LABOUR LAW PROJECT

TOPIC MINIMUM WAGES ACTCONSTITUTIONAL VALIDITY AND NEW ASPECT

1.) The minimum wages act up hails the ARTICLE 43 of the Indian
constitution, which states that,
Living wage, etc, for workers The State shall endeavor to secure, by suitable
legislation or economic organization or in any other way, to 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
and, in particular, the State shall endeavor to promote cottage industries on an
individual or cooperative basis in rural areas

The spirit of the minimum wages act of India is relied in the soul on of the
article 431 of Indian constitution, which SADLY is enshrined in part IV of the
constitution and hence is non-enforceable by law.
2.) Another constitutional provision that the minimum wages act is said to
defy is the ARTICLE 19(1g) which says that
To practice any profession or to carry on any occupation, trade or
businesses

It is questioned by certain jurists that the provisions of the minimum wages

act that ask for providing a fixed minimum wage by the employers to the
labours is a BAR to their fundamental right guaranteed under 19(1g).

1 Article 43 of Constitution of India deals with the topic of Living wage, etc., for workers

But this question has been raised again and again in the honorable courts
which have dissented from this opinion and upheld the validity of minimum
wages act.
In GUL MUHAMMAD TARA SAHEB VS STATE OF BOMBAY2,
Where the honorable court pointed out that the provision of 19(1g) is subject
to restriction enshrined in 19(6) of the Indian constitution.
Article 19(6) states that,
Nothing in sub clause (g) of the said clause shall affect the operation of any
existing law in so far as it imposes, or prevent the State from making any
law imposing, in the interests of the general public, reasonable
restrictions on the exercise of the right conferred by the said sub clause.

Here in 19(6) the words, the interest of general public creates a

restriction on the exercise of this right with respect to public order
i.e to preserve public order, the right can be curtailed.
The same question was raised in V.UNICHOV VS STATE OF KERALA 1962,
And the court upheld the view of GUL MOHAMMAD case.

It was held in this case that the fixation of minimum wages is for the
preservation of public order. As if no minimum wage is fixed, it shall
lead to arbitrariness by the employer and lead TO CLASHES OF
INTEREST BETWEEN EMPLOYER AND LABOUR, which shall cause
FRICTION IN SOCIETY.

2
1962

3.) The ARTICLE 14 of the Indian constitution, which relates to equality.

Now, it must be noted that minimum wages are not fixed in the nation.
They vary from places to places and region to region. This provision of
the minimum wages act is condemned by certain jurist as to say to
violate RIGHT TO EQUALITY.
But this view is also put down by the courts throughout the nation.

In BHIKUSHA vs SANGAMARA 1963

It was held by the court that person would be liable to different
minimum wages if they are working in different locality.

In C B BOARDING AND LODGING vs STATE 1970,

It was held that persons working in different industry, even though
they work in the same locality would be granted different wages.
Hence the question of the difference of wages throughout nation is totally
disregarded by the courts.

In N.M.WADIA CHARITABLE HOSPITAL vs STATE OF MAHARASTRA

1993,
It was held by the court that fixing different minimum wages for
different locality is permitted under the constitution and under
labour laws.
Hence the question that any provision of the minimum wages act is in any
way against the provisions of constitution is wrong.
The minimum wages act is valid in all sense and completely.

The variation of minimum wages3 between the States is due to differences in

socio-economic and agro-climatic conditions, prices of essential
commodities, paying capacity, productivity and local conditions influencing
the wage rate. The regional disparity in minimum wages is also attributed to
the fact that both the Central and State Governments are the appropriate
Government to fix, revise and enforce minimum wages in scheduled
employments in their respective jurisdictions under the Act.
THE MINIMUM WAGES ACT, 1948.
India introduced the Minimum Wages Act in 1948, giving both the Central
government and State government jurisdiction in fixing wages. The act is legally
non-binding, but statutory. Payment of wages below the minimum wage rate
amounts to forced labour. Wage Boards are set up to review the industrys capacity
to pay and fix minimum wages such that they at least cover a family of fours
requirements of calories, shelter, clothing, education, medical assistance, and
entertainment. Under the law, wage rates in scheduled employments differ across
states, sectors, skills, regions and occupations owing to difference in costs of living,
regional industries' capacity to pay, consumption patterns, etc. Hence, there is no
single uniform minimum wage rate across the country and the structure has
become overly complex.4
In a developing economy like India where about 90 percent of the workers work in
the informal sector, not having collective bargaining power, wages couldnt be left
to be determined entirely by the interplay of market forces and intervention on the
part of the government became imminent. It is with this objective of protecting the
vulnerable/less privileged strata of the society from exploitation by the capitalist
3
As pointed out by the UNION LABOUR AND EMPLOYMENT MINISTER SHRI MALLIKARIUN
KHARGE,

4
https://www.linkedin.com/pulse/constitutional-validity-minimum-wages-act1948

class that government of India enacted the Minimum Wages Act, 1948. The act
provides for fixation/revision of minimum rates of wages in sweating employments
by involving the authority of the state. The minimum rates of wages helps in
reducing the inequalities in the standard of living of different social groups of
workers by statutorily prescribing minimum wage rates. Labour Bureau,

(A): THE ACT IS NOT UNREASONABLE:

It can scarcely be disputed that securing of living wages to labourers which ensure
not only bare physical subsistence but also the maintenance of health and decency
is conducive to the general interest of the public. This is one of the directive
principles of the state policy embodied in Article 43 of the constitution.

