Procedure FOR FIXATION OF

MINIMUM WAGES: Present

challenges

LABOUR LAW II

SUBMITTED TO-: SUBMITTED BY-:

MS. RICHA SRIVASTAVA SOUMYA PADHI

(Assistant Professor) 12617703516

VIVEKANANDA SCHOOL OF LAW AND LEGAL STUDIES

VIPS

DELHI

2020
 DECLARATION

I, Soumya Padhi, a student of Vivekananda institute of professional studies, hereby declare that
this research paper and the work described in it are my own work. Information derived from the
published or unpublished work of others has been acknowledged in the text and a list of
references is given.

Date- 29/03/2020 Ms. Soumya Padhi

Place: Delhi
 ACKNOWLEDGEMENT
In course of the preparation of the research paper, I received generous help from different
individuals with academic and non-academic pursuits. Drawing a line of distinction among them
to distinction among them to distinguish individual contributions appears to me a difficult task
because there remains possibility of omissions as well as comparisons. However, while
acknowledging the help of few of them, I do not intend to depreciate or ignore the invaluable
contributions of others and respectfully acknowledge their help.

I express my sincere thanks to Prof. Richa Srivastava, Vivekananda School of Law and Legal
Studies, for their kind help and valuable suggestions.

I convey my special thanks to Mr. Mukesh Sachdeva (Librarian), Vivekananda institute of

Professional Studies, Delhi for his continuous guidance and for permitting me to use the
Vivekananda institute of Professional Studies library resources.

I express my gratitude to my Guardian and Advisor Advocate Savita Nawariya for rendering
active assistance and encouragement.

Lastly, but most importantly, I would like to acknowledge the assistance of Staff of Vivekananda
institute of Professional Studies, my friends and colleagues.
 LIST OF CASES

 Crown Aluminium Workers v. Their Workmen AIR 1958 SC 30

 Express Newspaper Pvt. Ltd. v. UOI AIR 1958 SC 578
 Hydro Engineers Pvt. Ltd. v. Workmen AIR 1969 SC 182.
 Kamini metals and alloy pvt ltd. v their workmen AIR 1967 SC 1175
 S.A.F.L Works v. State Industrial Court, Nagpur AIR 1978 SC 1113
 Standard Vaccum Refining Co. of India v. Its Workmen AIR 1961 SC 895
 U. Unichoy v. State of Kerala AIR 1962 SC 12
 Workmen v. Management of Raptakos Brett & Co AIR 1992 SC 504
 ABBREVIATIONS

AIR : All India Reporter

Co. : Company
Edn. : Edition
Govt. : Government
Id. : idem
Inc. : Incorporated
Ltd. : Limited
PC : Privy Council
Pvt. : Private
SC : Supreme Court.
SCC : Supreme Court Cases.
Sec. : Section
UOI : Union of India
 DETAILED CONTENT

1. Introduction
2. Research methodology
2.1. Research Problem
2.2. Hypothesis
2.3. Review of Literature
2.4. Objective
3. What is fixation of Minimum Wages
3.1. Fixation of Minimum Wages
3.2. Procedure for Fixation of Minimum Wages
3.3. Concept of Minimum Wages
4. Present Challenges in Procedure for fixation of Minimum Wages
5. Judicial Approach
6. Conclusion and Suggestion
7. Bibliography
1. INTRODUCTION
Minimum Wages Act 1948 came into force in India when India had recently gained its freedom.
Labor laws made by the Britishers were exploitative in nature. Wages were low and different in
every part of the country. The Minimum Wages Ad, 1948 [herein after referred to as the Act]
aims at making provision for the statutory fixation of minimum rates wages in a number of
industries wherein ‘sweated labour’1 is most prevalent or where there is a big chance of
exploitation of labour. The Minimum Wages Act was passed in 1948 and it came into force on
15th March, 1948. The National Commission on Labour has described the passing of the Act as
landmark in the history of labour legislation in the country. The Minimum Wages Act, 1948
(herein after referred as the Act), which covers a number of employments, both industrial and
agricultural, applies not only to regular employees but also to causal labour 2 The Central and
State Governments are empowered to fix and revise the minimum rates of wages in the
scheduled employments from time to time under the Act3.

