MINIMUM WAGES

I. INTRODUCTION

In a developing economy like India where about 90 percent of the workers work in the
informal sector, not having collective bargaining power.1 In India, 422.6 million workers
out of the total workforce of 467 million belong to the unorganized/informal sector. These
workers contribute to more than 60 per cent to India’s GDP growth.2 There are large groups
of unorganized workers in small industry, agriculture, construction, domestic service,
garment industry, many forms of self-employment, etc. Their condition resembles that of
workers in large industry in the early years of union formation. Few laws apply to them; even
the ones that are passed are not implemented. Many of these workers have no education, few
skills and little ability to organize themselves.3

Over the years, in our country, except certain highly organized industries, the labor as a
whole was not able to put a face of collective bargaining and look after their own interests. 4
In a labor surplus economy like India wages couldn’t be left to be determined entirely by
forces of demand and supply as it would lead to the fixation of wages at a very low level
resulting in exploitation of less privileged class. Keeping this in view, the Government of
India enacted the Minimum Wages Act, 1948.

II. BACKGROUND

On the recommendation of the 8th Standing Labor Committee, the Minimum Wages Bill was
introduced in the Central Legislative Assembly on 11th April, 1946 to provide for fixation of
minimum wages in certain employments. The Minimum Wages Bill was passed by the Indian
Dominion Legislature and came into force on 15th March, 1948. Under the Act, both Central
and the State Governments are “Appropriate Governments” for fixation/ revision of
minimum rates of wages for employments covered by the Schedule to the Act.5

1
“Report On The Working Of Minimum Wages Act”; for the year 1998 www.laborbureau.nic.in
2
“Minimum Wages India – Current Minimum Wage Rate India”; www.paycheck.in
3
“ Law Relating to Minimum Wages”, Anuja Mirchandaney, Alternative Law Forum
4
“ Chapter 5- Wages”; http://labour.nic.in/annrep/annrep0304/english/Chapter05.pdf
5
Ibid

LABOR AND INDUSTRIAL LAWS Page | I

Article 39 states that the State shall, in particular, direct its policy towards securing (a) that
the citizen, men and women equally shall have the right to an adequate livelihood and (b) that
there is equal pay for equal work for both men and women. Article 43 states that the State
shall endeavor, by suitable legislation or economic organization or in any other way, to give
all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work
ensuring a decent standard of life and full enjoyment of leisure, and social and cultural
opportunities.6

Under the Act, Central and State Governments are appropriate governments and can do the
two actions:

1. notify scheduled employment (specified in Part I- carpet weaving, mill and other
mines, plantation etc; Part II- agriculture, cultivation, harvesting etc specified in
the schedule).

2. fix/revise minimum wages

III. AIM AND OBJECTS OF MINIMUM WAGES ACT

The purpose of the Act is to provide that no employer shall pay to workers in certain
categories of employments wages at a rate less than the minimum wage prescribed by
notification under the Act. The Act provides for fixation / periodic revision of minimum
wages in employments where the labor is vulnerable to exploitation. Under the Act, the
appropriate Government, both Central and State can fix / revise the minimum wages in such
scheduled employments falling in their respective jurisdiction.7

The object of the Act is to prevent exploitation of the workers, and for that purpose it aims at
fixation of minimum wages which the employer must pay. The legislature undoubtedly
intended to apply the Act to those industries or localities in which by reason or causes such as
unorganized labor or absence of machinery for regulation of wages, the wages paid to
workers, were in the light of general level of wages and substantive level, inadequate.8

6
Khan, Kamaluddin, “Directive Principles For the establishment of the welfare state”, 19th Feb, 2009
7
“Report On The Working Of Minimum Wages Act”; for the year 2001 www.laborbureau.nic.in
8
Bhikusa Yamess Kshatriya v. Regional Labor Commissioner, A.I.R. 1963 S.C. 806

LABOR AND INDUSTRIAL LAWS Page | 2

In the essence what the Act purports to achieve is to prevent exploitation of labor and for the
purpose it authorizes the appropriate Government to take steps to prescribe minimum rates of
wages in the scheduled industries.

IV. WAGES

This Act defines Wages under Section 2(h) which reads as under-
“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 and
includes house rent allowance”
But does not include
The value of- any house, accommodation, supply of water, light etc or any
other amenity or any service excluded by general or spl. order of the
appropriate govt.

Any contribution paid by the employer to any pension fund or provident

fund or under any scheme of social insurance.

Any traveling allowance or the value of any traveling concession.

Any sum paid tot eh person employed to defray special expenses entailed
on him by the nature of his employment.

Any gratuity payable on discharge.

V. DEFINITION OF MINIMUM WAGE

A criticism against the Act has been that it does not define the term “Minimum wages”.
Trade Unions have urged that to avoid differences in interpretation by wage fixing authorities
“minimum wages” should be spelt out in precise terms. While fixing rigid cash equivalent of
the statutory minimum wage may not be a good idea (because of rise in prices due to inflation
and differences in regional conditions)9, some norms should be followed to guide the

9
Here is should be mentioned that the 2nd National Commission on Labor has proposed a National Floor Level
Minimum wage fixed by the Central Government, applicable to every employed worker, through out the

LABOR AND INDUSTRIAL LAWS Page | 3

fixation. The Act it self does not contain any clue as to the principles, criteria or norms, to be
followed while fixing a minimum wage for a given employment.
The 2nd National Labor Commission which came out with its report in 2002 recommends
that the Minimum wages should be such as to satisfy the needs of the worker and his family,
arrived at on the need based formula of the 15 Indian Labor conference. This should be
supplemented by the judgment of the Supreme Court in Raptakos Brett &Co. case10 they
said. In spite of endorsing such a wage, the Commission went on to say “the Appropriate
Government should keep in mind the capacity of the industry to pay as well as the basic
needs of the worker.11

