Labour Law Assignment

Topic-: The Concept of Wages: -

Submitted By

MOHAMMAD ZIYA ANSARI

BALLB (HONS)
SEMESTER-VIII
ENROLLMENT NO- GI- 6492
FACULTY NO- 17BALLB- 72
1st GCT

Submitted To

SADAF ALI KHAN SIR

Lecturer, Faculty of Law

Aligarh Muslim University

ALIGARH-202002 (INDIA)

2020-21
 SYNOPSIS

1-INTRODUCTION.

2- ORIGIN OF WAGES.

3- MEANING AND DEFINITION OF WAGES.

4- CLASSIFICATION OF WAGES.

5- KEY CONSIDERATION OF WAGE POLICY.

6- NATIONAL COMMISSION ON LABOUR ON WAGE POLICY.

7- THEORIES OF WAGES.

8- BIBLIOGRAPHY.
 ACKNOWLEDGEMENT

I WOULD LIKE TO EXPRESS A DEEP SENSE OF

THANKS & GRATITUDE TO MY PROJECT GUDIE SADAF ALI KHAN

SIR FOR GUIDING ME IMMENSELY

THROUGH THE COURSE OF THE PROJECT.

I ALSO THANKS TO MY SENIORS FOR THEIR MOTIVATION &

SUPPORT. I MUST THANKS TO MY CLASSMATES FOR THEIR
TIMELY HELP & SUPPORT FOR COMPLETION OF THIS PROJECT.

LAST BUT NOT THE LEAST, I WOULD LIKE TO THANKS TO ALL

THOSE WHO HELPED ME DIRECTLY OR INDIRECTLY TOWARDS
THE COMPLETION OF THIS PROJECT.

THANKING YOU

MOHAMMAD ZIYA ANSARI

BALLB-4th Year GI-6492

17BALLB-72
1-INTRODUCTION: -
A wage is monetary compensation (or remuneration, personnel expenses, labor) paid by an
employer to an employee in exchange for work done. Payment may be calculated as a fixed
amount for each task completed (a task wage or piece rate), or at an hourly or daily rate (wage
labour), or based on an easily measured quantity of work done. Wage is a reward for the
services rendered or remuneration for the work done and it is as old as the society itself. In the
primitive days, wages were paid in kind, most common of them was grains and the food. But
with the advent of industrialization wages form a complex problem and in almost all
industrialized countries it became a sensitive area of public policy. Very soon the quantum of
wages assumed a common cause of friction between the employers and the wage-earners.
Frequent disputes between employer and wage-earners resulted in strikes over the demand for
wage-increase.

Wage is a remuneration to labor for the work done for the service rendered by it to the
employer. There are different theories on the concept of wages as enunciated by economists and
sociologists, which explain various aspects of wage problems. However, these theories are not
applicable in all circumstances.

2-ORIGIN OF WAGE: -
Wage is a reward for the services rendered or remuneration for the work done and it is as old as
the society itself. In the primitive days, wages were paid in kind, most common of them was
grains and the food. But with the advent of industrialization wages form a complex problem and
in almost all industrialized countries it became a sensitive area of public policy. Very soon the
quantum of wages assumed a common cause of friction between the employers and the wage-
earners.

Frequent disputes between employer and wage-earners resulted in strikes over the demand for
wage-increase. The determination of adequate wages that should be justifiably payable to die
workmen by the employer, was not merely an economic problem but a multidimensional
phenomenon, necessarily involving relevant factors like place of industry, prices of the product,
living standards, basic needs of die wage-earner and the governmental policy in a given society.

The natural instinct of the employer to keep the wage-bill to a minimum and workers struggle to
secure a wage-increase to meet both ends, created a chaotic situation which demanded an
immediate State intervention to protect the weaker section of the society, namely, workers, in
view of its low bargaining capacity.
3- MEANING AND DEFINITION OF WAGE: -
In the ordinary language the term wages imply 'reward' to the laborers for the services rendered
by them. It may be paid daily, weekly, fortnightly, monthly, per hour or per unit. Services
rendered by the labourer include both physical and mental services.

In the words of Benham. "Wages are a sum of money paid under contract by an employer to a
worker for services rendered."

According to ILO " Wages refer to that payment which is made by the employers to the labourer
for his services hired on the conditions of payment per hour, per day, per week or per fortnight."

Appropriate Definition: Wages refer to that reward which is received from the employer for the
services rendered by the labourer per week, per month, per fortnight or per unit It includes
allowances also.