In View of the fact that Workers in developing countries like India with a high rate of
unemployment can be exploited by employers because of their exiting low bargaining power. In
such a circumstances, the worker may receive wages that is much below the expected level and
can result in the inability of the workers to meet his daily needs. The Act does not define the
concept of minimum wages; nor does it provide any criteria for determination of minimum
wage, but only defines the term ‘wages’ in general. While it is easy to make the case for
minimum wages in India on the basis of the fact that majority of workers are exploited due to
their unorganized nature and weak bargaining power, there is much difficulty in fixing the
minimum wages under the Act. According to its preamble the Minimum Wages Act, 1948, is an
Act to provide for fixing minimum rates of wages in certain employments. The employments
are those which are included in the schedule and are referred to as ‘Scheduled Employments’.
The Act extends to whole of India.

1
The Select Committee of the House of Lords, “The 5 th Report on Sweating System”
2
Sea 2 (i) of the Minimum Wages Act, 1948.
3
Id. at Sec. 3 (1)
 The basic idea behind the formulation of the Minimum Wages Act, 1948 was:

 to ensure that the employee can have the basic physical needs, good health and a level of
comfort
 To ensure a secure and adequate living wage for all laborers in the interest of the public.
 To ensure that the employee has enough to provide for his family.
 Ensuring a decent life standard that pertains to the social comfort of the employee.

Although the Minimum Wages Act, 1948 recognizes the argument for providing minimum
protections to the workers, it does not itself set a minimum wage for all works/occupations,
leaving it to the states for fixing occupation-specific wages. This has led to anomalies which is
evident by the sharp variation in wages among the different states and between the two genders
in the country.

2. RESEARCH METHODOLGY
2.1. RESEARCH PROBLEM
-The Minimum Wages Act of 1948 did not prescribe any principle for the guidance of
wage fixing bodies. What should be the principal of wage fixing bodies.
- There is Multiplicity of minimum wage rates across Centre and States, and across
occupations. Whether the minimum wages should be uniform.
2.2. HYPOTHESIS
 The Act did not prescribe any principal for guidance of wage fixing bodies
which resulted in creation of committees and also opportunity to interpret it were
given to courts which formed various concept under wages.
 The fixation of minimum wage in India, depends upon various factors like socio-
economic conditions and this is reason the minimum wages vary across the
country.

2.3. OBJECTIVE

Though it is believed that minimum wages reduce poverty in developed countries but it is
not the case in developing countries. The Minimum Wage Act, 1948 provides for fixation
 and enforcement of minimum wages in respect schedule employments to prevent
sweating or exploitation of labour through payment of low wages.

The present research will focus with the following objectives:

- To understand concept of procedure of fixation of minimum wages under the Act.

- To understand the different concept of wages under the Act
- To discuss cases under this topic
- To understand the present challenges in fixation of minimum wages.

2.4. REVIEW OF LITERATURE

The review of literature is an essential aspect of the planning of a research study. The
objective of the review of related literature is to justify the rationale of an ensuing study.
It provides an overview of historical perspective, development, new departures or
research in that area and also suggests methods of research appropriate to the problem
under investigation. The review of related disciplines relevant to the present study,
carried out in different disciplines by different researchers, has been examined here.
 Prof. BijuVarkkey and Khushi4 in his book wrote about minimum wages that In
many States while fixing the minimum wages, they are not linked to the payment
of dearness allowance. As a result, real wages of workers keep eroding due to
inflation, pushing them below the poverty line.
 Dr. Shanta A. Vaidya5 wrote that The definition of minimum wages got further
refined by the 15th Indian Labour Conference which laid down the norms for
fixing need based minimum wages to include: a standard working class family to
comprise of three consumption units i.e. wife and two children apart from the
earning worker, net intake of 2700 calories per day per consumption unit, per
capita consumption of 18 yards per year, minimum housing rent charged by the
government for low income groups, fuel, lighting and other miscellaneous items
of expenditure to constitute 20 per cent of minimum wage. But these norms were
criticised as being too idealistic giving little consideration to the capacity of the

4
Minimum wages: Issues and Concerns, Journal of Indian Institute of Management, Ahmedabad.
5
Minimum Wages in India Concepts and Practices,14 Global Journals Inc. (USA), (2014)
 industry to pay and the standard of living of other similar groups of people in the
community.
 Dr. V. G. Goswami6 have written in a detailed way the whole of minimum wages
Act , what is minimum wage and its concept and related topic.

