which a welfare State assumes every employer must pay before he employs labour. This Act aims to ensure not only bare physical subsistence but also maintenance of health and decency.
It ensures and secures adequate living wages to the labourer in the interest of the general public. To keep the family of the labourer living and to add to his efficiency and ensure a decent standard of life and full of employment of leisure and social and cultural opportunities.

What are Wages?
The meaning of the term ‘wages’ is defined under Section 2(h) of the Act. It means all remunerations 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, and includes house rent allowance.
There are some exceptions to this definition. The term wages under this Act does not include:
  • The value of any house accommodation, a supply of light, water medical; 
  • The value of any other amenity or any service excluded by the general or social order of the appropriate Government; 
  • Contribution by the employer to any Pension Fund or Provides Fund or under any scheme of social insurance; 
  • Any traveling allowance or the value of any traveling concession; 
  • Any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; 
  • Any gratuity which is payable on discharge.
In the year 1948, the Tripartite Committee on Fair Wages was appointed by the Central Advisory Council. The said committee had laid down a certain criterion for minimum wages. Such criterion provides 5 elements that have to be considered while fixing the minimum wages. These are as follows:
  • 3 consumption units per earners
  • 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.
Adding to it, the Appropriate Government has the power to fix the minimum rates of wages. It can fix the minimum rates of wages either:
  • by the hour; or
  • by the day; or
  • by the month or
  • by such a large wage period as may be prescribed.
What is Employment?
The act recognizes Scheduled Employment. The meaning of the term ‘scheduled employment’ is defined under Section 2(g) of the Act. It means employment specified in the Schedule or any process or branch of work forming part of such employment. The schedule is divided into two parts namely, Part I and Part II. When originally enacted Part I of Schedule had 12 entries. Part II relates to employment in agriculture. It was realized that it would be necessary to fix minimum wages in many more employments to be identified in the course of time. Accordingly, powers were given to the appropriate Government to add employments to the Schedule by following the procedure laid down in Section 21 of the Act. The State Government and Central Government have made several additions to the Schedule and it differs from State to State.

Who is an Employee?
The meaning of the term ‘employee’ is defined under Section 2(i) of the Act. It means any person who is employed for hire or rewards to do any work, skilled or unskilled, manual or clerical in scheduled employment in respect of which minimum rates of wages have been fixed; and includes an outworker to whom any articles or materials are given out by another person to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale purpose of the trade or business of that other person where the process is to be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of that person; and also includes an employee declared to be an employee by the appropriate Government. 
The definition does not include any member of the Armed Forces of the Union.

Who is an Employer?
The meaning of the term ‘employer’ is defined under Section 2(e) of the Act. It means any person who employs, whether directly or through another person, or whether on behalf of himself or any other person, one or more employees in any scheduled employment in respect of which minimum rates of wages have been fixed under this Act and includes:
  • In a factory where there is carried on any scheduled employment in respect of which minimum rates of wages have been fixed under this Act, any person named under clause (f) of sub-section (1) of Section 7 of the Factories Act, 1948, as manager of the factory; 
  • In any scheduled employment under the control of any Government in India in respect of which minimum rates of wages have been fixed under this Act, the person or authority appointed by such Government for the supervision and control of employees or where no person of authority is so appointed, the Head of the Department; 
  • In any scheduled employment under any local authority in respect of which minimum rates of wages have been fixed under this Act the person appointed by such authority for the supervision and control of employees or where no person is so appointed, the Chief Executive Officer of the local authority; 
  • In any other case where there is carried on any scheduled employment in respect of which minimum rates of wages have been fixed under this Act, any person responsible to the owner of the supervision and control of the employees or for the payment of wages. A person who engages workers through another, like a contractor would also be an employer.
This act does not include Wages payable by an employer to a member of his family who is living with him and is dependent on him under Section 26(3).