Individual employers might find it difficult to carry on the business on the basis of
minimum wages fixed under the Act but this must be not be the entire premise and
reason to strike down the law itself as unreasonable.

The restrictions, though they interfere to some extent with the freedom of trade or
business guaranteed under Article 19(1)(g) of the constitution, are reasonable and ,
being imposed on the general interest of the general public, are protected by the
terms of the clause (6) of the article 19. This quote is a part of judgement in the
case Gulmuhommad Tarasaheb5 , a bidi factory by its proprietors Shamrao /VS/
State of Bombay , AIR 1962 Bom 97: AIR1955, Sc33:1963, Ker 115: 1964 Tri 32.

An another important judgement that favours and supports the constitutional

Valitity of the Minimum Wages Act,1948 is , V. Unichonoy /VS/ State of
Kerala,1962, SC12. This case raised the same questions which were raised in the
case of Gulmuhommad Tarasaheb /vs/ State of Bombay, AIR 1962 Bom 97., which
were , that , can a state be prevented from making any law, in the interest of
general public, where it creates restrictions and interferes to some extent with the
freedom of trade or business guaranteed under Article 19(1)(g) , of the Constitution
5
GUL MOHAMMAD case.-1962

of India, and it was held that , Fixation of minimum wages is for preservation of
public order , and if no minimum wage is fixed then it shall lead to arbitrariness by
the employers and that shall lead to clashes of interest between employer and
labour which shall cause friction in society.

The article 14 of the Indian Constitution which relates to equality before the law, it
must be noted that minimum wages are not fixed equally across the whole nation
but they vary from occupation to occupation and industry to industry and from
place to place.

The case of Uchinoy /vs/ State of Kerala ,1962 SC12, further quotes the following ,
As regards to the procedure for fixing of the minimum wages, the appropriate
government has undoubtedly been given very large powers , but it has to take into
consideration, before fixing wages, the advice of the committee if one is appointed
on the representations on proposals made by persons who are likely to be affected
thereby. The various provisions constitute an adequate safeguard against any hasty
or capricious decision by the appropriate government. In suitable cases, the
appropriate government has also been given the power of granting exemptions
from the operations of the provisions of the Act. There is no provision undoubtedly,
for a further review of the decision of the appropriate government , but that itself
would not make the provisions of the act unreasonable.

(B) THE ACT DOES NOT VIOLATE ARTICLE 14

OF THE INDIAN CONSTITUTION.
On a careful examination of the various of the Act and the machinery setup by this
Act, Section 3(3)(iv) neither contravene Article 19(1) of the constitution nor does it
infringe the equal protection clause of the constitution. the Courts have also held
that the constitution of the committees and the Advisory Board did not contravene
the statutory provisions in that behalf prescribed by the legislature,- this was held
in the case of Bhikusa Yamasa Kshatriya /vs/ Sangammar Akola Bidi Kamgar Union,
AIR 1963 SC306. Further , as decided in the case C.B. Boarding & Lodging,
Re(1970) II LLJ 403: AIR 1970: SC 2042 : 38 FIR I . , it added to the above

mentioned case that , ... nor the reason that two different procedures are provided
for collecting information. .

(C) NOTIFICATION FIXING DIFFERENT RATES

OF MINIMUM WAGES FOR DIFFERENT
LOCALITIES IS NOT DISCRIMINATORY.
where the fixation of rates of wages and their revision were manifestly preceded by
a detailed survey and enquiry and the rates were brought into force after a full
consideration of the representations which were made by a section of the
employers concerned, it would be difficult in the circumstances to hold that
notification which fixed different rates of minimum wages for different localities was
not based on intelligent differentia having a rational nexus with the object of the
Act, and thereby violated article 14. when the Government issued notification
improving upon the existing minimum wages as revised minimum wages
disregarding the contrary report of the committee appointed under Section 5-1(a) ;
such notification was bad under the law and was to be made inoperative..

As pointed out by one of the Indias Union Labour and Employment Minister Shri
Mallikarjuna Kharage ;, The variation of minimum wages between the states is due
to differences in socio-economic and agro-climatic conditions, prices of essential
commodities, paying capacity, productivity and local conditions influencing the
wage rate. The regional disparity in minimum wages is also attributed to the fact
that both the Central and the State Governments are the appropriate Governments
to fix, revise and enforce minimum wages in Scheduled employments in their
respective jurisdictions under the Act.

Referring the case of N.M.Wadia Charitable Hospital /VS/ State of Maharashtra ,

1993, it was decided by the Court that Fixing different minimum wages for
different localities is permitted under the constitution and under labour laws , hence

the question that any provisio of the Minimum Wages Act is in any way against the
provisio of constitution is wrong.