3. WHAT IS FIXATION OF MINIMUM WAGES

3.1. FIXATION OF MINIMUM WAGES
The Minimum Wages Act, 1948 is an Act of Parliament concerning Indian labour law
that sets the minimum wages that must be paid to the skilled and unskilled labours. Sec
2(h)7 of the Act defines the term as to what “wages” is and what includes and does not
includes in this term. The Act does not specifically provides as to what is minimum
wages and principal to the wage committee to set it.

3.2. PROCEDURE FOR FIXATION OF MINIMUM WAGES

Section 3 of the Act provides that the appropriate Government may fix the minimum
rates of wages payable to employees employed in an employment specified in Part – I or
Part – II of the Schedule and in an employment subsequently added to the Schedule. The
Government may review the minimum rates of wages and revise the minimum rates at
intervals not exceeding five years.
Appropriate Government may fix separate minimum rates of wages for time rate and for
piece rate. Different wage rates may be fixed for different scheduled employments,
different classes of work in the same scheduled employment, for adults, adolescents,
children and apprentices and for different localities and for any one or more of the wage
periods, viz., by the hour or by the day or by the month or by such larger wage period as
may be prescribed.
Sec. 4 deals with the rates of wage fixed and revised by appropriate govt. in respect of
scheduled employment consist of the:
 Any minimum rate of wages fixed or revised may consist of a basic rate of
wages and a special allowance ; or

6
Central Law Agency, Allahabad, 8th Edn. – 2004
7
Minimum Wages Act, 1948
 A basic rate of wages with or without cost of living index and the cash value of
concessions in respect of supplies of essential commodities at concessional rates;
or
 An all-inclusive rate allowing for the basic rate, the cost of living allowance and
the cash value of concessions, if any.

Procedure for Fixing And Revising Minimum Wages (Sec. 5)

In fixing minimum rates of wages in respect of any scheduled employment for the
first time or in revising minimum rates of wages, the appropriate Government can
follow either of the two methods which are as follow -:

 This method is known as the ‘Committee Method’. [Section 5(1)(a)]

The appropriate Govt. may appoint as many committees and sub-committees as it

considers necessary to hold inquiries and advise it in respect of such fixation or
revision as the case may be. After considering the advice of the committee or
committees, the appropriate Govt. shall, by notification in the Official Gazette fix or
revise the minimum rates of wages. The wage rates shall come into force from such
date as may be specified in the notification. If no date is specified, wage rates shall
come into force on the expiry of three months from the date of the issue of the
notification.

Composition of committee which is nominated by appropriate government is given

in Section 9 of the Act.

 [Section 5(1)(b)] The method is known as ‘Notification Method’.

The appropriate government publishes proposals in the official gazette to inform

the persons who may be affected.

The notification specifies a date that is at least two months away from the date of
the notification. This is the date on which the proposals will be due for
consideration. Before publishing these notifications, the government consults
various committees and sub-committees.
 3.3. CONCEPT OF MINIMUM WAGES
In the Indian context, soon after the independence, Government of India set up a
Committee on Fair Wages in 1948 which has defined various concepts of wages
which govern the wage structure in the country specially in those sectors which can
be termed as underpaid and where workers do not have bargaining power through
unions. The Fair Wages Committee’s Report published by the Government of India in
1949 has been broadly approved by the SC in Express Newspaper Pvt. Ltd. v. UOI8
and Standard Vaccum Refining Co. of India v. Its Workmen 9 and gave these
concepts as: minimum wage, living wage, and fair wage. Later, the concept of need-
based minimum wage was added. Let us have a brief look at these concepts10.
 Living wage-: A living wage is one which should enable the earner to
provide for himself and his family not only the bare essentials of food,
clothing and shelter but a measure of frugal comfort including education for
his children, protection against ill-health, requirements of essential social
needs and a measure of insurance against the more important misfortunes
including old age. 
 Fair Wage: Fair wage is the wage which is above the minimum wage but
below the living wage. The lower limit of the fair wage is obviously the
minimum wage: the upper limit is to be set by the capacity of the industry to
pay.
The fair wage depends on considerations of such factors as:
(i) The productivity of labour,
(ii) The prevailing rates of wages in the same or neighbouring localities,
(iii) The level of the national income and its distribution, and
(iv) The place of the industry in the economy of the country.
Industry cum region Formula: If there are a large number of industries in the
same region carrying on the same business and the wages should be generally
fixed on the basis of the comparable industries of the same kind.

