How Work and Minimum Wages in India are Being Determined

Under India’s Minimum Wages Act of 1948, minimum wage rates in the country are fixed.

Due to the fact that labor is a concurrent issue under the Indian Constitution, minimum wage rates are being determined by its Central Government as well as the Provincial Governments.

Generally, minimum wage rates in India are being stated at the national, state, sectoral and skill / occupational levels. Moreover, the same is established for the benefit of trainees, youth and piece-rate employees. It is being determined by considering the wage earners’ cost of living.

Minimum wage rate may comprise of a basic rate of wage and with or without cost of living allowance, or a basic rate of wages, as well as the cash value of concessions in respect of the supply of basic commodities at concession rates if authorized, or an all-inclusive rate permitting for the basic rate, the cost of living allowance as well as the concession cash value of the concessions if any.

While setting or modifying minimum wage rates, the different minimum rates of wages may be settled for the following factors:

• Different scheduled employments
• Different classes of work in the same scheduled employment
• Adults, adolescents, children and apprentices
• Different localities

Also, minimum wage rates may be settled by:

• Hour
• Day
• Month
• Or any such other larger wage period as may be agreed

As stated under the Minimum Wages Act, both the Central and State Governments may advise the scheduled employments and fix or revise minimum wage rates for the said scheduled employments. Both the agricultural and non-agricultural employments are included in the scheduled employment, and both the Central and State Government are authorized to advise any employment sector in the schedule where the number of laborers is 1000 and above and settle the rates of minimum wages in respect of the laborers employed therein.

In the Central sphere, the minimum wage is being proclaimed for 45 scheduled employments while the State level minimum wage is being determined by every state keeping in sight the sectors more prevalent in the State. Minimum wage is modified while considering the following elements:

• Consumption units per earner
• Minimum food requirement of 2700 calories per average adult
• Cloth requirement of 72 yards per annum per family
• House rent corresponding to the minimum area provided under the Government's Industrial Housing Scheme
• Fuel, lighting and other miscellaneous items of expenditure to constitute 20% of the total minimum wage
• 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 (the last component added by the Supreme Court in Reptakos Brett Vs Workmen case in 1991).

Minimum wage may be examined at various intervals but such intervals cannot exceed five years.

Under the Minimum Wages Act, there are two methods of fixation / revision or minimum wages. Meanwhile, under the Committee Method, there are the committees and sub-committees formed by the government to entertain inquiries and create recommendations regarding fixation and revisions of minimum wages. On the other hand, other the Notification method, government proposals are being published in the Official Gazatte for information of the persons most likely to be affected and indicate a date which shall not be less than two months from the date of the notification, on which the proposals will be taken into account.

Upon review of the Committees / sub-committees advice through a committee method, and all the representations received by the indicated date known as the Notification method, the proper Government, by the Official Gazette’s notification, settles / modifies the minimum wage in respect of the concerned scheduled employment, which come into effect on expiry of at least three months from the date of its issuance.

In an effort to protect the real wages against inflationary effects, the Central government arranges for linking of Variable Dearness Allowance to the Counsel Price Index for industrial workers or the CPI-IW. Most states allow for variable dearness allowances in modifying the minimum wage. VDA is modified occasionally twice a year effective from April and October.