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;

4- CLASSIFICATION OF WAGES: -
Broadly Speaking, the wages can be classified into the following categories:

(a) Living Wage

(b) Fair Wage

(c) minimum Wage

(a) Living Wage -

The concept of "Living wage" is the wage rate which prevails in most of the economically
advanced Countries. The term Living Wage has not been defined under the Minimum wages Act,
1948. South Australian Act of 1912 defines it as 'Living Wage means a sum sufficient for the
normal and reasonable needs of the average employee living in a locality, where the work under
consideration is done or is to be done.
Justice Higgins of the Australian Commonwealth Court of Conciliation defined the living
wage as one appropriate for the normal needs of the average employee, regarded as a human
being living in a civilized society. The living wage must provide not merely for absolutely
essentials such as food, shelter, and clothing but for condition of frugal comfort, estimated by
current human standard.
Living wages are wages without which working people cannot live and perform their duties
as a citizen. It varies from country to country depending upon the price level of necessaries of
life, and it is determined by the socio-economic conditions of a particular country.
The living wage should enable the wage earner to provide for himself and his family not
merely the bare essentials of food, clothing and shelter but the measure of frugal comfort
including education for the children protection against ill health, requirements for essential social
needs and a measure of insurance against the more important misfortune including old age.
In India, there is no statutory definition for the term 'living wage'. According to Article 43
of the Indian Constitution, the State shall endeavor to Secure to all workers living wages,
conditions of ensuring a decent standard of life and full enjoyment of leisure and social and
cultural opportunities.

(b) Fair Wage -

Fair wage is a mean between the living wage and the minimum wage. A fair wage is related
to fair work-load and the earning capacity. It can say that it is more than minimum wage but less
than the living wage. It may roughly be said to approximate to the need based minimum, in the
sense of the wage which is adequate to cover the normal needs of the average employee regarded
as a human being in a civilized society. Fair wage is fixed, taking into consideration, the present
economic position and further prospects of the Industry.

Between these two limits (Living Wage and the Minimum Wage) actual wage would depend
upon a consideration of certain factors namely -

i) the productivity of Labor.

ii) the prevailing rates of wages in the same industry for similar occupations in the same or
similar occupations in the same or neighboring localities;

iii) the level of national income and its distribution; and

iv) the place of the industry in the economy of the country.

The Concept of fair wages, therefore, involves a rate sufficiently high to enable the worker to
provide a standard family with food, shelter, clothing, medical care and education for children
appropriate to his status in life but not at a rate exceeding the wage-earning capacity of the class
of establishment concerned. As time passed and prices rise even the fair wage fixed for the time
being tends to sag downwards and then revision becomes necessary.

(c) Minimum Wage -

The term 'Minimum Wage' has not been defined in the said Act (Minimum Wages Act,
1948) The minimum wage is the lowest wage in the scale below which the efficiency of a worker
is likely to be inspired. The minimum wage includes not only the bare physical necessities but
also a modicum of comfort otherwise known as conventional necessities. The Minimum wages
must, therefore, provide not merely for the bare subsistence of life but also for the preservation
of the efficiency of the worker. For this purpose, the minimum wage must also provide for the
same measure of education, medical requirements, and amenities. Therefore, any employer who
is unable to pay this minimum wage to workers has no right to exist. Where a person provides
labor or service to another for remuneration which is less than the minimum wages, such labor is
'forced labor’ within the meaning of Article 23 of the Indian Constitution and thereby entitles the
person to invoke Article 32 or Article 226 of the Constitution of India.

The Concept of fair wages was to be dynamic. There is no reason to assume that fair wages fixed
years ago should continue to be fair wages for all time, and any fixation of minimum wages,
should be taken not as minimum wages but as fair wages because it is above the fair wages once
fixed.
Constituents or Components of Minimum Wage -

According to Section 4 of the said Act, (Minimum Wages Act, 1948) consists of the following :

(1) Any minimum rate of wages fixed or revised by the appropriate government in respect
of scheduled employments under section 3 may consist of –

(i) a basic rate of wages and a special allowance at a rate to be adjusted at such intervals and
in such manner as the appropriate government may direct to accord as nearly as practicable with
the variation in the cost of living index number applicable to such workers;

(ii) a basic rate of wages with or without the cost of living allowance and the cash value of
the concessions in respect of suppliers of essential commodities at concession rates were so
authorized; or

(iii) an all-inclusive rate allowing for the basic rate the cost of living allowance and the cash
value of the concessions if any.

(2) The cost of living allowance and the cash value of the concessions in respect of supplies of
essential commodities at concession rate shall be computed by the competent authority at such
intervals and in accordance with such directions as may be specified or given by the appropriate
government.