The constitution of India accepts the responsibility of the State to create an

economic order, in which every citizen finds employment and receives a fair
wage. This made it necessary to quantify or lay down clear criteria to identify fair
wage. Therefore, a Central Advisory Council, in its first session in November 1948,
appointed a tripartite Committee on Fair Wages. The committee consisted of
representatives of employers, employees, and the Government. Their task was to
enquire into and report on the subject of fair wages to the labour.

(D) SANCTITY OF THE MINIMUM WAGE ACT

Supreme Court in three separate rulings has held that non payment of minimum
wages is tantamount to forced labour prohibited under Article 23 of the
Constitution. The Supreme Court holds that forced labour may arise in several
ways, including compulsion arising from hunger and poverty, want and
destitution. In Sanjit Roy Vs. State of Rajasthan (1983), the Supreme Court held
that the Exemption Act in so far as it excluded the applicability of the Minimum
Wages Act 1948 to the workmen employed in famine relief work is clearly
violative of Article 23. Thus even public works ostensibly initiated by the
government for the sole purpose of providing employment are subject to the
Minimum Wage Act.
Drawing on the Supreme Court rulings, Andhra High Court set aside the
Government of India (GoI) notification mandating that prevailing state minimum
wage be paid. This has been underscored in the legal opinion provided by Additional
Solicitor General, Ms. Indira Jaising, to the Central Employment Guarantee Council
(CEGC) Working Group on Wages where she made it clear that using Section 6(1) to
allow a payment of less than minimum wage in MGNREGA works will amount to
forced labour. 15 eminent jurists and lawyers of India too have asked Government of
India to immediately revoke its unconstitutional notification and ensure that
minimum wages are paid to all workers in India.

The Act and the judgements are in favour of equality provided under Article 14 of
the Constitution and a judgement in the case namely, Engineering Workers
Union /vs/ Union of India(1994) I .LLJSup.942Bom., pronounces the judgement
that , The provision under Section 3(2)(A), that minimum rate of wages in
scheduled employment fixed or revised, shall not apply to the employees during the
period of adjudication, violated equality clause of Article 14 and hence that section
is void.

In the view of the Directive Principles of State Policy as contained in the Article 43 of
the Indian Constitution, it is beyond doubt that securing of living wages to labourers
which ensures not only bare physical subsistence but also the maintenance of
health and decency, it is conducive to the general interest of the public.

The Minimum wages Act was passed to fulfill the aspiration as contained in the
following resolution:-

If the labourers are to be secured the enjoyment of minimum wages and they are
to be protected against exploitation by their employers, it is absolutely necessary
that restraints should be imposed upon the freedom of contract and such
restrictions cannot be said to be unreasonable. On the other hand, the cannot be
heard to complain if they are compelled to pay any minimum wages to their
labourers even though the labourers , on account of their poverty and helplessness,
are willing to work even at lesser wages.

In the case of PETITIONER: BIJAY COTTON MILLS LTD./Vs./

RESPONDENT: THE STATE OF AJMER.DATE OF JUDGMENT:

14/October /1954,

The Constitutional validity of this Act was attacked on the ground that it violates the
guarantee of freedom of trade or business etc., envisaged by Article 19(1)(g) of the

Indian Constitution, (Constitution of India, Article. 19(1)(g), 19(6)-Minimum Wages

Act (XI of 1948), sections. 3,4 and 5-Appropriate

Government-Fixing minimum rate of wages-Whether offends fundamental rights

guaranteed under Art. 19(1)(g).)

, it was held that , the restrictions imposed upon the freedom of contract by the
fixation of minimum rates of wages though they interfere to some extent with the
freedom of trade or business guaranteed under Art. 19(1)(g) of the Constitution are
not unreasonable and being imposed in the interest of general public and with a
view to carry out one of the Directive Principles of State Policy as embodied in Art.
43 of the Constitution are protected by the terms of el. (6) of Art. 19. It can thus be
said that the provisions of the Act are bound to affect harshly and even oppressively
a particular class of employers, who for purely economic reasons are unable to pay
the minimum rate of wages fixed by the authorities , but have absolutely dishonest
intention of exploiting their workers.

The fact that employer might find it difficult to carry on business on settled principle
cannot be a sufficient reason for striking down the law itself as unreasonable. The
poverty of labourers is also a factor to be taken into consideration while determining
the question whether a particular provision is in the interest of the general public.

