MINIMUM WAGES ACT, 1948

MINIMUM WAGES ACT, 1948

Introduction

Labour laws in India consist of significant legislations such as the Industrial Dispute Act, 1947, Payment of Bonus Act, 1965, Workmen Compensation Act, 1923, Minimum Wages Act, 1948, etc. In the Indian Constitution, labour laws fall under the Concurrent List, which gives power to both Central and state governments to legislate and make rules on the matter. These legislations play significant roles in protecting the rights and interests of the workers, providing employment opportunities to the workers, protecting employees from exploitation, creating a healthy work environment, etc. The system of paying minimum wages to the employees has been globally accepted as a system to combat poverty and stabilise the economy. The Minimum Wages Act, 1948 was brought into force by the Parliament of India in order to provide due remuneration to the workers and to prevent unfair exploitation of the workers by the employers. The Act lays down the minimum rates of wages and fixing of minimum wage rates for both skilled and unskilled labour and aims to provide a decent standard of living for them. The Act grants power to both the Central and state governments to regulate, review and revise the rate of minimum wages paid to the employees employed in the scheduled employment under their respective jurisdiction. The Act does not discriminate between men and women, it pays all the employees equally for doing the same work.

1. Understanding the term minimum wage

The International Labour Organisation (ILO) has defined the term minimum wage as the lowest amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, that cannot be reduced by collective agreement or an individual contract. Around 90 member states of the ILO follow the provision of minimum wage. The purpose of minimum wage is to protect the workers from unduly low pay. It enables them to earn adequate wages for the work done by them and to maintain a minimum living standard. It also acts as a tool to eradicate poverty and to remove discrimination between men and women. This system has been designed and developed in a way to supplement and reinforce other social and employment policies, including collective bargaining, which is used to set terms of employment and working conditions.

In India payment of minimum wages is regulated and administered by the Minimum Wages Act, 1948. Since, India offers one of the most competitive labour costs in Asia, with the national-level minimum wage at around INR 176 which amounts to INR 4576 in a month. However, it is the national-level wage which will vary considering the geographical location and other relevant factors. In India, a complex method of setting a minimum wage is used which defines nearly 2,000 different types of jobs for unskilled workers and over 400 categories of employment which provides a minimum daily wage for each type of job.

2. Types of wages

In 1948 a tripartite committee, known as the ‘Committee on Fair Wages’ was established. The committee’s report was the benchmark for the formulation of wage policy in India. The committee not only set guidelines for wage rates in the country but also laid down three kinds of wages namely:

1. Minimum wage: This is the type of wage provided for bare subsistence so that the workers can maintain a decent standard of living such as providing for education, medical requirements and an adequate level of comfort.
2. Fair wage: Any wage paid to the employees that are more than the minimum wage is known as a fair wage. It is the wage that seeks to maintain a level of employment in the industry and also looks after the industry’s capacity to pay sufficient remuneration to the employees.
3. Living wage: A living wage not only meets the minimum requirement of the employees provided by the employers but also allows individuals or families to afford adequate shelter, food, and other necessities. It also includes health, sanity, education, dignity, comfort, and provide for any contingency.

3. Need for a meaningful minimum wage

In India, the minimum wages fixed for the labourers are so low that it is not enough even for two meals a day, leave aside the needs of health, education and shelter. The main objective behind minimum wages of the workers should be primarily because of two reasons:

1. Social objective: Minimum wage is essential for abolishing poverty by providing a basic standard of living to the employees.
2. Economic objective: The rate of minimum wage should be fixed in such a way that would motivate the workers to put in maximum efforts at their jobs and thus improve the economy of the country and their standard of living.

Minimum wage legislation in India requires the active support of workers, trade unions, and labour associations. It would also require sincerity on part of the labour departments in each state in order to determine the minimum wage rate on the basis of ethical and humanitarian concerns to ensure basic subsistence for workers in unorganised sectors. Ignorance and illiteracy are also the primary reasons for the exploitation of the employees in the unorganised sectors. Trade unions and NGOs can help by making the workers aware of the legal provisions of the minimum wage rate and the benefits to which they are entitled. Furthermore, minimum wage data is not readily available to the general public. Only limited official data is available from the National Labour Ministry website which may or may not be updated regularly and in a timely manner. The information available does not permit extensive comparison of wages in formal and informal sectors due to different formats of reporting or recording of wage rates in each state.

4. Need for Minimum Wages Act, 1948

The Minimum Wages Act, 1948 was enacted by the Indian Legislature to deal with matters relating to providing the minimum wage to the workers so that they can afford their basic needs and maintain a decent standard of livelihood. The Act further ensures a secure and adequate living wage for all labourers and it also guarantees that an employee earns enough to provide for his family. The Act authorises both Central and state governments in fixing the rate of minimum wage. The Minimum Wages Act, 1948 has also laid down a provision for revision of minimum wages in order to cope with the changing prices of basic commodities.