VI. FIXATION OF MINIMUM WAGES

The term ‘Minimum Wage Fixation’ implies the fixation of the rate or rates of minimum
wages by a process or invoking the authority of the State. 12 The statutory minimum wage has
the force of law and it becomes obligatory on the part of the employers not to pay below the
prescribed minimum wage to its employees. The obligation of the employer to pay the said
wage is absolute. This process helps the employees in getting fair and reasonable wages more
particularly in the unorganized sector. Also the other gain which could be derived by fixing
minimum wages under statutory provisions are to eliminate exploitation of labor to ensure
rapid growth and equitable distribution of the national income thereby ensuring sound
development of the national economy.13

Section 3 of the Minimum Wages Act, 1948 lays down that the appropriate Government shall
be empowered to fix the minimum rates of wages in the manner prescribed under this Act,
payable to employees employed in the scheduled employments and in an employment added
to either Part I or Part II of the Schedule by Notification under Section 27.14

The appropriate Government shall review the minimum rates of wages to fix and revise the
minimum rates, if necessary, at such intervals as it may think fit, where the intervals as
aforesaid may not exceed five years. But where for any reason the appropriate Government

country. This will not take away the power of the state governments which should notify a separate State
Minimum wage which should not be less than the National level minimum wage(in Volume I, Part I at p.433,
434 of its Report).
10
1977 WLN 461
11
‘Report of the National Commission of Labour, Volume I, Part I’ at p. 366.
12
“Minimum Wages Act 1948”, www.nidfm.nic.in
13
Supranote no. 7
14
Gujarat State Bakers'' Federation ... vs State Of Gujarat (1995) 1 GLR 73, (1995) ILLJ 1224 Guj

LABOR AND INDUSTRIAL LAWS Page | 4

has not reviewed the minimum rates of wages fixed by it within an interval of five years, the
appropriate Government shall not be without power to review or revise after five years. Until
the minimum rates are so revised the minimum rates in force immediately before the expiry
of the said period of five years shall continue in force.

Under Section 3 (1-A) the appropriate government can refrain from fixing and revising
minimum wage in certain circumstances if the workers are less than 1000 in the whole State.
But if at any time after the inquiry appropriate govt. finds that the workers are more than
1000 regarding that same employment appropriate government can fix the minimum wages.15

It has been provided under the provisions of Section 3(2) of the Minimum Wages Act that the
appropriate Government may fix:

(a) A minimum rate of wages for time work, hereinafter referred to as ‘a minimum time rate’;
(b) A minimum rate of wages for piece work, hereinafter referred to as ‘a minimum piece
rate’;
(c) 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, hereinafter referred to as ‘a guaranteed time rate’;
Clause (c) of Section 3(2) is intended to meet a situation where operation of minimum
piece rate fixed by Government may result in worker earning less than minimum wage.16
(d) A minimum rate, whether a (time rate or a piece rate) to apply in substitution, for the
minimum rate which would otherwise be applicable, in respect of over-time work done by
employees, hereinafter referred to as “over-time”.17

The minimum rates of wages shall not apply in the following cases during the period in
which the proceeding is pending and the award made therein is in operation or where the
notification is issued during the period of operation of an award during that period:

(i) Where in respect of an individual dispute relating to the rates of wages payable to any of
the employees employed in a scheduled employment any proceeding is pending before a
Tribunal or National Tribunal under the Industrial Disputes Act, 1947, or before any like
authority; or

15
Sahadeo Sahu v. State of M.P. and another (1990) II LLJ 402 (MP)
16
Hydro (Engineers) Pvt. Ltd. v. Workmen, AIR 1969 SC 182
17
The Minimum Wages Act, 1948, Section 3(2); Airfreight Ltd v. State of Karnataka and others, 1999 SCC
(L&S) 1185

LABOR AND INDUSTRIAL LAWS Page | 5

(ii) Where an award made by any such authority as aforesaid is in operation; and
(iii)A notification fixing or revising the minimum rates of wages in respect of the scheduled
employment is issued during the pendency of such proceeding or the operation of the
award.

Where such proceeding or award relates to the rates of wages payable to all the employees in
the scheduled employment no minimum rates of wages shall be fixed or revised in respect of
that employment during the said period.

In fixing or revising minimum rates of wages under Section 3(3):

(a) Different minimum rates of wages may be fixed for-
(i) Different scheduled employment;
(ii) Different classes of work in the same scheduled employment;
(iii)Adults, adolescents, children and apprentices;
(iv) Different localities;
(b) Minimum rates of wages may be fixed by one or more of the following wage periods,
namely :- (i) by the hour, (ii) by the day, (iii) by the month, or (iv) by such other longer
wage-period as may be prescribed.

Fixing of different rates of minimum wages for different industries or in different localities
by dividing State into different several zones will be in conformity with Section 3 or the
scheme of the Act.18 This Act purports to prevent exploitation of labor. For that purpose the
appropriate Government is authorized to take steps to prescribe minimum rates of wages in
the scheduled industries. This Act prescribes minimum wage rates which a welfare State
assumes every employer must pay before he employs labor. 19 The minimum rates of wages
are fixed with the dual object of providing sustenance and maintenance of the worker and his
family and preserving his efficiency as a worker.20 However, the minimum prescribed is not
the economic or industrial minimum but contains several components which take the
statutorily prescribed minimum near the level of the fair wage, and when that is the effect of
the statutory provision capacity to pay may, no doubt, have to be considered.21

VII. MINIMUM RATES OF WAGES

18
Chandra Bhawan Boarding and Lodging, Bangalore v. State of Mysore, AIR 1970 SC 204
19
Crown Aluminium Works v. Their Workmen, AIR 1958 SC 30
20
U.Unichay v. State of Kerala, AIR 1969 SC 12
21
Ibid