Sanctity of The Minimum Wage Act

Supreme Court in three separate rulings, has held that non payment of minimum
wages is tantamount to forced labour prohibited under Article 23 of the
Constitution. The Supreme Court holds that forced labour may arise in several
ways, including compulsion arising from hunger and poverty, want and
destitution. In Sanjit Roy Vs. State of Rajasthan (1983), the Supreme Court held
that the Exemption Act in so far as it excluded the applicability of the Minimum
Wages Act 1948 to the workmen employed in famine relief work is clearly
violative of Article 23. Thus even public works ostensibly initiated by the

government for the sole purpose of providing employment are subject to the
Minimum Wage Act.
Drawing on the Supreme Court rulings, Andhra High Court set aside the
Government of India (GoI) notification mandating that prevailing state minimum
wage be paid. This has been underscored in the legal opinion provided by Additional
Solicitor General, Ms. Indira Jaising, to the Central Employment Guarantee Council
(CEGC) Working Group on Wages where she made it clear that using Section 6(1) to
allow a payment of less than minimum wage in MGNREGA works will amount to
forced labour. 15 eminent jurists and lawyers of India too have asked Government of
India to immediately revoke its unconstitutional notification and ensure that
minimum wages are paid to all workers in India.
Three Chief Ministers (Rajasthan, Andhra Pradesh and Kerala) have written to the
Prime Minister requesting the Ministry of Rural Developments (MoRD) compliance
with the Minimum Wage Act, followed by a letter from the Chairperson, NAC and
UPA, to the Prime Minister calling his attention to find urgent resolution of this
matter. Finally, the Labour Ministry too has reiterated its fundamental objection to
Section 6(1), warning that using Section 6(1) to allow payment of less than
prevailing state minimum wage will not stand legal scrutiny.
However despite this overwhelming legal and political consensus, both the GoI and
the Government of Andhra Pradesh continue to be in contempt of the Andhra
Pradesh High Court (July 2009) citing fiscal concerns. In fact in his response to the
Chairperson, NAC regarding violation of minimum wages in NREGA, the PM has
asserted that the wage rate under NREGA is independent of the provisions of
the Minimum Wages Act, a statement that runs counter of the established
Constitutional, legal and political opinion
The Act and the judgments are in favour of equality provided under Article 14 of the
Constitution and a judgment in the case namely,
Engineering Workers Union /vs/ Union of India(1994) I .LLJSup.942Bom.,
pronounces the judgment that , The provision under Section 3(2)(A), that minimum
rate of wages in scheduled employment fixed or revised, shall not apply to the

employees during the period of adjudication, violated equality clause of Article 14

and hence that section is void.
In the view of the Directive Principles of State Policy as contained in the Article 43 of
the Indian Constitution, it is beyond doubt that securing of living wages to labourers
which ensures not only bare physical subsistence but also the maintenance of
health and decency; it is conducive to the general interest of the public.
The Minimum wages Act was passed to fulfill the aspiration as contained
in the following resolution:
If the labourers are to be secured the enjoyment of minimum wages and they are
to be protected against exploitation by their employers, it is absolutely necessary
that restraints should be imposed upon the freedom of contract and such
restrictions cannot be said to be unreasonable. On the other hand, the cannot be
heard to complain if they are compelled to pay any minimum wages to their
labourers even though the labourers , on account of their poverty and helplessness,
are willing to work even at lesser wages.
In the case of PETITIONER: BIJAY COTTON MILLS LTD./Vs./
RESPONDENT: THE STATE OF AJMER.DATE OF JUDGMENT:
14/October /1954,
The Constitutional validity of this Act was attacked on the ground that it violates the
guarantee of freedom of trade or business etc., envisaged by Article 19(1)(g) of the
Indian Constitution, (Constitution of India, Article. 19(1)(g), 19(6)Minimum Wages
Act (XI of 1948), sections. 3,4 and 5 Appropriate.
Government fixing minimum rate of wages Whether offends fundamental rights
guaranteed under Art. 19(1)(g).) .
It was held that, the restrictions imposed upon the freedom of contract by the
fixation of minimum rates of wages though they interfere to some extent with the
freedom of trade or business guaranteed under Art. 19(1)(g) of the Constitution are
not unreasonable and being imposed in the interest of general public and with a
view to carry out one of the Directive Principles of State Policy as embodied in Art.

43 of the Constitution are protected by the terms of el. (6) of Art. 19. It can thus be
said that the provisions of the Act are bound to affect harshly and even oppressively
a particular class of employers, who for purely economic reasons are unable to pay
the minimum rate of wages fixed by the authorities, but have absolutely dishonest
intention of exploiting their workers.
The fact that employer might find it difficult to carry on business on settled principle
cannot be a sufficient reason for striking down the law itself as unreasonable. The
poverty of labourers is also a factor to be taken into consideration while determining
the question whether a particular provision is in the interest of the general public.

NEW ASPECTS IN MINIMUM WAGES ACT

The Union Labour & Employment Minister Shri Mallikarjun Kharge has
informed the Rajya Sabha that the norms recommended by the Indian
Labour Conference (ILC), held in 1957 are taken into account while fixing the
minimum wages. These are as follows: a)
b)

3 consumption units for one earner.

Minimum food requirements of 2700 calories per average Indian

adult.
c)
d)

Clothing requirements of 72 yards per annum per family.

Rent corresponding to the minimum area provided for under

Governments Industrial Housing Scheme.

e)

Fuel, Lighting and other miscellaneous items of expenditure to

constitute 20% of the total minimum wage.

The Honble Supreme Court delivered a judgment in the case of

REPTAKOS & CO. VS. ITS WORKERS

that the childrens education, medical requirement, minimum
recreation including festivals/ceremonies, provision for old age,
marriage etc. should constitute 25% of the minimum wage and used
as a guide in fixation of minimum wages. The State Governments have
been requested from time to time to keep the above norms and judicial
pronouncement in view while fixing/revising the minimum wages.

