Types of Wages in India

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This article is authored by Kirti Bhushan, a student of Campus Law Centre, University of Delhi. The article explains the various sort of wages prevalent in India. The Minimum Wages Act, 1948 governs the provisions related to the minimum wages in India which have been brought into effect by the Government of India due to the duty conferred on it by the Constitution of India, 1950.

INTRODUCTION

According to Merriam-Webster, wage is “a payment usually of money for labour or services; usually according to contract and on an hourly, daily, or piecework basis.”

“Wage is a remuneration to labour for the work done or the service rendered by it to the employer. Of all the problems that face the worker that of wage is the most vital and important to him.” 

Thus, a wage is a monetary employee compensation paid by an employer to an employee in exchange for the work done by such an employee. It can be fixed on hourly basis as well as collectively based on quantity of work or task done.

Difference between wages and salary: Wages are generally associated with the employee compensation which is based on multiplication of an hourly rate of pay with total number of hours worked. Usually, it is paid daily or weekly.

Salary, on the other hand, is also associated with employee compensation but it is based or quoted on an annual basis. Usually, it is paid on a semi-monthly or monthly basis.

Definition under the Minimum Wages Act, 1948: According to Section 2(h) of the Minimum wages Act, 1948 the term ‘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-

(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 special order of the appropriate government;

(ii) any contribution paid by the employer to any person fund or provident fund or under any scheme of social insurance;

(iii) any traveling allowance or the value of any traveling 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.”

Variation in Wages

The various differences existent in wages rate or level is known as variation in wages. There are various wage varieties resulting due to political, behavioural, ethical, social and economic factors on which wage levels depend. The three types of variations or wage varieties in wage rates are:

  1. Regional variation which depicts the difference in wages in different regions of same industry as it might be due to demand and supply of the workers or standard of living etc.
  2. Time Variation implies the change in wage rates during various times such as inflationary or depression period going on in the country etc.
  3. Industrial Variation indicates that one industry may be paying differently to workers working in same industry and same kind of work i.e. Wages may differ from industry to industry depending upon nature of work, demand and supply of labour, working conditions in the industry etc.

Types of Wages in India

There are three main types of wages in India viz. Living, Minimum and Fair wages. The concept of living wages, fair wages and minimum wages was formulated by The Fair Wages Committee when its report got published by the Government of India in 1949. These are explained below:

1. Living Wages

The wages which sufficiently serve the need of certain basic facilities as well as other needs of the employee and his family according to their social status are termed as Living wages. They are usually sufficient for the betterment of the employee. The term ‘living wages’ is not defined in the Minimum Wages Act, 1948.

According to the Committee on Fair Wage, “The living wage, represented the higher level of wage and, naturally, it would include all amenities which a citizen living in modern civilized society is entitled to when the economy of the country is sufficiently advanced and the employer is able to meet the expending aspirations of his workers. As the traditional doctrine interprets it, living wages as is ‘a will’ the wish which floats a little further ahead an arm’s length out of reach. Its pursuit belongs to the same category as ‘sparing the circle.’”

In All India Reserve Bank Employee Association vs. Reserve Bank of India, Hidayatullah J. remarked: “Our political aim is ‘living wage’ though in actual practice living wage has been an ideal which has eluded our efforts like an ever-receding horizon and will so remain for some time to come. Our general wage structure has at best reached the lower levels of fair wage though some employers are paying higher wage than the general average”.

Article 43 of the Constitution of India, 1950 confers a duty on the state to secure by suitable legislation or economic organisation 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.

Thus, to put it briefly, living wages need to be sufficient for some other leisure activities in addition to food, clothing and shelter which are the basic necessities of man. This other leisure or comfort needs generally include education for children, treatment during ill-health, the requirement of essential social needs and measures of insurance against old age etc.

2. Minimum Wages

The term Minimum Wage(s) has not been defined in the Minimum Wages Act, 1948. The minimum wage is the lowest wage in the scale. Below the minimum wage, the efficiency of the worker is at stake. It includes the simple physical necessities of the worker as well as some comfort such as the conventional necessities as otherwise, any wage below it will necessarily need to depletion of the efficiency of the worker. Thus, the minimum wage must take note of some basic measure of education, medical requirements, and amenities of the worker and his family.

Any employer who cannot or is unable to pay the minimum wage to his employee has no right to exist as the same will come under the purview of  ‘forced labour’ within the meaning of Article 23 of the Constitution of India, 1950 and therefore, entitles the person to invoke Article 32 or Article 226 of the Constitution of India, 1950 to get a legal redress against such employer. Thus, an employer has to at least give minimum wages to its workers or employees to continue its existence in the industry.

It is to be noted here that the notion of minimum wages should be dynamic and requires to be keep changing with time and standard of living of people as well as other socio-economic and political changes taking place.

3. Fair wages

Fair wage is something which is more than the minimum wages. It is derived as a mean between the minimum wage and the living wage. In Express Newspaper Ltd. v. Union of India, Das Gupta J. defined ‘fair wage’ “which may roughly be said to approximate to the need-based minimum, in the sense of a wage which is adequate to cover the normal needs of the average employee regarded as a human being in a civilized society.” Moreover, in the words of Hidayatullah, J. in Hindustan Times Ltd. V/S their workman: “‘Fair wage’ lies between the minimum wage which must be paid in any event and the living wage which is the goal.”

A fair wage relates to the earning capacity and workload. Therefore, the lower limit of a fair wage, certainly, should be the ability to pay minimum wage and the upper limit is the ability or capacity of the industry to pay. Between these two limits, the actual wage will depend on a consideration of certain variables such as prevailing wage rate, the productivity of the labour, national income and its distribution among various sectors and the level of industry in the economy of the country. Thus, it means the wage which is paid to the workers for various jobs which require equal efficiency, difficulty and pains.

CONCLUSION

The Directive Principles enshrined in the Constitution of India, 1950 confers a duty on the state to secure a basic living wage for the working class. Practically speaking, this cannot be achieved overnight as the government also has to undertake the interests of the industry and its survival so that the standard of living rises of the working class.  The higher the standard of living, higher will be the minimum wage rate in the country.  So, there should be tireless efforts towards achieving the goal enshrined in Article 43 of the Constitution of India, 1950 for the betterment of the working class.

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