LABOR AND INDUSTRIAL LAWS Page | 6

Section 4(1) provides with the minimum rates of wages. It provides that any minimum rates
of wages fixed or revised by the appropriate Government in respect of scheduled
employments under Section 3 may consist of :-

1. A basic rate of wages; and

2. A special allowance at a rate to be adjusted, at such intervals and in such a manner as the
appropriate Government may direct, to accord as nearly as practicable with the variation in
the cost of living index number applicable to such workers, hereinafter referred to as the
cost of living allowance; or
3. A basic rate of wages with or without the cost of living allowance and the cash value of
concessions in respect of supplies of essential commodities at concessional rates where so
authorized; or
4. An all-inclusive rate allowance for the basic rate, the cost of living allowance and the cash
value of the concessions, if any.
The cost of living allowance and the cash value of the concessions in respect of supplies of
essential commodities at concessional rates shall be computed by the competent authority at
such intervals and in accordance with such directions as may be specified or given by the
appropriate Government.22
The special allowance mentioned in Section 4(1) of the Act, is a variable amount forming part
of the wages, being linked with the cost of living index number. The phrase ‘a special
allowance’ does not take within its ambit the “trip allowance”. This allowance is specifically
referred to in Section 4(1) as “cost of living allowance”. Therefore “trip allowance” and “cost
of living” fall in different categories for the former has not much to do with the prevailing
cost of living index number.23
In Karnataka Film Chamber of Commerce v. State of Karnataka24, it was held that the
language of Section 4 does not lend itself to the interpretation that a minimum wage under
Section 4(1) necessarily should consist of basic wages and dearness allowance. Minimum
wages may consist of a basic rate of wages and a special allowance at a rate adjusted at such
intervals and in such manner as the appropriate Government may direct to accord as nearly as
practicable with the variation in the cost of living index number applicable to such workers,
or basic rate of wages with or without cost of living allowance and the cash value of the
concessions in respect of supplies of essential commodities at concessional rates, where so

22
The Minimum Wages Act, 1948, Section 4(2)
23
Mahendra Chandra v. State, AIR 1971 Tri 32
24
(1987)I LLJ 182 (Karn)

LABOR AND INDUSTRIAL LAWS Page | 7

authorized, or all inclusive rate allowing for the basic rate, the cost of living allowance and
the cash value of the concessions, if any. Therefore minimum wage may consist of basic
wages and a special allowance to be adjusted with variations with increase or decrease in
basic wages when question of neutralization of cost of living arises by payment of dearness
allowance.
As indicated earlier, the main object of the Act was to fix statutory minimum wages in those
industries where sweated labor is most prevalent or where there is a considerable chance for
exploitation of labor. The Act lays down these employments in Parts I and II of its schedule.

Sl. No. Scheduled Employments

1(a) Employment in Agriculture:

Agricultural works
1 (b) Employment in Agriculture: Soil
Conservation
2 Aerated Water Manufacturing
Industry
3 Agarbathi Industry
4 Automobile Engineering (including
servicing & repairing works)
5 Bakeries
6 (a) Tobacco Industry: Beedi Making
6 (b) Tobacco Industry: Tobacco Processing
7 Biscuit Manufacturing Industry
8 Brass Copper and Aluminium Utensils
manufacturing industry
9 Bricks Industry
10 (a) Wood Work including: Carpentry
industry and Saw Mill industry
10 (b) Wood Work including: Match Works
(Match Box)Industry
10 (c) Wood Work including: Plywood
Industry

VIII. REVISION OF WAGES

Revision of wages is necessary mainly for 2 reasons:

LABOR AND INDUSTRIAL LAWS Page | 8
1. To provide for the erosion of the real value of money due to inflation and
2. To allow for the workers to share in the fruits of development.
At present the Act requires that a wage once fixed should be revised periodically, with
intervals not exceeding 5 years. The past experience has shown that minimum rate of wage
once fixed remain in operation for more than five years in many employments.25 The First
National Commission on Labor (1967) recommended that the Act should be amended to
make it obligatory on the appropriate government to revise the minimum wage every three
years. This is followed in Karnataka There are two ways to protect against inflation: the first
being to revise the wage at frequent intervals. This is not the practice in almost all the
states.26 The second is to link the cost of living to the minimum wage. This is called the
linking of dearness allowance (D.A) and is most commonly followed. In 1990 The Ministry
of Labor, Government of India decided that D.A would be announced every 6 months for
Industries for whom the Central government is the Appropriate Government.
Points to Lobby for: The dearness allowance must be provided every six months and
therefore the Act should be amended so that there is provision for enhancement automatically
every six months on the basis of the Consumer Price index.27 At present in Karnataka, it is
revised once a year.

IX. IRRELEVANT CONSIDERATIONS IN FIXATION OF MINIMUM WAGES

The following considerations are not relevant in fixation of wages:--

(a) The fact that an employer may find it difficult to carry on his business on the basis of
minimum wages;28
(b) The financial capacity of the employee i.e., his capacity to pay;29

25
Observed by the Ist National Commission on Labour, 1969.
26
As per Parduman Singh and R.K.A Subrahmanya in “A New Approach To Minimum Wages as an instrument
of Social Protection” Published by Social Security Association of India & Friedrich Ebert Stiftung, 1999.
27
Dearness Allowance or ‘DA’ is basically an additional sum of money to neutralise the effect of inflation. If
the price of goods increase and workers wages remain the same then they cannot purchase
all their basic requirements. The Consumer Price Index is a list (published by the statistical department of the
government) which measures the rise in price in a fixed basket of commodities from a year called the ‘Base
year’. The consumer price index measures the rise in price of this fixed basket of goods in terms of points. The
DA is fixed by the government is ‘x’ paise, per point of the
consumer price index. Example: In 1997, beedi workers (piece rate workers), were getting a wage of Rs 40/- for
1000 beedis rolled. From the period, 1997 to 1998 the variable points of the consumer price index was 136 and
the D.A fixed by the State Government was 2.5 paise. The Variable D.A. is therefor Rs. 3.625 ( 2.5 paise
multiplied by 136 points), which was added to the basic wage of Rs. 40/-.