The act seeks to provide better protection of the rights of the employees by establishing advisory boards to resolve any dispute between the employer and employee regarding the payment of minimum wage to the employees. The Act further appoints a Commissioner for Workmen’s Compensation or any other officer of the Central Government exercising functions as a Labour Commissioner for any region, with an experience as a judge in order to hear and decide cases concerning non-payment or payment of less than the minimum wages to the employees. The Act also states provisions for penalising any employer who fails to provide the minimum wage to the employer and contravenes any rule or order made under the Act. Thereby, it can be said that the enactment of this Act was extremely crucial since it aims to expand the concept of social justice to the workers of scheduled employment and also provide them with the rates of minimum wages fixed by the statute. It also protects the rights and interests of the workers and prevents the workers from being wrongfully exploited by their employers.

5. Objectives of Minimum Wages Act

The significance of the Minimum Wages Act, 1948 is mentioned below:

• To fix the minimum rates of wages that are to be provided to the employees and revise such rates of wages every five years.
• To secure an adequate living wage for all the labourers in the interest of the public.
• To fix the daily working hours of the employees.
• To prevent exploitation of the workers by the employers.
• To ensure that the labourers can maintain a decent standard of living.
• To provide basic physical needs, good health and a level of comfort to the employees.
• To penalise the employers when they fail to provide minimum wages to the workers.
• To establish advisory boards to regulate and administer the provisions of the Act.
• To lay down the powers and duties of the inspectors for the purposes of this Act.
• To prevent any employer from wrongfully infringing the right of any employees.
• To establish appropriate authorities where the employees can seek redressal when the employer has failed to pay the daily wage.
• To authorise the Central and state governments to make rules and regulations for the purposes of this Act.

The Minimum Wages Act, 1948 is applicable to the whole of India as laid down in Section 1 of the Act. It applies to any employment if it employs 1000 employees in the respective state. However, it does not apply to any employees in any undertaking owned by the Central Government or of the federal railway, except with the consent of the Central Government.

6. Essential provisions under Minimum Wages Act-

• Minimum rates of wages: Under Section 3 of the Act, the minimum wages payable to the employees are to be fixed by the appropriate government. However, this Section also mentions that the rate of wages shall be revised every five years. The appropriate government may fix:
• The minimum rate of wages for time work,
• The minimum rate of wage for piece work,
• A minimum rate of remuneration to apply in the case of employees employed on piece work for the purpose of securing to such employees a minimum rate of wages on a time work basis,
• A minimum rate of wage to substitute the for the minimum rate which would otherwise be applicable, in respect of overtime work done by employees.

In fixing or revising minimum wages under Section 3 of the Act:

• Different minimum rates of wages may be fixed for; different classes of work, different scheduled employment, different localities, different age groups, etc.
• Minimum wages may be fixed by the wage period such as; by the hour, by the day, etc.

Section 4 of the Minimum Wages Act, 1948 states that the minimum wages fixed by the appropriate government must consist of:

• A basic rate of wages and a special allowance must be adjusted at necessary intervals by the appropriate government to match the cost of living of the employees.
• The cost of living allowance and the cash value of the concessions in respect of supplies of essential commodities must be computed by a competent authority and at such intervals specified by the appropriate government.
• Section 5 states that in order to fix or revise the minimum wage of the employees the appropriate government may establish as many committees and subcommittees necessary to hold enquiries in matters regarding fixing and revision of minimum wage. Further, the appropriate government by notification to the Official Gazette publish its proposal for the information of the individuals who are likely to be affected by such information and thereby specify the date which must not be less than two months from the date of notification of the proposals that will be taken into consideration.

Advisory board

Under Section 7 the appropriate government must appoint advisory boards for coordinating the work of the committees and subcommittees mentioned in Section 5 and also for advising the appropriate government generally in the matter of fixing and revising minimum rates of wages.

Central Advisory Board

In the matters of fixation and revision of minimum rates of wages of the employees, the Central Government shall appoint a Central Advisory Board. The Central Advisory Board shall consist of:

• Members to be nominated by the Central Government representing employers and employees in the scheduled employment, who shall be equal in number, and
• Independent persons not exceeding one-third of its total number of members. One such member shall be appointed as the Chairperson by the Central Advisory Board.

Committees

Section 9 of the Act states that the members of committees, sub-committees, and Advisory Boards shall be appointed by the appropriate government. Individuals who are appointed to these committees shall be representatives of employers and employees in scheduled employments and shall be equal in number. The appropriate government shall appoint such an independent person to be the Chairman of the committee.