5-KEY CONSIDERATIONS OF WAGE POLICY: -

The key to considerations in public policy concerning wages/salaries may be identified as under:

1. End of Exploitation – To end exploitation and provide remuneration to capital and labour
such that “while in the interests of the consumers and the primary producers excessive profits
should be prevented by suitable measures of taxation and otherwise, both will share the product
of their common effort after making provision for payment of fair wages to labour, a fair return
on capital employed in the industry and reasonable reserves for the maintenance and expansion
of the undertaking” (Industrial Policy Resolution, 1948).

2. Differentials – To provide for wage differentials.

3. Regulation of Wages – To regulate wages and salaries to eliminate/reduce undue disparities.

4. Linking – To link remuneration to productivity.

5. Compensation – To compensate for increasing in cost of living.

6. Fixation of Minimum Wages – To fix a statutory minimum wage in selected industries and
promote fair wage agreements in the organized industries (Industrial Policy Resolution, 1948).

7. Equality – To ensure equal pay for equal work (Constitution of India).

8. Determination – To determine fair wages over and above minimum wages with due regard
to-

(i) The productivity of labour.

(ii) The prevailing level of wages.

(iii) The level of national income and distribution.

(iv) The place of industry in the economy of the country.

9. Capacity to Pay – However, the Supreme Court ruled that ‘an employer who cannot pay
minimum wages has no right to exist’. The capacity to pay becomes a subject of consideration to
determine fair wages over and above the minimum wages.

10. Basic Needs – The basic needs of labour.

11. Living Wages – To secure a living wage for workers.

6-NATIONAL COMMISSION ON LABOUR ON WAGE POLICY: -

According to the NCL, “The main aim of a wage policy, as we envisage it, is to bring wages into
conformity with the expectation of the working class and in the process seek to maximum wage
employment”.

To achieve this, the NCL’s following observations may be noted:

(a) Wage policy should aim at the progressive increase in real wages. Sustained improvement in
real wages can be brought about by increasing productivity.

(b) The wage levels will have to recognize that in India modern capital-intensive, large-scale
sector exists side-by-side with the small and traditional labor-intensive sector.

(c) ‘Wage policy’ should therefore foster an appropriate choice of techniques so as to maximize
employment at rising levels of productivity and wages.

(d) The incomes and wage policy that may be formulated has to take into account the structural
feature of the national economy.
(e) In the unorganized sector adequate governmental or quasi-governmental machinery may be
necessary to provide for minimum wage regulation according to conditions in different workers
in weak position.

(f) In order to protect real wage from erosion the level of money wages has to be adjusted to
price changes.

7- THEORIES OF WAGES: -
1. Subsistence Theory

2. Wages Fund Theory

3. Residual Claimant Theory

4. Marginal Productivity Theory

5. The Demand and Supply Theory of Wages.

1. Subsistence Theory of Wages: -Many of the Classical economists have popularized this
theory. According to this theory, the general level of wages in the long run, is equal to the
subsistence level (i.e., food, cloth and shelter), which is the level of bare necessities.

2. Wages Fund Theory: - This theory was propounded by J.S. Mill. According to this theory,
the general rate of wages can be found by dividing the wage fund set apart by the employer by
the number of workers.

3. Residual Claimant Theory: - This theory was propounded by Prof. Walker. This theory
states that wage is of the nature of a residue and the worker is to get what remains after other
agents of production have been paid.

4. Marginal Productivity Theory of Wages: - The marginal productivity theory of wages,

developed by J.B. Clark, is based on the assumption of pure competition in both commodity and
labor markets. In both the markets the buyers and sellers are supposed to be price-takers. In brief,
the marginal productivity theory of wages states that under perfect competition, wages are
determined by the value of the marginal product of labor.

5. The Demand and Supply Analysis: - This is the modern theory of wages, provides a
satisfactory explanation of the wage determination. According to this theory, the price of labor is
determined by the market forces of demand and supply.
8- BIBLIOGRAPHY: -

a-Gunjan S, Wages: Meaning, Types, Factors, Theories and Determination,

https://www.microeconomicsnotes.com/wages/wages-meaning-types-factors-theories-and-
determination/15967

b-Aniruddha S, Wage Policy, https://www.economicsdiscussion.net/wages/wage-

policy/31892

c-The Concepts of Wages, Labor Law, https://www.srdlawnotes.com/2017/11/the-concepts-

of-wages-labor-law.html

d-Anita, Different Concept of Wages, http://www.legalserviceindia.com/legal/article-1127-

different-concepts-of-
wages.html#:~:text=According%20to%20Section%202(h,of%20work%20done%20in%20
such

e-Aliya K, Wage Policy, https://www.yourarticlelibrary.com/human-resource-

management-2/wage-policy/wage-policy/99763