28
Hydro (Engineers) Pvt. Ltd v. The Workmen, AIR 1969 SC 182

LABOR AND INDUSTRIAL LAWS Page | 9

 (c) The fact of the employer-company having incurred losses during the previous years;
(d) Employer’s difficulties in importing raw materials; and
(e) The region-cum-industry principles.

However in fixing fair wages the financial capacity of the employer and the wages scale
prevailing in the comparable industries in the region are some of the relevant
considerations.30 Minimum wages must be paid irrespective of the extent of profits, the
financial condition of the establishment or availability of workmen, on lower wages. 31 The
minimum wages is independent of the kind of industry and applies to all alike, big or small.
It sets the lowest limit below which wages cannot be allowed to sink in all humanity.

X. PROCEDURE FOR FIXING AND REVISING MINIMUM WAGES

Section 5 lays down that in fixing rates of wages in respect of any scheduled employment for
the first time under this Act or in revising minimum rates of wages so fixed, the appropriate
Government shall either :--

(a) appoint as many committees and sub-committees as it considers necessary to hold

enquiries and advise it in respect of such fixation or revision, as the case may be, or

(b) by notification in the Official Gazette, publish its proposals for the information of persons
likely to be affected thereby 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 the advice of the committees appointed, and all representations received by
it before the date specified in the Gazette notification, the appropriate Government may by
notification in the official Gazette, fix or revise the minimum rates of wages in respect of
each scheduled employment, which shall come into force after the expiry of 3 months unless
otherwise provided in the notification.

However where the appropriate government proposes to revise the minimum rates of wages
by the mode specified in Section 5(1)(b), the appropriate Government shall consult the
Advisory Board also. The Advisory Board is constituted to co-ordinate the work of the
committees and the sub-committees and to advise the Government generally in the matter of

29
Sangam Press v. Workmen, AIR 1969 SC 2035
30
Ibid 28
31
Kamani Metals and Alloys Ltd v. Workmen, AIR 1967 SC 1175

LABOR AND INDUSTRIAL LAWS Page | 10

fixing and revising the minimum rates. However, in the initial fixation of minimum wages,
consultation with the Advisory Board is not compulsory.32

For the purposes of advising the Central and State Governments in the matter of fixation and
revision of minimum rates of wages and other matters under this Act and for coordinating the
works of the Advisory Boards, the Central Government shall appoint a Central Advisory
Board. Thus, the Central Advisory Board is constituted by the Central Government under
Section 8 of the Minimum Wages Act, for the following purposes:
1. To advise the Central and State Governments in the matters of fixation and revision of
minimum rates of wages;
2. To advise on any matters within the scope of this Act;
3. To co-ordinate the work of the Advisory Boards.

The object of Section 5 is to enable the Government to collect data required for fixing the
minimum wages, the committee appointed under Section 5 is only an advisory body and
Government is not bound to accept any of its recommendations.33 The Act speaks of two
procedures by which a minimum wage can be fixed by the government for a given
employment. It is in the government’s discretion to choose either of these methods or a
combination of both. In one, the committees hold enquiries and advice in respect of the
fixation or revision and the Government in the light of advice, ultimately decides. In the
other, the Government formulates its proposals, invites the representations and after
consulting the Advisory Board, arrives at its decision.

XI. ADVISORY BOARD

The appropriate Government shall according to Section 7 appoint an Advisory Board for the
purpose of-

(a) Co-ordinate the work of committees and sub-committees, appointed under Section 5; and
(b) Advising the appropriate Government in the matter of fixing and revising minimum rate
of wages.

Besides the Advisory Board may device the procedure to be adopted for discharging its
function under Section 5 of the Act.34

32
Chandra Bhawan Boarding and Lodging v. State of Mysore, AIR 1968 Mys. 156
33
Jaswant Rai Beri v. State of Punjab, AIR 1958 Punj 425
34
Gulam Ahmad v. State of Bombay, AIR 1962 Bom 97

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XII. CENTRAL ADVISORY BOARD

Section 8 makes it obligatory upon the Central Government to appoint a Central Advisory
Board for the following purposes:

(i) Advising the Central and State Governments in the matters of the fixation and revision of
minimum rates of wages and other matters under the Act; and
(ii) For coordinating the work of the Advisory Boards.

Section 8(2) provides that Central Advisory Board shall consist of:-

(i) Advising the Central and State Governments in the matters of the fixation and revision of
minimum rates of wages and other matters under the Act; and
(ii) For coordinating the work of the Advisory Boards.