The recently held 44th Indian Labour Conference, inter alia, discussed
the issue of amendment of the Minimum Wages Act and made certain
recommendations for incorporation in the amendment proposals. The
recommendations were mainly on national minimum wage, enhancement of
penal provisions, adoption of VDA in all States/UTs, etc.
A Conference Committee of the 44th session of ILC was constituted to
discuss Agenda Item No.(i) concerning Minimum Wages and related issues.
These issues, inter alia, include norms for fixation/revision of minimum rates
of wages, Variable Dearness Allowance(VDA), National Floor Level Minimum
Wages etc. On the basis of detailed discussion, the following points emerged.
1.

There was broad consensus that the Government may fix minimum

wages as per the norms/ criteria recommended by the 15th ILC (1957) and
the directions of the Honble Supreme Court (Reptakos& Co. Vs. its workers
Union) 1992. The Government may take necessary steps accordingly.
2.

It was suggested that the Minimum Wages Act should cover all

employments and the existing restriction for its applicability on the

scheduled employments only should be deleted. This will also help India
ratify ILO Convention No.131.

3.

It was broadly agreed that there should be national minimum wages

applicable to all employments throughout the country.

4.

It was pointed out that the payment to the apprentices should be

treated differently from the other categories.

5.

The Committee noted that at present there are 12 States/UTs who

have not adopted VDA. There was consensus that all States/UTs should adopt
VDA.
6.

It was also recommended that the payment of minimum wages

should be done through Banks/Post Offices etc.

7.

It was felt that the enforcing agencies should not be given the power

of adjudication and, therefore, this proposal should be re-examined.

8.

Regarding penal provision for violation of the Act, it was felt that

imprisonment clause under Section 22 and 22A is harsh to the employer and
may be re-examined. Further, it was felt that non-maintenance of registers
should not attract imprisonment.
9.

The proposal of paying different minimum wages in respect of same

employment either in the Centre or in the States should be done away with.

1 Minimum Wages in India: Issues and Concerns Prof. Biju Varkkey and Khushi
Mehta Abstract The wage and employment policies relating to the unorganised
workers and in particular the issue of minimum wages paid to them has been a
subject of considerable discussion among union leaders and labour experts in India.
While minimum wage legislation has to a large extent been effective in providing
protection to workers in the organised sector, with periodic revision, this has not
been the case with the unorganised workers, who largely remain outside the
purview of minimum wage legislation. The paper highlights the issues and concerns
relating to Minimum Wage Act, 1948 in India. Written by Prof. Biju Varkkey,

Professor, Personnel and Industrial Relations Area and Ms. Khushi Mehta, Research
Associate, Indian Institute of Management, Ahmedabad. 2 1. Minimum Wages in
India The Indian economy is characterised by a dualism, i.e., the existence of
comparatively well organised sector along with the decentralised sector with a large
population which is self-employed1 (explanation of concept of unorganised sector is
India is given in Annexure 1). According to reports, 422.6 (94%) million workers out
of the total workforce of 457.5 million belong to the unorganised/informal sector2 in
India. These workers contribute to more than 60 per cent to Indias GDP growth. The
Constitution of India envisages a just and humane society and accordingly gives
place to the concept of living wage in the chapter on Directive Principles of State
Policy. The Minimum Wages Act, 1948 is based on Article 43 of the Constitution of
India which states that, "The State shall endeavour to secure by suitable legislation
or economic organisation or in any other way to all workers, agricultural, industrial
or otherwise, work, a living wage (emphasis added) conditions of work ensuring a
decent standard of life and full enjoyment of leisure and social and cultural
opportunities".3 The term 'Labour' is included in the 'concurrent list' of the
Constitution which provides for labour legislation both by the central and the state
governments. Labour laws for most workers in the informal sector4 are enforced by
the state governments, while that for contractors and casual workers in
establishments is regulated by the central government. All labour laws enacted by
the central government directly or indirectly influence wage level and structure of
wages in the informal sector. Table 1 gives a list of legislations that have a direct
influence on wages in the informal sector. 1
http://planningcommission.nic.in/plans/planrel/fiveyr/6th/6planch24.html 2 Informal
sector in India is broadly characterized as consisting of units engaged in the
production of goods and services with the primary objectives of generating
employment and incomes to the persons concern. The workers in informal sector
are engaged in economic activities which are not officially regulated and which
operate outside the incentive system offered by the state and its institutions. 3
http://nceus.gov.in/Report_Bill_July_2007.htm 3 Table 1: Labour legislations
influencing wages in the informal sector in India Labour legislation Type of
intervention The Minimum Wages Act, 1948 To provide minimum compensation for
work. Workers in scheduled employment to be paid minimum wage. The Trade
Unions Act, 1926 To enable workers of a number of small units to form unions, who
can bargain wages and other condition of work. The Industrial Disputes Act, 1947 To
enable unions to raise industrial disputes on wages and the conciliation machinery
to intervene. The Equal Remunerations Act, 1976 Assure equal wage to women for
same or similar work. The Payment of Wages Act, 1936 To regulate the manner of
payment of wages and their realisation in case of non-payment. The Contract
Labours (Regulation and Abolition) Act, 1970 The contractor is required to pay
wages and in case of failure on the part of the contractor to pay wages either in part
or in full, the Principal Employer is liable to pay the same. Source: Das, K.S. (1998),
Wage policy issues in the informal sector, The Indian Journal of Labour Economics, V
41(4), p 896. Minimum wage legislation is the main labour legislation for the

