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4. What do you understand by wages? Describe the process of determining minimum wages.

 Need for minimum wages

The exploitation of labourers in India became a norm at one point in history. Be it the Mughal period or the British rule, the labourers have always suffered economically as well as socially. To improve the situation of the labourers in the country, the State strives to eliminate poverty. By fixing the minimum wages for the labourers, the State tries to achieve the social objective of eradicating poverty of the labourers by guaranteeing a minimum remuneration for the work done, as well as the economic objective of motivating the workers to put in maximum efforts for maximum benefits. These benefits include, but are not limited to, the following:

  1. Protecting workers from exploitation – By providing a minimum wage for a fixed number of hours, the exploitation of the workers shall be reduced to a great extent.
  2. Ensuring a basic income – Minimum wages are fixed and revised based on adequate living standards. Thus, fixing minimum wages for the workers shall ensure a basic income for them.
  3. Reducing income inequality – The disparity in income can be reduced by fixing the minimum wages of the workers.
  4. Promoting economic stability – Fixing minimum wages for the workers shall provide a way to promote economic stability by improving the standard of living.
  5. Setting labour standards – By reducing the exploitation of workers, the standard of work would improve to a great extent.
  6. Addressing poverty – Fixing minimum wages of the employees paves the way for poverty eradication by encouraging more people to undertake work of any kind.

History of minimum wages

With the onset of the Industrial Revolution, the gap between the rich and the poor became wider. The poor were forced to work in factories and establishments to sustain themselves. This was the period when the need to have a law to protect the workers was felt. The Industrial Revolution in India arrived as late as 1854 when India was still a colony of the British. The first discussion in India regarding minimum wages followed its international counterpart, i.e., the Draft Convention adopted at the International Labour Conference, 1928, in the form of the Royal Commission on Labour. The Commission pointed out the need to adopt a structured wage system for the labourers. The question of wage-fixing machinery was again raised at the third and fourth meetings of the Standing Labour Committee held in 1943 and 1944 respectively. Lastly, the Minimum Wages Bill was introduced in 1946 and enacted in 1948.

Objectives of Minimum Wages Act, 1948

The main objectives of the Minimum Wages Act, 1948 are as follows:

  1. To fix and revise the minimum wages to be paid by the employer to the employees in certain employments;
  2. To fix an adequate minimum wage for all employees in the interest of the public;
  3. To fix the daily working hours of an employee according to the employment type;
  4. To prevent exploitation of the workers;
  5. To resolve any issues pertaining to the non-payment or less payment of wages;
  6. To establish and provide the powers and duties of inspectors;
  7. To establish and provide the powers and duties of labour commissioners and other important labour officers;
  8. To provide the powers to make rules to the appropriate government.

Application of Minimum Wages Act, 1948

The Minimum Wages Act, 1948, is applicable to the whole of India as provided under Section 1 of the Act. The appropriate government may fix minimum wages for scheduled employment if more than one thousand employees are employed in the given industry in the whole State, as provided under Section 1A of the Act. However, it is pertinent to note that this is not a mandatory condition for the application of the Act. The appropriate government may fix and revise minimum rates of wages for employment wherein less than one thousand employees are employed.

Rules for Payment of Wages

The four sections which detail the rules for payment of wages under the Payment of Wages Act, 1936 are:

  1. Responsibility for payment of wages – Section 3
  2. Fixation of wage periods – Section 4
  3. Time of payment of wages – Section 5
  4. Wages to be paid in currency notes or currency coins – Section 6

Let’s look at each of these sections in detail.

Section 3 – Responsibility for Payment of Wages

(1) Every employer is responsible for the payment of all wages to all the employees that he employs. In any other case, if the employer names a person, or if there is a person responsible to the employer or is nominated, then such a person is responsible for the payment of wages.

(2) Notwithstanding anything contained in sub-section (1), the employer is responsible to make the payment of all wages which the Act requires him to make. In fact, if the contractor or the person that the employer designates to make the payment fails to do so, then the responsibility lies with the employer.

Learn more about Payments of Wages Act – Section 8 (Fines) here in detail.

Section 4 – Fixation of Wage Periods

(1) The person responsible for the payment of wages under Section 3 must fix periods in respect of which he shall make the payment of wages. This period is called the wage period.

(2) A wage period will not exceed one month under any circumstance

Section 5 – Time of Payment of Wages

(1) Every person employed upon or in:

  1. Any railway, factory or industrial or other establishments upon or in which the total number of employed persons is less than one thousand, must receive his wages before the expiry of the seventh day from the last day of the wage period for which the wages are payable.
  2. Any other railway, factory or industrial or other establishments, must receive his wages before the expiry of the tenth day from the last day of the wage period for which the wages are payable.

(2) If the employer terminates the employment of a person, then he must ensure that the terminated employee receives his wages before the expiry of the second working day from the date of termination of employment.

(3) The Appropriate Government can exempt to such an extent and also subject to such conditions in the order the person responsible for the payment of wages to employed persons.

(4) The employer or the person responsible for paying wages must ensure that the wages are paid on a working day.

Section 6 – Payment of wages in currency notes or currency coins

The employer or the person responsible for making the payment of wages must pay in currency coins or currency notes or in both. Further, he cannot pay in kind.

Also, the employer can pay the wages via a cheque or a direct deposit to the bank account of the employee after taking a written authorization from him.

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