Section 8(2) provides that the Central Advisory Board shall consist of:-

(i) Persons to be nominated by the Central Government representing employers and

employees in the scheduled employment who shall be equal in number; and
(ii) Independent persons not exceeding one-third of its total number of members. The
Chairman of the Central Board shall be one of the independent persons and shall be
appointed by the Central Government

XIII. COMPOSITION OF COMMITTEES ETC.

Section 9 provides that such of the committee, sub-committees and the Advisory Board shall
consist of persons to be nominated by the appropriate Government. Persons who can be
appointed to these committees shall be representatives of the employers and employees in the
scheduled employments and shall be equal in number. Independent persons not exceeding
one-third of the total number of members in such bodies shall be appointed. The appropriate
Government shall appoint one of such independent to be the Chairman.35

The expression ‘independent person’ in this section means a person other than those who are
employer and employees in relation to the scheduled employment in respect of which
minimum wages are sought to be fixed.36

35
K.T. Appannah vs State Of Mysore By Its Chief Secretary To Government And Anr. AIR 1962 Kant 157, AIR
1962 Mys 157, 1962 (5) FLR 502
36
D.Salt Works v. State AIR 1971 Guj 14

LABOR AND INDUSTRIAL LAWS Page | 12

XIV. CORRECTION AND ERRORS

Section 10 empowers the appropriate to correct clerical or arithmetical mistakes in any order
fixing or revising minimum rates of wages under this Act or errors arising from any
accidental slips or omissions by Notification in the Official Gazette. Every such notification
shall be placed before the Advisory Board for information. The notification making necessary
corrections in order of fixing or revising minimum wages issued by the Government under
Section 10(2) is not a piece of legislation of any kind, neither delegated legislation nor
subordinate legislation nor conditional legislation. The Legislature in enacting Section 10(2)
had no intention to assign to the appropriate Government anything more than a mere
accessory power of taking an executive action of issuing notifications which were necessary
to carry out the policy of the Act.37

37
AIR 1960 Bom 229

LABOR AND INDUSTRIAL LAWS Page | 13

INTRODUCTION

The minimum wages Act defines wages under Section 2 (h), which reads as under—

“Wages means all remuneration, capable of being expressed in terms of money, which would
be, in terms of 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 but does not include :--

(i) the value of

a) any house accommodation, supply of light, water, medical attendance ; or
b) any other amenity or any service excluded by general or specific order of the
appropriate government;
(ii) any contribution paid by the employer to any pension funds or provident fund or any
other scheme of social insurance;
(iii) any travelling allowance or the value of any travelling concession;
(iv) any sum paid to the person employed to defray special expenses entailed on him by
the nature of his employment; or
(v) any gratuity payable on discharge.”

The analysis of this section indicates that the following requirements are necessary for
wages:--

1) wages include all remuneration paid to an employee including house rent allowance;
2) wages must be capable of being expressed in terms of money;
3) wages become due when there is a contract between employer and employee.
However, the contract may be expressed or implied;
4) the terms and conditions of the contract must be fulfilled, or he must have done work
assigned to him under such employment.

The term ‘wages’ has a composite meaning, which includes all remuneration and other
payments payable to an employee, which are not expressly excluded by the provisions of the
Act.

LABOR AND INDUSTRIAL LAWS Page | IV

 WAGE STRUCTURE & ITS COMPONENTS

Broadly speaking the wage structure can be divided into three categories – The basic
‘minimum wage’ which provides bare subsistence and is at poverty line level, a little above is
the ‘fair wage’ and finally the ‘living wage’ which comes at a comfort level. It is not possible
to demarcate these levels of wage structure with any precision.

Certain principles on which wages are fixed have been stated by the Supreme Court in
Kamani Metals and Alloys v. Their Workmen.38

“Broadly speaking the first principle is that there is a minimum wage which in
any event must be paid, irrespective of the extent of profits, the financial condition of the
establishment or the availability of workmen on lower wages. The minimum wages is
independent of the kind of industry and applies to all alike big or small. It sets the lowest
limit below which the wages cannot be allowed to sink in all humanity. The second principle
is that wages must be fair, that is to say, sufficiently high to provide a standard family with
food, shelter, clothing, medical care and education of children appropriate for the workmen
but not at a rate exceeding his wage earning capacity in the class of establishment to which
he belongs. A fair wage is thus related to the earning capacity and the workload. It must,
however be realised that “fair wage” is not a “living wage” by which it means a wage which
is sufficient to provide not only the essential above mentioned but, a fair measure of frugal
comfort with an ability to provide for old age and evil days. Fair wage lies between minimum
wage, which must be paid in any event, and the living wage, which is the goal”.

MINIMUM WAGES--: The expression “minimum wages” is not defined in the Act
presumably because it would not be possible to lay down a uniform minimum wages for all
industries throughout the country on account of different and varying conditions prevailing
from industry to industry and from one part of the country to another.39 It was held in Hydro
(Engineers) Private Limited v. The Workmen,40 that:--

“The concept of minimum wages takes in the factor of the prevailing cost of essential
commodities whenever such minimum wage is to be fixed. Furthermore, in the right of
spiralling of prices in the recent years, if the wage scales are to be realistic it may become

38
AIR 1976 SC 1175
39
Hydro (Engineers) Pvt. Ltd. v. The Workmen
40
Ibid

LABOR AND INDUSTRIAL LAWS Page | IV

necessary to fix them so as to neutralize at least partly the price rise in essential
commodities”.

Components of a minimum wage.-- The concept of minimum wage does not mean a wage
that enables the worker to cover his bare physical need and keep himself just above
starvation. The capacity of the employer to pay is irrelevant in fixing minimum wage.
Therefore, no addition shall be made to the components of the minimum wage, which would
take the minimum wage near the lower level of the fair wage. In Unichay v. State of Kerala,41
it was held that “the Act contemplates that minimum wage rates should be fixed in the
scheduled industries with the dual object of providing subsistence and maintenance of the
worker and his family and preserving his efficiency as a worker.”