workers in unorganized sector. In India, the policy on wage determination had been
to fix minimum wages in sweating employments and to promote fair wage
agreements in the more organised industries. Wages in the organised sector are
determined through negotiations and settlements between employer and
employees. On the other hand, in unorganised sector, where labour is vulnerable to
exploitation due to illiteracy and does not have effective bargaining power, the
intervention of the government becomes necessary. The Minimum Wage Act, 1948
provides for fixation and enforcement of minimum wages in respect of schedule
employments to prevent sweating or exploitation of labour through payment of low
wages. The objective of the Act is to ensure a minimum subsistence wage for
workers. The Act requires the appropriate government to fix minimum rates of
wages in respect of employment specified in the schedule and review and revise the
minimum rates of wages at intervals not exceeding five years. Once a minimum
wage is fixed according to the provisions of the Act, it is not open to the employer to
plead his inability to pay the said wages to his employees. 4 The minimum wage
rate may be fixed at a) time rate, b) piece rate, c) guaranteed time rate and d)
overtime rate. The Act provides that different minimum wage rate may be fixed for
a) different scheduled employments, b) different works in the same employment, c)
adult, adolescent and children, d) different locations or e) male and female. Also,
such minimum wage may be fixed by a) an hour, b) day, c) month, or d) any other
period as may be prescribed by the notified authority. In order to protect the
minimum wages against inflation, the concept of linking it to the rise in the
consumer price index was recommended at the labour ministers' conference in
1988. Since then, the concept of Variable Dearness Allowance (VDA)5 linked to
consumer price index has been introduced. The VDA is revised twice a year in April
and October. While the Centre has already made provision in respect of all
scheduled employments in the central sphere, 22 states and Union Territories have
adopted VDA as a component of minimum wage. 2. Norms for fixing minimum
wages The fixation of minimum wage in India, depends upon various factors like
socioeconomic and agro-climatic conditions, prices of essential commodities, paying
capacity and the local factors influencing the wage rate. It is for this reason that the
minimum wages vary across the country. In the absence of any criteria stipulated
for fixing the minimum wage in the Minimum Wages Act, the Indian Labour
Conference in 1957 had said that the following norms should be taken into account
while fixing the minimum wage. The norms for fixing minimum wage rate are (a)
three consumption units per earner, (b) minimum food requirement of 2700 calories
per average Indian adult, (c) cloth requirement of 72 yards per annum per family,
(d) rent corresponding to the minimum area provided under the government's
Industrial Housing Scheme and (e) fuel, lighting and other miscellaneous items of
expenditure to constitute 20 per cent of the total minimum wage (f) Fuel, lighting
and other miscellaneous items of expenditure to constitute 5 While fixing or revising
Minimum Wages, Dearness Allowance (D.A) linked to cost of living index called
Variable Dearness Allowance (V.D.A), in addition to basic wages so as to neutralise
the cost of living. 5 20% of the total Minimum Wages, (g) children education,

medical requirement, minimum recreation including festivals/ceremonies and

provision for old age, marriage etc. should further constitute 25% of the total
minimum wage. 6 In September 2007, the national minimum floor level wage7 was
increased to Rs 80 per day for all scheduled employments from Rs 66 in 2004 to Rs.
45 in 1999, Rs. 40 in 1998 and Rs. 35 in 1996. 3. Issues in Wage Policy Minimum
wages are expected to cover the essential current costs of accommodation, food
and clothing of a small family. The Minimum Wage Act, while being very progressive
has led to specific problems. Doubts have been raised on the existence of a clear
and coherent wage policy in India particularly in unorganized sector. This is mainly
due to its poor norms of fixation, enforcement, implementation and coverage in
various parts of the country. Some of the issues and concerns faced in India
regarding minimum wages are summarized below: a. Norms for fixing minim wages
The Act does not set out a minimum wage in rupee terms, but just stipulates that
the wage be a living wage8 which is to be decided by labour department in each
state. Certain norms have been laid out including that of calorie requirements, yards
of cloth per family and so on. The Act also stipulates that minimum wage rates are
to be revised keeping in mind inflation. Additionally, the guidelines laid down for the
minimum wage by the 15th Indian Labour Conference (ILC) and the Supreme Court
suggest that a minimum wage for 8 hours of work should be high enough to cover
all the basic needs of the worker, his/her spouse and two children. However, in
many states while fixing the minimum wages, they are not linked to the payment of
6 http://labour.nic.in/wagecell/welcome.html 7 The national minimum floor level
wage represents the lowest level of wage for any employment in the country. The
wage rate is applicable to all employments which are currently not covered under
the Minimum Wage Act. The State Government has to ensure that the minimum
wage fixed under MWA is not lower than the national minimum wage rate. 8 A
"living wage" is the level of income sufficient to allow workers to support their
families. 6 dearness allowance. As a result, real wages of workers keep eroding due
to inflation, pushing them below the poverty line. Another inadequacy is that though
the MWA requires wages to be revised every five years, this rarely happens. The
MWA also has a clause which states that if wages are not revised, the existing
wages should continue. Such an arrangement has only led to greater laziness and
unaccountability on the part of state labour departments, leaving some workers to
live below poverty line. Further to overcome these inadequacies, the National
Commission on Rural Labour in 1990, recommended that the MWA should be
amended to compel timely revision of wages and it should be linked to VDA. It
should also ensure enhancement of wages every six months on the basis of the
Consumer Price Index. How far the amendment has been implemented in states is
unknown. (For example, states like Rajasthan, Orissa etc. do not have provision for
VDA). Different wages are fixed for the same work in different sectors. For instance,
a watchman in the shop or commercial establishment may be fixed higher or lower
wages than a watchman in the plastic industry or in a construction or maintenance
of roads or building operations, though a watchmans job will be the same wherever
he may work. To overcome these deficiencies, several states like Himachal Pradesh,