Wages in kind under the Act

• Section 11 of the Minimum wages Act, 1948 mentions how the wages will be payable to the employees.
• Minimum wages under this Act shall be paid in cash.
• The appropriate government under necessary circumstances by notification to the Official Gazette authorise the payment of the minimum wages either wholly or partly in kind.
• The appropriate government by notification to the Official Gazette authorised a provision for the supply of essential commodities at concession rates.
• The cash value of wages and the concession rates shall be authorised in the prescribed manner stated under the Act.
• The payment of wages to the employees under this Act should be done in accordance with Section 12 of the Act, which states that the employer shall pay the minimum rate of wages fixed to every employee working under him within such time and manner prescribed under the Act.
• Fixing hours for a normal working day

Section 13 specifies that the appropriate government may:

• Fix the working hours of a normal day including one or more specified intervals.
• Provide a day of rest in every period of seven days to all the employees or a class of employees, and adequate remuneration must be provided to the employees during the day of rest.
• Provide payment to the employees on the day rest which shall not be less than the overtime rate.
• When an employee works more than the specified number of hours constituting a normal working day, the employer shall be liable to pay him for every hour or part of the hour at the overtime rate fixed under this Act or under any law of the appropriate government for the time being in force.

Furthermore, under Section 15 if an employee has worked less than the required number of hours constituting a normal working day they shall be entitled to receive wages in accordance with work done by him on that day as if he has worked a full day. However, he might not receive the wages of a full day under certain circumstances.

Maintenance of registers and records

Under Section 18 of the Minimum Wages Act, 1948 every employer will be liable to maintain registers and records relating to the number of employees employed under him, the work done by them, the wages paid to them, the work performed by them, maintain the receipts given by the employers and any other relevant information.

Inspectors

In this Act, the appropriate government by notification to the official gazette shall appoint inspectors in a manner prescribed under the Act. The inspectors shall be liable to exercise their functions within the local limits of their jurisdiction. The inspectors shall enter the premises or places within the local limits of their jurisdiction where the employees are employed to work in respect of which minimum rates of wages have been fixed under this Act, for the purpose of examining the register, record of wages, etc.

• To examine any person on the premises or places who is an employee.
• Seize or take copies of registers, records of wages, or other required documents under this act which he may consider relevant in case of commission of any offence.
• The inspector will be required to exercise any other power as may be prescribed under the Act.
• Every inspector under this Act will be deemed to be a public servant within the meaning of the Indian Penal Code,1860.

Claims

The appropriate government may by notification to the Official Gazette appoint any Commissioner for Workmen’s Compensation or any officer of the Central Government exercising functions as a Labour Commissioner for any region, with an experience as a judge to hear and decide cases in a particular region about matters relating to non-payment or payment of less than the minimum wages to the employees.

When an application under Section 20 of the Minimum Wages Act, 1948 is made to the authority, the authority shall give adequate opportunities of being heard to both the applicant and the employer. Under this Section, every direction of the authority shall be binding and final. The authority appointed under the Act shall have the powers of a civil court under the Code of Civil Procedure, 1908 for the purposes of taking evidence, enforcing the attendance of witnesses, production of documents, etc.

Procedure before the authority

The procedure before the authority in the matters relating to non-payment or payment of less than the minimum wages to the employees shall take place in the following manner as prescribed under the Act. The prescribed authority shall give adequate opportunities of being heard to the employer, applicant or any other person relevant to the case. In case of non-payment of wages, or delay in the payment of wages the authority shall direct the refund of such amount to the applicant of the amount unpaid, or delayed along with the compensation for the damages suffered by the employee. No compensation will be awarded to the employee if the authority is satisfied that the delay in payment of wages of the employee was a bona fide error. The authorised person was unable to make the payment even though they exercised due diligence.

7. Penalties for offences

Section 22 of the Minimum Wages Act, 1948 an employer who fails to provide minimum rates of wages to the employees or contravenes any rule or order made under Section 13 of the Act shall be punished with imprisonment for a term which may extend to six months or fine not less than five hundred rupees or both.

Exemptions of the employers in certain cases

1. When an employer is accused under this Act and brought before the court he will be exempted from such offence under the following circumstances:
2. The employer has used due diligence in the execution of all the provisions of the Act.
3. The other person has committed the offence without his knowledge, connivance or consent. Then in that case the other will be held liable as if he were the employer and the employer will be discharged.

The power of the Central Government to make rules

Section 29 of the Minimum Wages Act, 1948 authorises the Central Government to make rules by notification to the Official Gazette in matters relating to the term of office of the members, the manner of voting, and the mode of conducting business by the Central Advisory Board, and other relevant matters.