The concept of the need “based minimum wage was evolved by the 15th Indian Labour
Conference, held in July, 1957. With regard to the minimum human needs of the industrial
worker, irrespective of any other considerations.” In order to calculate the minimum wage,
the Tripartite Committee of the Indian Labour Conference held in New Delhi in 1957,
accepted the following norms, and recommended that they should guide all wage-fixing
authorities, including minimum wage committees, Wage Boards, adjudicators, etc. :--

1) In calculating the minimum wage, the standard working class family should be
taken to consist of three consumption units for one earner; the earnings of women,
children and adolescents should be disregarded.
2) Minimum food requirements should be calculated on the basis of net intake of 2700
calories, as recommended by Dr. Aykroyd for an average Indian adult of moderate
activity.
3) Clothing requirements should be estimated as per consumption of 18 yards per
annum which would give for the average worker’s family of four, a total of 72
yards.
4) In respect of housing, the norm should be the minimum rent charged by
Government in any area for houses provided under the Subsidised Industrial
Housing Scheme for low income groups.
5) Fuel, lighting and other ‘miscellaneous’ items of expenditure should constitute 20%
of the total minimum wage.

41
AIR 1962 SC 12

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 6) Children’s education, medical requirements, minimum recreation including
festivals/ceremonies and provision for old age marriages, etc. should further
constitute 25% of the total minimum wage.42

It was further held in the above case that the wage structures which approximately answers
the above six components is nothing more than a minimum wage at subsistence level. The
employees are entitled to minimum wage at all times and under all circumstances. An
employer who can’t pay minimum wages has no right to engage labour and no justification to
run the industry.

In People’s Union for Democratic Rights v. Union of India,43 it was held by the Supreme
Court that where children below the age of 14 years are employed in violation of the
Employment of Children’s Act, 1938 and minimum wages are denied to such children or to
other persons who by reason of poverty or socially or economically disadvantageous position
are unable to approach the Court, legal redress may be sought on their behalf by any member
of the public.

FAIR WAGES:

There is a difference between minimum wages and fair wages. In case of fair wage, besides
the principle of industry-cum-region, the company’s capacity to bear the financial burden
must receive due consideration. But mere hopeful observations made in the director’s annual
report can’t be basis for awarding increased wages because such observations are sometimes
made to inspire hope and confidence in shareholders and they can’t be a substitute for actual
audited figures.44

It was held in Transport Corp. of India Ltd. v. State of Maharashtra & Others, 45 that it is not
for the Labour Court or Tribunal to fix the minimum rates of wage. While fixing fair rates of
wages the courts or tribunals take into consideration the minimum rates of wages and where
the Government has not fixed the minimum rates of wages then the courts or tribunals
ascertain for themselves what would be the minimum rate of wages. In fact minimum rate of
wages are fixed by the Government. Courts or tribunals merely ascertain what are the
minimum rates of wages for the purpose of deciding ‘fair wages’.

42
Added by the Supreme Court in view of socio-economic aspect of the wage structure operating in our society
today, while deciding Workmen v. Reptakos Brett & Co Ltd., 1992 SCC 271
43
(1992) 2 LJ 545 (SC)
44
Sangam Press v. Workmen, AIR 1975 SC 2035
45
(1993) II LLJ (Bom)

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LIVING WAGE:

The Fair Wage Committee in its report published by Government of India, Ministry of labour
in 1949 defined the ‘living wage’ as under:

“The living wage should enable the male earner to provide for himself and his family not
merely the bare essentials of food, clothing and shelter but a measure of frugal comfort
including education for children, protection against ill health, requirements of essential
social needs, and a measure of insurance against the more important misfortunes including
old age”.

FIXATION OF MINIMUM WAGES

Section 3 of the act lays down that the appropriate Government shall be empowered to fix the
minimum rates of wages in the manner prescribed under this Act. It shall fix such rates of
wages payable to employees employed in an employment specified in Part I or Part II of the
Schedule and in an employment added to either part by notification under Section 27.

But the appropriate Government may in respect of employees employed in an employment

specified in part of the Schedule, instead of fixing minimum rates of wages under this clause
for the whole State, fix such rates for a part of the State or for any specified class or classes of
such employment in the whole of the state or part thereof.

The appropriate Government shall review the minimum rates of wages to fix and revise the
minimum rates, if necessary at such intervals as it may think fit. The intervals as aforesaid
shall not exceed five years. But where for any reason the appropriate government has not
reviewed the minimum rates of wages fixed by it within an interval of five years, the
appropriate government shall not be with the power to review or revise after five years. Until
the minimum rates are revised, the minimum rates in force immediately before the expiry of
the said period of five years shall continue in force.

Sub-section (1-A) provides that the appropriate government may refrain from fixing
minimum level of wages in respect of any scheduled employment in which there are in the
whole state less than one thousand employees engaged in such employment. But if at any
time, the appropriate Government comes to a finding after such enquiry as it may make or
cause to be made in this behalf that the number of employees in any scheduled employment
in respect of which it has refrained from fixing minimum rates of wages, has risen to one

LABOR AND INDUSTRIAL LAWS Page | IV

thousand or more. It shall fix minimum rates of wages payable to employee in such
employment as soon as may be such finding.

In Sahadeo Sahu v. State of M.P. and another46 it was held that Section 3(1-A) does not
prevent the appropriate government from fixing the minimum rates of wages even if the
number of employees in that scheduled employment is less than one thousand. The word
‘refrain’ used in Section 3(1-A) would include jurisdiction to withdraw the minimum rates of
wages fixed if the strength of the scheduled employment falls below 1000. The power to
rescind the wages once fixed without any expressed provision is that regard in Section 3(1-A)
can well be inferred with reference to Section 21 of the General Clauses Act.