West Bangal, Andhra Pradesh, etc., have rationalised all the different occupation
categories into just four categories - unskilled, semi-skilled, skilled and highlyskilled. As per this system, only one notification is applicable to all industries, rather
than the time-consuming system of notifying wages individually for various
industries. Though the system gives a clear and detailed information of minimum
wages, it has not been adopted by all states, including the Indian Labour Ministry
website, which gives the minimum rate of wage (that is wages for unskilled workers)
for each occupation. b. Coverage In order to have minimum wage fixed, the
employment or industrial activity has to be included in the schedule of
Employments. Currently the number of scheduled 7 employments in the Central
government is 45 whereas in the state sphere the number is 1232. The criterion for
inclusion in the list of scheduled employment is that there should be at least 1000
workers engaged in that activity in the state. Thus, many activities are excluded
from the list. This criterion for inclusion has left a very large number of workers in
the unorganised sector outside the purview of the Minimum Wage Act. c.
Implementation The main problem of minimum wage legislation in India is its poor
implementation. The Act empowers the appropriate government (Central, Sate or
Local) to fix a minimum wage for workers in unorganised sectors. However, often
exemptions from the payment of minimum wages have been granted to industries.
In addition, minimum wage levels have been revised only at long intervals (where
the actual prescribed limit is within 5 years). Such a failure in implementation of
MWA is not only due to loopholes in policy design but is also an outcome of lapses in
the administration. Poor implementation of MWA does not affect organised workers
as much as it does to workers in unorganized sectors. Unorganised workers are
employed with millions of employers (generally small trade, enterprise, sole
proprietor or household) who are scattered and hence becomes difficult to cover
them under law. This diversity in locations and nature of work has left them
vulnerable to exploitation in the absence of a broad legal standard. Also, many
workers for the fear of losing their jobs do not report about payments lower than the
minimum wage rate. At times, these workers are even forced by their employers to
certify payments below minimum wages. d. Enforcement Poor enforcement of the
Act is another issue prevalent in most of the states in India. The issue arises mainly
due to lack of awareness amongst the workers about minimum wage provisions and
their entitlement under the labour laws. Surveys have shown that almost 80 per
cent of the workers in unorganized sector earn less than 20 8 rupees a day, or less
than half the government-stipulated rural minimum wage of 49 rupees a day and
urban wage of 67 rupees9 . This is particularly true in remote areas and in areas
where workers are not unionized or otherwise organised. As a result their wages
have long since failed to keep pace with rising costs and continue to diminish in real
value over time. 4. Need for meaningful minimum wage policy In spite of vast
number of workers in unorganized sector, and their substantial contribution to the
national economy, they are amongst the poorest sections of Indias population. It is
therefore imperative that urgent steps are taken to improve their condition.
Infrequent revisions and inadequate cost of living adjustments have been a marked