The rules made by the Central Government must be laid before the Parliament while it is in session for a total period of thirty days which may consist of one session or two successive sessions. Furthermore, Section 30 of the Act also authorises the state government to make rules by notification to the Official Gazette for carrying out the purposes of this Act.

8. Constitutional validity of Minimum Wages Act

The constitutional validity of this Act was challenged before the court in various cases. However, the judiciary played a critical role in determining that the Act was constitutionally valid and it protects the interests of the workers so that they have access to food, shelter, clothing, education, medical assistance, etc. The judiciary also stated that failure to pay below the minimum wage rate amounts to forced labour.

• Not violative of Article 19 of the Constitution

The constitutional validity of the Minimum Wages Act, 1948 was first challenged in the case, Bijay Cotton Mills Ltd. V. The State of Ajmer, 1954. In this case, there was an industrial question between the industry and the workers regarding the improvement of wages. The company alleged before the court that the provisions of the Act are illegal since it puts unreasonable restrictions on the employer as he is deterred from resuming his trade or business unless he is ready to pay the minimum wages to the workers. The rights of the employees are also limited, as they are disabled from working in any trade or industry unless the terms are agreed to between them and their employers. Therefore, the Act is violative of Article 19(1)(g) of the Indian Constitution which guarantees freedom of trade and business. However, the Supreme Court of India held that the provisions of the Act are not unreasonable and permissible under Article 19 of the Indian Constitution, moreover, the provisions of the Act have been imposed for the benefit of the general public as the Directive Principles of State Policy embodied under Article 43 of the Constitution. Thus, it can be said that because of certain provisions of the Act the employers might find it difficult to carry on or start a business, but it is done in order to protect the general interest of the public and so the Act can not be deemed unreasonable or stuck down on such grounds.

Similarly, in the case Bhikusa Yamasa Kshatriya v. Sangamner Akola Bidi Kamgar Union, 1958, the Bombay High Court held that the constitution of the committees and the Advisory Boards under the Minimum Wages Act, 1948 did not contravene the statutory provisions of the prescribed legislature and further on careful examination of the Act it was noticed that Section 3(3)(iv) of the Act does not contravene Article 19(1) of the Indian Constitution neither does it violate equal protection of the law guaranteed by the Constitution.

• Not violative of Article 14 of the Constitution

Furthermore, the Act is not violative of Article 14 of the Constitution which states equality before the law. It was brought into light by India’s Union Labour and Employment Minister Shri Mallikarjuna Kharage that the variation of minimum wages of workers in different states is due to the different socio-economic conditions, prices of commodities, paying capacity, productivity, etc. which impacts the wage rate paid to the workers in a particular state. In the case, N.M. Wadia Charitable Hospital v. State of Maharashtra, 1986, it was held by the Bombay High Court that fixing different rates of minimum wages for different localities is permitted under the Constitution and the labour laws of the country, thus fixing different rates of minimum wages for different areas is not discriminatory and not violative of the Constitution.

9. MGNREGA wages rate or minimum wages rate

Mahatma Gandhi National Rural Employment Guarantee Act is a scheme which guarantees employment for 100 days at a rate of wage of INR 120 per day that came into force in 2009. The Act is applicable to everyone whether they are below the poverty line or above. The Central Government removed the MNREGA wage rates from the state’s lowest minimum wage rates in January 2009 when states such as Uttar Pradesh, Rajasthan and Maharashtra revised and increased their minimum wage rates. This had serious consequences across the nation for the MNREGA scheme directly in the Central Government budget. Protests began in various parts of the country concerning workers’ welfare, poor payments, unclear sources of funds, etc.

The National Advisory Council reco”mend’d that MGNREGA wage rates should be coordinated with the minimum wage rates, but this was rejected by the Central Government. The Central Government stuck on its decision to freeze MGNREGA wages even after a Supreme Court order. Eventually, the Prime Minister agreed to accept the recommendations and converted MNREGA wages into minimum wage rates until an expert committee produced a desired index.

Conclusion

The Minimum Wages Act, 1948 was enacted to safeguard the rights and interests of the workers working in some scheduled class of employment which is laid down under the Act. The Act seeks to provide equal employment opportunities and adequate remuneration for maintaining a decent standard of livelihood for the workers. The provisions under the Act such as revision of wages at an interval of every five years and fixing working hours in a normal working day portray how the Act prevents undue exploitation of the workers. The Act further establishes advisory boards and committees that the workers can approach to seek redressal regarding cases concerning non-payment of wages or delay in the payment of wages by their employers. The Act also grants adequate powers to the inspectors to look after the welfare of the workers. Therefore, this Act plays a crucial role in providing the basic needs of the workers of a scheduled category of employment, to grant adequate wages to the workers to survive with their livelihood and also to promote the Directive Principles of State Policy laid down under Article 43 of the Constitution of India.