Sub-section (2) provides that the government may fix—

a) a minimum rate of wages for time work (i.e., “a minimum time rate”);
b) a minimum rate of wages for piece work (i.e., “a minimum piece rate”);
When a piece rate is fixed, every worker will not earn the same amount for the day.
If the difference is due to reasons which are purely personal to the worker, no
grievance can be made, but if the difference is brought about by furnishing one with
an appreciable example providing one with a machinery and the other with a hand
mallet, there may be a possibility of injustice and an attempt must be made for
arriving at a result which may really be reasonable and just in the circumstances. 47
c) a minimum of remuneration to apply in the case of employees employed in a piece
work for the purpose of securing to such employees a minimum rate of wages on a
time work basis which is known as “a guaranteed time rate”, Clause (c) of section
3(2) is intended to meet a situation where operation of minimum rate fixed by the
Government may result in worker earning less than minimum wage.48
d) a minimum rate ( whether a time rate or a piece rate ) to apply to apply in
substitution for the minimum rate which would otherwise be applicable, in respect
of overtime work done by the employees, which is known as “overtime”.

The minimum rates of wages shall not apply in the following cases during the period in
which the proceeding is pending and the award made therein is the operation or where the
notification is issued during the period of operation of an award during that period:

46
(1990) II LLJ 402 (MP)
47
M.G.A. Pai & Sons v. State, AIR 1971 Mys. 46.
48
Hydro (Engineers) Pvt. Ltd. v. Workmen, AIR 1969 SC 182

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 (i) where in respect of an industrial dispute relating to the rates of wages payable to any
of the employees employed in a scheduled employment any proceeding is pending
before a Tribunal or a National Tribunal under the Industrial Disputes Act 1947, or
before any like authority; or
(ii) where an award made by any such authority as aforesaid in its operation; and
(iii) a notification fixing or revising the minimum rates of wages in respect of the
scheduled employment is issued during the pendency of such proceeding or the
operation of the award.

Where such proceedings or award relates to the rates of wages payable to all the employees in
the employment no minimum rates shall be fixed or revised in respect of that employment
during the said period.

In fixing or revising minimum rates of wages under Section 3:

a) different minimum rates of wages may be fixed for ---

i. different scheduled employments;
ii. different classes of work in the same scheduled employment;
iii. adults, adolescents, children and apprentices;
iv. different localities;
b) minimum rates of wages can be fixed by one or more of the following wage periods,
namely:--
i.) by the hour,
ii.) by the day,
iii.) by the month, or
iv.) by such other longer wage-period as may be prescribed.

Where such rates are fixed by the day or the month, the manner of calculating wages for a
month or for a day, as the case may be, may be indicated. Where any wage-period have been
fixed under Section 4 of the Payment of Wages Act, 1936, minimum wages shall be fixed in
accordance therewith.

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In S.F.A.L. Works v. State Industrial Court, Nagpur,49 it was held that in fixing the minimum
rates of wages, the Act also makes provisions for the special allowances to be paid along with
the basic rate of wages. The allowance is fixed by the Government to accord as nearly as
practicable with the variation in the cost of living index number applicable to such workers.
So far as the provisions of the act relating to the minimum wages and special allowances are
concerned they are fixed without any reference to the paying capacity of the employer, but
when a dearness allowance is fixed as a part of the fair wage, it will have to depend upon the
paying capacity of the employer. It has been held though the dearness allowance is given to
compensate for the rise of the cost of living, cent per cent neutralisation is not given as it may
tend to inflation.

In Jyothi Home Industries v. State of Karnataka,50 the question for consideration was
whether the appropriate government can fix guaranteed remuneration under this Act, for the
day on which the employer in unable to give the work. It was held that the appropriate
government under Section 3 can fix minimum wages for hours actually worked by the
employee and if he is not in the position to fulfil his part of the contracts on account of the
facts that the employer does not offer him necessary raw materials required for his job, he
would be entitled to remuneration under Section 3(2)(c). This view is supported by the other
provisions like section 13 and 20 of the Act also. Thus the Government can fix guaranteed
remuneration.

49
AIR 1978 SC 1113

50
(1983) 1 LLJ 201 (Karnataka)

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FIXING AND REVISING OF MINIMUM WAGES.

Irrelevant considerations in fixation of minimum wages.

The following considerations are not relevant in fixation of wages:-

a) The fact that an employer may find it difficult to carry on his business on the basis of
minimum wages51
b) The financial capacity of the employee i.e., his capacity to pay52
c) The fact of the employer-company having incurred losses during the previous years.
d) Employer’s difficulties in importing raw materials and
e) The region cum industry principles

However, in fixing fair wages the financial capacity of the employer and the wages scale
prevailing in the comparable industries in the region are some of the relevant
considerations.53 Minimum wages must be paid irrespective of the extent of the profits, the
financial condition of the establishment or the availability of workmen, on lower wages.54
The minimum wages are independent of the kind of industry and applies to all alike, big or
small. It sets the lowest limit below which wages cannot be allowed to sink in all humanity.

PROCEDURE

Section 5 lays down that in fixing minimum rates of wages in respect of any scheduled
employment for the first time under this Act or in revising minimum rates of wages so fixed,
the appropriate Government shall either:

a) Appoint as many committees and sub- committees as it considers necessary to hold

enquiries and advise it in respect of such fixation or revision, as the case may be; or
b) By notification in the Official Gazette, publish its proposals for the information of the
persons likely to be affected thereby and specify a date not less than two months from
the date of the notification on which the proposals will be taken in consideration.

After considering the advice of the committees appointed, and all representations received by
it before the date specified in the gazette notification, the appropriate government may by
notification in the Official Gazette, fix or revise the minimum wages in respect of the each

51
Supra 11
52
Sangam Press v. Workmen AIR 1969 SC 2035
53
Supra 14
54
Supra 1

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scheduled employment, which shall come into force after the expiry of three months unless
otherwise provided in the notification.

When the appropriate Government proposes to revise the minimum rates of wages, by the
mode specified in section 5(1) (b), the appropriate government shall consult the advisory
board also.