Offences and Penalties
The offences and penalties recognized by this Act have been dealt with under Section 22. They are listed as below:
  • Any employer who pays to any employee less than the minimum rates of wages fixed for that employee’s class of work or less than the amount due to him under the provisions of this Act or contravenes any rule or order made under Section 13, shall be punishable with imprisonment for a term which may extend to 6 months or with fine which may extend to 500 rupees or with both. 
  • While imposing any fine for an offence under this section the court shall take into consideration the amount of any compensation already awarded against the accused in any proceedings taken under section 20. 
  • It is further stipulated under Section 22A of the Act that any employer who contravenes any provision of this Act or of any rule or order made thereunder shall if no other penalty is provided for such contravention by this Act be punishable with fine which may extend to five hundred rupees.
Fixation and Revision of Rates of Wages
The government under the Minimum Wages Act, 1948 has made it mandatory to provide the workers working in a factory with minimum wages. Therefore, Section 3(1)(a) of this act states the Fixation of Minimum Rates of Wages. This will help the employees to get their hard-work paid appropriately.
  • The appropriate Government may fix the minimum rates of wages payable to employees employed in an employment specified in Part - I or Part - II of the Schedule and in employment added to the Schedule.  The Government may review the minimum rates of wages and revise the minimum rates at intervals not exceeding five years.
  • The appropriate Government may fix a minimum rate of wages for time and for piece rate.  However different wage rates may be fixed for different scheduled employments, different classes of work in the same scheduled employment, for adults, adolescents, children and apprentices and for different localities and for any one or more of the wage periods, viz., by the hour or by the day or by the month or by such larger period.
Minimum Rate of Wages
Any minimum rate of wages fixed or revised may consist of:
  • A basic rate of wages and a special allowance.
  • A basic wage rate with or without the cost of living allowances and the cash value of concessions in respect of supplies of essential commodities at concessional rates.
  • An all-inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of concessions.
Procedure for Fixing and Revising Minimum Wages
  • The appropriate Government may appoint an advisory Board for advising it, generally in the matter of fixing and revising minimum rates of wages.
  • The Central Government may appoint a Central Advisory Board for the purpose of advising the Central and State Governments in the matters of the fixation and revision of minimum rates of wages.
Dearness Allowance
The Dearness Allowance (DA) is a cost of living adjustment allowance paid to Government employees, Public sector employees (PSE) and pensioners. It is payable to monthly, daily and piece-rate earners. The respective State Governments issue the Cost of Living Index number every six months for each and every scheduled employment.
For calculation, DA is divided into two separate categories: Industrial Dearness Allowance and Variable Dearness Allowance.
Industrial Dearness Allowance (IDA) applies to the Public sector employees of the Central Government. The Industrial Dearness Allowance for public sector employees undergoes quarterly revision depending on the Consumer Price Index to help offset the impact of rising levels of inflation.
Variable Dearness Allowance (VDA) applies to the employees of the Central Government. It is revised every six months according to the Consumer Price Index to help offset the impact of rising levels of inflation. VDA in itself is dependent on three different components as given below.
  • Base Index – remains fixed for a particular period.
  • Consumer Price Index – impacts VDA as it changes every month.
  • Variable DA amount that has been fixed by the Government remains fixed unless the government revises the basic minimum wages.
The following formula is being used by the Central Government to calculate the dearness allowance for the Central Government Employees, after implementing the recommendations of the 7th Pay Commission, from July 1st, 2016 onwards. The formula is: 

Dearness Allowance% = (Average of AICPIN for the past 12 months – 261.4) * 100 / 261.4
Dearness Allowance% = (Average of AICPIN for the past 3 months – 126.33) * 100 / 126.33

AICPIN stands for the All India Consumer Price Index. Dearness allowance is calculated from the AICPIN value, once the AICPI(IW) for a particular month is published by the Government. AICPIN is issued by the Ministry of Labour and Employment, which are revised periodically.
The dearness allowances are revised by the government twice a year. It was increased by the Central Government from 15% to 17% when was revised in July 2019.
The minimum rates of wages include the basic rates and Variable Dearness Allowance. The revised rates of Variable Dearness Allowance on the basis of the average Consumer Price Index for Industrial Workers.