Work and Wages

Minimum Wage

Minimum wage rates in India are fixed under the Minimum Wages Act, 1948. Since labour is a concurrent subject under the Indian Constitution, minimum wage rates are determined both by the Central Government and the Provincial Governments. Minimum wage rates in India are declared at the national, state, sectoral and skill/occupational levels. Minimum wage rates may be established for any region, occupation and sector. Also, the minimum wage is established for trainees, youth and piece-rate workers.  Minimum wage is determined by considering the cost of living.

Minimum rate of wages may consist of a basic rate of wages and a cost of living allowance; or a basic rate of wages, with or without the cost of living allowance, and the cash value of concessions in respect of the supply of essential commodities at concession rates (if authorized); or an all-inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of the concessions (if any).

While fixing or revising minimum rates of wages, different minimum rates of wages may be fixed for different scheduled employments; different classes of work in the same scheduled employment; adults, adolescents, children and apprentices; and different localities. The minimum wage rates may be fixed by hour, day, month or any such other larger wage period as may be prescribed.

Under the Minimum Wages Act, both the Central and State Governments may notify the scheduled employments and fix/revise minimum wage rates for these scheduled employments. The scheduled employments include both the agricultural and non-agricultural employments. Both the Central and State Governments are empowered to notify any employment (industry/sector) in the schedule where the number of employees is 1000 or more and fix the rates of minimum wages in respect of the employees employed therein.

Minimum wage is announced for 45 scheduled employments in the Central Sphere while the State level minimum wage is determined by every state keeping in view the sectors more dominant in the State. Minimum wage is revised while considering the following five elements: three 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; and 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 wages may be reviewed at different intervals however such intervals cannot exceed five years.

The Minimum Wages Act provides for two methods of fixation/revision of minimum wages. Under the Committee Method, committees and sub-committees are set up by the Government to hold inquiries and make recommendations with regard to fixation and revision of minimum wages. Under the Notification method, government proposals are published in the Official Gazette for information of the persons likely to be affected 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 advice of the Committees/Sub-committees (Committee method) and all the representations received by the specified date (Notification method), the appropriate Government, by notification in the Official Gazette, fixes/revises the minimum wage in respect of the concerned scheduled employment which come into force on expiry of three months from the date of its issue.

In protecting the real wages against inflationary effects, the Central government provides for linking of Variable Dearness Allowance to the Consumer Price Index for industrial workers (CPI-IW). Most states provide for variable dearness allowance in revising the minimum wage. VDA is revised periodically twice a year effective from 1st April and 1st October.  

Compliance with labour legislation including payment of minimum wages to workers is ensured by the labour inspectors, as are appointed under section 19 of the Minimum Wages Act 1948. In the event of non- compliance, fines, imprisonment and payment of arrears can be applied as per law. Section 22 of the Minimum Wages Act stipulates that violators may be punished to pay fine (which may extended to 500 rupees) or imprisonment, which may extend to period of six months or both. The Authority (magistrate) may also require payment of arrears to the worker along with compensation for delay in payment of due wages. However, such extra compensation should not exceed 10 times the due amount. Similarly, an employer who fails to maintain a register or record as required under the law is liable for a fine of up to 500 rupees.

If a worker receives wages, which are less than the government declared minimum wages, he/she may file a complaint with the labour inspectorate.  The complaint can be filed by the worker or through a legal practitioner, or an official of the registered trade union. The claims for any unpaid/due wages must be filed within 6 months of their becoming due.

The Code proposes that the central government fixes a floor wage, taking into account living standards of workers.  The central government may set different floor level wages for different geographical areas. The central government may also obtain the advice of the Central Advisory Board (tripartite plus advisory body with representation from worker, employer and government groups as well independent persons) and may consult with state governments. Moreover, 33% of the total members on both the central and state Boards must be women.  The Boards have the mandate to advise the respective governments on various issues including: (i) fixation of minimum wages, and (ii) increasing employment opportunities for women.

The minimum wages notified by the central or state governments must be higher than the floor level wage. Where the existing minimum wages are higher than the floor wage, these cannot be reduced.

The Wage Code prohibits employers from paying workers less than the minimum wages.  Minimum wages notified by the government are either time based (number of hours of work) or per piece. The minimum wages must be revised and reviewed by the central or state governments at an interval of not more than 5 years.  While fixing minimum wages, the central or state governments may take into account various factors such as: (i) skill of workers, and (ii) arduous nature of work.

The Code on Wages Bill, 2019 was passed by the Lok Sabha on July 30, 2019 and Rajya Sabha on 02 August 2019. 

The Wage Code regulates wage and bonus payments in all employment.  The Code combines the provision of the following four laws: (i) the Payment of Wages Act, 1936, (ii) the Minimum Wages Act, 1948, (iii) the Payment of Bonus Act, 1965, and (iv) the Equal Remuneration Act, 1976. The Wage Code repeals the above 4 laws. 

Source: §3-5, 18-22, 27 & 28 of the Minimum Wages Act 1948


Non-Standard Workers' Rights on Minimum Wage - Platform Workers

Minimum wages are applicable only to employees. However, the law allows the appropriate (central or state government) to include in the list of employees any "person declared to be an employee by the appropriate Government". Hence, the wages can be announced by the central and state governments for platform workers.

The Code on Wages, 2019 (enacted in August 2019) provides for the procedure to set minimum wages. The law also requires employers to pay minimum wages to employees. Employee is defined as "any person (other than an apprentice engaged under the Apprentices Act, 1961), employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of India".

The Code on Wages entitles only employees to the bonus payment. Service agreement may also provide for a bonus payment to incentivise service delivery. 