8
AIR 1958 SC 578
9
AIR 1961 SC 895
10
Kamini metals and alloy pvt ltd. vs their workmen AIR 1967 SC 1175
 In case of Kamini Metals and Alloys Ltd. vs. Their workman11 the court
observed that Minimum wages is at the bottom of the different categories of
the minimum wages. Minimum wages set the lowest limit below which
wages cannot be allowed to sink in all humanity. Minimum wages are
determined on the cost of living and the normal or reasonable needs of the
worker and his family. The minimum wage principle has no reference either
to the value of the work done by the worker or the capacity of the industry to
pay. The minimum wages are paid irrespective of the extent of profits,
financial conditions or the availability of workmen at a lower wage.
 Statutory Minimum Wage: Minimum wage is the wage which must
provide not only for the bare sustenance of life, but for the preservation of
the efficiency of the workers. For this purpose, minimum wage must provide
some measure of education, medical requirements and amenities.
 Need-Based Minimum Wage:The Indian Labour Conference in its 15th
session held in July 1957 suggested that minimum wage should be need
based and should ensure the minimum human needs of the industrial worker,
irrespective of any other consideration.The need-based minimum wage is
calculated on the following bases:
(i) The standard working class family should be taken to consist of 3
consumption units for the earner; the earnings of women, children and
adolescents should be disregarded.
(ii) The minimum food requirements should be calculated on the basis of the
net intake of 2 700 calories, as recommended by Dr. Akroyd, for an average
Indian adult of moderate activity.
(iii) The clothing requirements should be estimated at a per capita
consumption of 18 yards per annum which would mean an average worker’s
family of 4, a total of 72 yards.
(iv) In respect of housing, the norms should be the minimum rent charged by
the Government in any area for houses provided under the Subsidized
Housing Scheme for low income groups.

11
AIR 1967, SC 1175
 (v) Fuel, lighting and other miscellaneous items of expenditure should
constitute 20 per cent of the total minimum wage.
In U. Unichoy v. State of Kerala12 the Supreme Court held that, "in fixing
minimum wage, capacity of management to pay is not a consideration.

4. PRESENT CHALLENGES IN PROCEDURE FOR FIXIATION OF MINIMUM

WAGES

1. Multiplicity of minimum wage rates: For the most common occupation, say
agriculture, 33 States/UTs have reported different rates, wherein Delhi has the
highest minimum wage of Rs.279 and the Union Territory of Puducherry
(Yamuna region) the lowest wage of Rs.5513. As a result there is divergence in
minimum wages within a State like in the State of Andhra Pradesh, the lowest
minimum wage fixed is Rs.69.27 and the highest minimum wage fixed is
Rs.298.59.
2. Applies only to scheduled criterion: The criterion for inclusion in the list of
scheduled employments viz. more than 1000 workers in a State has resulted in
exclusion of many activities from the list and huge number of workers from the
purview of the Minimum Wages Act. As per World of Work Report 2013 only
about 60 per cent of the wage earners, excluding public-sector workers, were
covered by minimum wage legislation in India in the mid-2000s.
3. Lack of awareness: The Minimum Wages Act among employers and workers is
also an issue which has been highlighted in the Evaluation Studies on
Implementation of the Minimum Wages Act 14. On the other hand despite being
aware about the minimum wages the willingness of workers to accept lower
wages is influenced by other compelling factors such as weak bargaining power,
the rural push induced by conditions of drought, non-availability of work, loss of
income yielding assets, indebtedness etc.
12
AIR 1962 SC 12.
13
Institute of Applied Manpower Research, “Report on the Working of the Minimum Wages Act, 1948 for the year
2012”
14
the Ministry of Labour & Employment, “In the Evaluation Study on the Implementation of Minimum Wages Act,
1948 in Stone Breaking & Stone Crushing Industry in Karnataka 2007-08 among the units surveyed only 30 per cent
of the units and 8 per cent workers reported awareness about the Act”.
 4. Compliance rate to the Minimum Wages Act is very low due to poor
implementation including exemptions provided under the Act.
5. Penalties for non- compliance are very low. They need to be high to dissuade
employer to contravene the provisions of the Act. Also the procedure for
imposing the penalty is cumbersome.