feature of minimum wages in India. The rates of minimum wages so fixed in few
states, is not enough even for two times meal in a day, leave aside the needs of
health, education and shelter. In specific terms, the issues and problems of the
wage policy in both organised and unorganised sector, relate to the elements like
need based minimum wage, protection of the real wages through compensation for
rise in the cost of living, incentives for increases in productivity, allowances for
hazards of occupation, wage differentials for skills, etc. The main objective to be
considered while fixing or revising the minimum wage rate should be two fold - 1)
Social objective: that is, by providing sufficient purchasing power to the worker,
enable him/her to have a basic standard of living. In long run such a step would help
in abolishing labour exploitation and poverty. 2) Economic objective: The rate of
minimum wage should be fixed at such a level which would motivate workers and
enable them to enjoy the benefits of economic growth, and thereby contribute to
the economy.10 For example, the Sixth Central Pay Commission (CPC) has fixed the
minimum wage of Central Government employees at Rs 5740. The first four scales
of pay suggested by the Fifth CPC for the Group D Employees of the government
have now been removed, under the Sixth CPC. The existing employees in these
grades are to be moved to Group C cadres through a process of 9 March 11, 2008,
Rising labour concerns for Indian government, Business Standard. 10
http://www.amrc.org.hk 9 training thereby indicating that the unskilled functions in
the governmental sector would be contracted or outsourced. Two major and recent
initiatives for providing social security to the workers in the informal sector have
been passed in the parliament; a) the National Rural Employment Guarantee (NREG)
Act 2005 and, b) the Social Security for Unorganised (Informal) Sector Workers. The
National Rural Employment Guarantee (NREG) Act 2005 is meant for the working
poor in villages to take care of the problem of underemployment and thus to
enhance their income that would make them less poor or cross the officially
determined poverty line. It entitles adult citizens in rural areas to seek work up to
100 days per household per year. With the implementation of National Rural
Employment Guarantee Scheme, hopes are raised for meeting basic needs of
workers in unorganised sector, by earning minimum wages at least. On the other
hand, Social Security scheme covers health (hospitalisation for self and family) and
maternity, life and disability and old age security in the form of state pension for
those belonging to poor households and a provident fund for others. The scheme is
based on contributions from workers, employers and government in the ratio of
1:1:1. 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 to determine minimum wage rate on the basis of
ethical and humanitarian concerns in order to ensure basic subsistence to workers
in unorganized sectors. Implementation of government policies and legislations is
the main problem in the unorganized sector. Also, low productivity in unorganised
sectors, limitation of avenues for gainful employment, lack of organisation on the
part of workers, affects their bargaining capacity, accounting for their vulnerable
situation. Hence, involvement of non government organizations and trade unions

can play an important role in better enforcement of minimum wages act. For
example, Self Employed Women Association (SEWA) in Ahmedabad. 10 SEWA is the
7th largest trade union organisation in India working towards organising women
workers (mainly in informal sector) for full employment, which means employment
whereby workers obtain work security, income security, food security and social
security (at least health care, child care and shelter). SEWA has been organising
workers in the dyeing, chemical and screen-printing industry, agarbatti rollers,
ragpickers, street vendors, etc for many years now. Involvement of such
organisations gives a voice to workers in unorganised sectors in collective
bargaining. Ignorance and illiteracy are the main reasons for exploitation of workers
in unorganized 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. Also, minimum wage data is not readily available. Only limited
official data is available from national labour ministry website which may or may not
be updated on regularly basis. The information available does not permit extensive
comparison on wages in formal and informal sector due to different formats of
reporting or recording of wage rate in each state. Minimum Wage Checker on
Paycheck website provides the information on minimum wages in each Indian state.
The minimum wage data collected from labour department in each state is
uploaded on the website in a detailed format enabling inter-state comparison easy.
The need of the hour is not only to increase the basic rates of minimum wages but
the basic approach towards the whole issue also needs to be changed. The
prevailing system of minimum wages, instead of abolishing the poverty, is in fact
increasing it. Initiatives like strengthening the enforcement machinery, simplifying
the procedure relating to coverage and revisions of minimum wage rate, linking the
rates with the Consumer Price Index Numbers (CPI), and increasing the involvement
of various workers' organisations in the implementation of the Minimum Wages Act,
are some of the steps advocated to improve the situation. 11 Annexure Unorganised
sector in India According to reports, 422.6 (94%) million workers out of the total
workforce of 457.5 million belong to the unorganised sector in India. These workers
contribute to more than 60 per cent to Indias GDP growth. The term unorganised'
is often used in the Indian context to refer to the vast numbers of women and men
engaged in different forms of employment. These workers are engaged in
unorganized economic activities in small scale industries, cottage industries,
construction, manufacturing units, textile and garment, horticulture, agriculture,
rural occupations, forest based employments, fisheries, sweeping-cleaning, loadingunloading, mining, forestry, service sector, entertainment, temporaries, home
workers, domestic servants, time rated or piece rated, casuals, part time workers,
own account workers, and contractual workers. Unorganised sector work is often
characterised by low wages that are often insufficient to meet minimum living
standards including nutrition, long working hours, hazardous working conditions,
lack of basic services such as drinking water and sanitation at the worksite, etc. In
India, workers in informal sector are distinguished from the workers in formal
sectors in the following way: a) in the organised sector activities are regulated by

legislation, while that in unorganised sector are not well regulated and b) workers in
the organised sector are covered under social security legislations, while they do
not cover the unorganised sector. As a rule of thumb the demarcation line between
organized and unorganized enterprises is at 10 employees. Unorganised sector
workers are mostly employed in rural jobs and are increasingly migrating to the
cities. Being migrant and casual in nature, they often remain outside the purview of
India's tough labour laws and the collective bargaining strength of the unions.
Workers engaged in the unorganised sector do not have the benefit of several laws
such as the Minimum Wages Act or the Factories Act. They are also not covered by
statutory welfare measures such as maternity benefits, provident fund, gratuity, etc.