Under the Wage Code, it is the responsibility of Inspector-cum-Facilitator to inspect all such establishments where workers are employed. On inspection of record or filing of a complaint by a worker, proceedings can be initiated against an employer. However, since platform workers are regarded as independent contractors, these are not covered under the Wage Code. 

Wage Codes provides for penalties where compliance with the law is lacking. The fine ranges between 20,000 to 100,000 Indian rupees. Since platform economy workers are considered independent contractors, their contracts/service agreements are governed under the Indian Contract Act, 1872.

Regular Pay

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. It, however, does not include the value of any house-accommodation, supply of light, water, medical attendance, or any other prescribed amenity or service; any pension or provident fund, or social insurance scheme, contributions paid by the employer; travelling allowances or concessions; reimbursement for special expenses incurred by the employee; or gratuity payable on discharge. 

In accordance with the Minimum Wage Act, the employer is obliged to pay wages on regular and timely basis at least once a month.  Wage period may be fixed on hourly, daily, weekly or monthly basis. The employer is under obligation to pay wages in cash on a working day before the expiry of the 7th day after the last day of the wage period (in establishments with less than 1000 workers). In other establishment, i.e., those hiring more than 1,000 workers, wages must be paid before expiry of 10th day after the last day of the wage period. If the employment of a worker is terminated by or on behalf of the employer, the outstanding wages are paid within two days of employment termination. Wage periods can't be fixed for duration longer than one month.

Minimum wages are generally payable in cash however if it is customary to pay wages wholly or partly in kind, the appropriate Government may authorize the payment of minimum wages either wholly or partly in kind.

Payment of Wages Act 1936 required that all wages be paid in current coin or currency notes or in both (in legal tender). An employer may, after obtaining the written authorization by the worker, pay worker the wages either by cheque or by crediting the wages in bank account. A 2017 amendment in the 1936 Act, applicable from 28 December 2016, now allows the employer to pay wages in coins or currency notes; or by check; or by crediting the wages in worker’s account. The amended Act has withdrawn the requirement of taking prior authorization from worker about mode of wage payment. The relevant (central or state) government may however specify certain industrial or other establishments requiring those to pay either by check or bank transfer.

Workers are entitled to the wages without any kind of deduction except in cases prescribed by the Payment of Wages Act 1936. It may include deductions as fine; for absence; for damage or loss of goods or money; for house accommodation supplied by employer; for recovery of advances or loans; for income-tax; and any other kind of deduction that is made by order of a Court or other authority competent to make such order.

The Wage Code proposed that wages are paid in (i) coins, (ii) currency notes, (iii) by cheque, (iv) by crediting to the bank account, or (v) through electronic mode.  

The wages can be paid by the employer on (i) daily, (ii) weekly, (iii) fortnightly, or (iv) monthly basis. The industrial or commercial establishments may be required by notification to pay wages through cheque or by crediting the wages directly in the worker’s bank account. 

The Wage Code also specifies the time limit for payment of wages. For daily wagers, the wages must be paid at the end of daily shift. In the weekly wage period, the wages must be paid on the last working day of the week; for fortnightly wage period, the wages must be paid within 2 days at the end of fortnight. For monthly wage period, the wages must be paid within 7 days of the end of working month. 

Under the Wage Code, workers’ wages may be deducted on certain grounds including: (i) fines, deductions for loss of goods or money due to the worker’s neglect (ii) absence from duty, (iii) accommodation given by the employer or other amenities, (iv) recovery of loans and advances given to the employee, among others, (v) deductions for payment of trade union fees or contribution to social security schemes, or (vi) deductions of income tax. The total deductions should not exceed 50% of the worker’s total wage.

The Wage Code also has provision on determination and payment of bonus. All such worker who have worked at least 30 working days in a year with an establishment and whose wages do not exceed a specific monthly amount, as notified by the central or state government, will be entitled to an annual bonus.  The bonus will be at least: (i) 8.33% of his/her wages, or (ii) Rs 100, whichever is higher.  In addition to the minimum bonus (where the allocable surplus exceeds the minimum bonus), the employer is required to distribute a part of the gross profits amongst the workers.  It is distributed in proportion to the annual wages of a worker.  The worker can receive a maximum bonus of 20% of his annual wages.

The Code on Wages Bill, 2019 was passed by the Lok Sabha on July 30, 2019 and Rajya Sabha on 02 August 2019. 

The Wage Code regulates wage and bonus payments in all employment.  The Code combines the provision of the following four laws: (i) the Payment of Wages Act, 1936, (ii) the Minimum Wages Act, 1948, (iii) the Payment of Bonus Act, 1965, and (iv) the Equal Remuneration Act, 1976. The Wage Code repeals the above 4 laws.

Source: §3-6 & 11 of the Minimum Wages Act 1948; §3-7 of the Payment of Wages Act 1936, amended in 2017

Non-Standard Workers' Rights on Regular Pay  - Platform Workers

The payment system in the platform economy is quite varied. Some platforms apply an hourly rate, others offer a specific amount per delivery, ride or task. The platforms do not ask for a service fee. However, it is often required that workers use their own equipment or means of transport to perform their worker duties.

This varies per platform. For independent contractors, offering bonuses is legally allowed in any way, shape or form. Uber offers Quest and Boost incentives/bonuses. Quest promotions allow drivers/partners to earn extra money for reaching certain trip goals in a set amount of time (a week). Select drivers/partners receive weekday and weekend boosts as well.

For independent contractors, applying deductions is legally allowed in any way, shape or form. Deductions from payment on account of service fees are covered under the Indian Contracts Act 1872.