5. JUDICIAL APPROACH
The Act fails to give any test to determine minimum wages of a work. This leaves the
court with the duty to decide as to what is minimum level of wage that should be given to
a workmen.
In case of Workmen v Management of Raptakos Brett & Co. 15 and observed: The
concept of 'minimum wages’ is no longer the same as it was in 1936. Even 1957 is way
behind. A worker's wage is no longer a contract between an employer and an employee.
It has the force of collective bargaining under the labour laws. Each category of the wage
structure has to be tested at the anvil of social justice which is the live fibre of our society
today. Keeping in view the socio-economic aspect of the wage structure, we are of the
view that it is necessary to add the following additional component as a guide for fixing
the minimum wage in the industry.
In S.A.F.L Works v. State Industrial Court, Nagpur16, the Supreme Court enunciated
the following principle in determining the financial capacity pf the employer in order to
determine the fair wage as the Supreme Court in this case held as follows:
In order to determine the fair wage including the scale of pay, the price rise, the dearness
allowance, etc., the financial capacity of the concern has to be determined. A close
working of the concern has to be made. The profit and loss account, the prospects of the
company improving itself in future and all other relevant matters will have to be taken
into account. The expenses properly incurred for working the industry such as buying the
raw material, expenses incurred in running the factory, office and other transport
expenses incurred in marketing and other such allowable expenditure has to be deducted.
It is not correct to say that the gross profit alone has to be taken into account. Equally it is

15
AIR 1992 SC 504
16
AIR 1978 SC 1113
 wrong to say that net profits alone should be the basis of determining the financial
capacity.
As the Supreme Court in Hydro Engineers Pvt. Ltd. v. Workmen17, held that "the
minimum wages should provide not merely for the bare subsistence of his life but for the
preservation of worker and so must provide for some measure of education, medical
requirement and amenities.
Similarly, in Crown Aluminium Workers v. Their Workmen18 , the Supreme Court
holds that "if an employer cannot maintain his enterprise without cutting down the wages
of his employees below even a bare subsistence or minimum wages, he would have no
right to conduct his enterprise on such terms.

6. CONCLUSION AND SUGGESTION

It cannot be concluded that ‘despite the best of intentions, the minimum wage has proved an
ineffective-and often counter productive policy in the war on poverty. In India though many
policy improvements were made in the Minimum Wages its effect on raising the average daily
wages of the unskilled workers is yet to set in. The need of the hour is to fix the basic
minimum wage especially for low skilled activities like agriculture, domestic work, stone
crushing etc compatible with the living wage of the respective State/ Union Territory so that
the workers earning minimum wage are able to lead a decent life.
The latest amendment to the Minimum Wages Act which is yet to come out as a legislation
viz; making the National Floor Level Minimum Wage statutory, extension of the Minimum
Wages Act to all employments irrespective of the size of the workforce in that employment;
inter alia are some of the outstanding amendments that could bring about a remarkable change
in the implementation of the Minimum Wages Act in India.
The fixation of minimum wage in India, depends upon various factors like socio economic 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.
The Study Group on Wages, Incomes and Prices (1978) attempted to quantify a ‘National
Minimum Wage’ thereby laying down the lowest limit of minimum wage, which will be

17
AIR 1969 SC 182.
18
AIR 1958 SC 30
 uniform all over the country19. The penalties for contravention need to be hiked for better
compliance.
In addition what is also essential is awareness creation among the employers and most
importantly the labour force about the statutorily determined reward for ‘sweated labour.

Bibliography
19
Govt. of India, “ Bhootlingam Committee Report on minimum wages Act” 1967
PRIMARY SOURCES

 Bhootlingam Committee Report on minimum wages Act (1967)

 Institute of Applied Manpower Research Report
 The Ministry of Labour & Employment Report
 Select Committee of the House of Lords

SECONDARY SOURCES

 Dr. Goswami V.G Labour & Industrial Laws

 Dr. Vaidya Shanta A., “Minimum Wages in India Concepts and Practices,14 Global
Journals Inc. (USA), (2014)”
 Prof. Varkkey Biju and Khushi, “Minimum wages: Issues and Concerns, Journal of
Indian Institute of Management, Ahmedabad.”