If the advisory board approves the notification, regarding revision of wages without
discussing the objections made, the action of the board would be arbitrary because it amounts
to non-application of mind in granting approval.55

The exercise of power to fix or revise the minimum wages under sub-section (2) of section 5
is limited to employment specified in the schedule. Under Section 27 of the Act, the
appropriate government may add any employment to the schedule. The nature and extent of
the power of the appropriate Government under Section 27 and Section 5 (2) is separate and
distinct and what can be done by the appropriate government in exercise of its power under
Section 27 cannot be done by it in exercise of its powers under Section 5 (2) of the Act.56

The power conferred upon the appropriate Government under Section 5(1) is neither arbitrary
nor unguided. Therefore, sub-section (1) does not offend Article of the Constitution.57 In the
matter of fixing minimum wages, the economic capacity of the trade or industry is irrelevant,
for, what alone is germane, is, the wage required by the employees to survive.58 The fixation
of wages depend upon the prevailing economic conditions, the cost of living in a place, the
nature of the work to be performed and the conditions in which the work is performed.
Where a notification is issued by the Government authorising the employer to deduct the sum
mentioned in the notification towards the cost of free meals supplied to the workers by him, it
was held that the notification gives only an option to the employer and does not impose an
obligation upon him.59

In Muruga Home Industries v. Government of Tamil Nadu & Anr.60 minimum wages of
beedi-workers were revised by the State Government revised by the State Government by a
notification issued after consultation with the Advisory Board. It was the notification fixing

55
H B Verma v. Union of India, (1993) 1 LLJ 39 Del
56
Madhya Pradesh Mineral Industrial Association v. The Regional Labour Commissioner, AIR 1950 SC 1068
57
Chandra Bhavan Boarding and Lodging, Bangalore v. State of Mysore, AIR 1970 SC 2042.
58
Arbunda Bhuvan Tea Shop & Ors. v. State of Maharashtra & Ors., 1992 I LLJ 807 (Bom)
59
Supra 20
60
(1996) I LLJ 598 (Madras)

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minimum wages should not be interfered with in writ proceedings except on most substantial
grounds. Advisory Board is well balanced since representation is given to employers and
employees. Work in Beedi industry is unorganised sector and condition of work and wages of
beedi workers are below subsistence level and minimum wages fixed is fair and just and not
arbitrary.

In North Bihar Chamber of Commerce and Industries, Muzzaffarpur and others v. State of
Bihar and others,61 a notification was issued revising the minimum rates of wages on the
advice of the Advisory Board. It was contended that the composition of the Advisory Board
was defective. The revised rates of minimum wages were impugned in these petitions.
Dismissing the petitions the High Court observed that the petitioner had neither pleaded nor
advanced arguments that any prejudice was caused by an alleged defect in the composition of
the Advisory Board would not per se vitiate the decision.

In Andhra Pradesh Hotels Association v. Government of Andhra Pradesh & Anr62, the
Government of Andhra Pradesh issued a Gazette notification on March 1999 proposing
revision of minimum wages in Hotel industry under Section 5(2) of the Minimum Wages
Act, 1948. On October 17, 2000 the Government of Andhra Pradesh in consultation with the
State Advisory Board issued another G.O. revising the minimum wages in exercise of powers
conferred by Sections 3(1) and 5(2) of the Act in Hotels and Restaurants etc. Being aggrieved
by the said notification the petitioner association filed the present writ petition. Dismissing
the appeal the High Court made following observations:--

1) Fixation of minimum wages was an administrative act and the quantum fixed on
humanitarian ground was not subject to judicial review, unless the fixation was ultra
vires, the Minimum Wages Act, 1948.
2) Minimum wages must provide not merely for bare subsistence but for the preservation
of worker’s efficiency also, and so the capacity of the employer to pay such wages
was treated as irrelevant.
3) The High Court while reviewing a notification fixing minimum wages could not
assume the role of an appellate authority and reappreciate each and every factor.
4) It could not be said that under no circumstances the rate of neutralisation of variable
D.A. should not exceed 100%.

61
(2002) I LLJ 488 (Pat.)
62
(2002) III LLJ 623 (AP.

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 5) The Minimum Wages Act, 1948 was a beneficial piece of social legislation and in
fixing the wages under it, the consideration was that workmen should receive their
proper share of the National income which they help to produce.
6) The appellant had not made out any permissible ground to quash the impugned
Government order.

The further part of the Act talks about the authorities under the Act, their composition and
process of working. The later Sections also enlist the penalties for different offences under
the Act and also the power of the Government to make and validate rules under the Act.

CONCLUSION

This Act provides the workers with a weapon to defend themselves in case undue advantage
of their services is sought to be taken by the employers. It empowers the workmen to demand
for special allowances in addition to the minimum wages. The fixation of minimum wages
for every sort of work ensures that a basic standard of living is enjoyed by the workers and
that they are properly rewarded for their labour.

However, minimum wage provides not merely for the bare subsistence of life but for the
preservation of the efficiency of the worker. Therefore, provisions for some measure of
education, medical requirements and amenities are also enunciated in the Act. The idea of
fixing such wages in the light of cost of living at a particular juncture of time and neutralising
the rising prices of essential commodities by linking up scales of minimum wages with the
cost of living index can’t, therefore, be said to be alien to the concept of minimum wage.

The concerned Act also provides for a fair procedure for determination of minimum wages as
well as remedies that could be sought in case the workers are deprived of their much deserved
minimum wages. This legislation specifically aims at securing livelihood for the unskilled
workers who lack the ability to raise a demand for their services or labour.

This project has brought to light the need for fixing of such minimum wages, the procedure
for determination of minimum wages for different industries, the reasons which the
appropriate government takes into account before determination of minimum wages as well
as the remedies available to the workmen.

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