Classification of Wages
Classification of Wages
INTRODUCTION
Wages can take various forms, extending beyond a simple cash payment.
Understanding and classifying these diverse compensation structures is
imperative for both employers and employees to navigate the legal landscape
effectively. The classification of wages involves identifying different
components, such as basic salary, allowances, bonuses, and benefits, and
determining their legal implications.
The term 'wages' has a composite meaning which includes all remuneration and
other payments payable to an employee, which are not expressly excluded by
the provisions of the Act.
The International Labour Organisation, which has since its inception given
inspiration and impetus to numerous measures of social justice and Social
Security in provision including India, recognised the importance of the problem
of wages and remuneration an adequate living wage, and recognition of the
principle of equal for equal work.
The fair wage committee formulated the concept of living wage the fair wage
anf the minimum wage. The supreme court of india has approved these levels
and in the below heads these concept of minimum wage fair wage and living
wage are clearly discussed.
Minimum wages:
The term minimum wage has been understood in two different senses the first
being an industrial minimum wage and second one a statutory minimum wage.
An industrial minimum wage is sustenance wage which the employer of any
industrial labour must pay in order to be allowed to continue an industry. On the
other hand a statutory minimum wage is a minimum wage which must provide
not merely for the bare sustenance of life but for the preservation of the
efficiency of the worker. For this purpose the minimum wage must also provide
for some measure of education medical requirements and amenities.
The main object of the Act is to prevent 'sweated' labour as well as exploitation
unorganized labour. If proceed on the basis that it is the duty of the state that at
least Minimum Wages are paid to the employees irrespective of the capacity of
the industry or the unit to pay the same.
In Kanta Devi and others V/S State of Haryana and others1 and Electric
Construction and Employment Co. Ltd Vs State of Haryana and others 2 the
S.C. held that even if an industry creates a different category of workers outside
the recognized categories of workers in respect of whom minimum wages are
fixed under the M.W. Act, such as the category of learness created in the
present cases, it will not be permitted to pay less than the minimum for the
lowest level employee in that industry namely in unskilled workman. The basic
idea is to avoid exploitation by the management by creating different category
outside the recognized categories of workers.
In Sandeep Kumar and others V/s State of U.P3, where five persons were
working as junior engineers in a project place under the control of executive
officer, city board Ghaziabad engaged in the work of slum clearance. The
project financed by the state of UP and World Bank fund. They were working
on daily rate basis and on an average-received Rs. 1000 per month. No other
benefits were given even they did not get any payment for the holiday.
However, similarly qualified engineers when employed for similar work on
regular basis are paid a minimum grade pay of Rs. 1400.
The Supreme Court held that there is no justification to discriminate between
the two categories and directed pay Rs. 1400 per month instead of Rs. 1000.
1
1994 SCC, Supl. (2) 508
2
1990 77 STC 424 P H
3
In Mahatma Rhule Agricultural University, Vs Nasik Zilla Sheth Kamgar
union and others4. Supreme Court held that the status of permanency cannot be
granted when there are not posts. There can be no justification in the state
government not making available the required funds. The state administration
cannot shrink it responsibility of ensuring proper education in schools and
college on the plea of lack of resources. It is for the authorities running the
administration to find out wages and means of securing funds for the purpose!
There universities are imparting education; it is necessary for them, to maintain
the agricultural field and to carry on experiments. To maintain agricultural
fields, they required daily wagers. As the daily wagers were required the state
Govt, cannot say that they would not pay the daily wagers what is due to them.
In Ahmad Nagar Zilla Sheth Mazdoor Union V/s Dinkar Rao Kalyan Rao
Jagdale5, (connected with the above mentioned case) it has been held by the
Supreme court there continuance every year of seasonal work obviously during
the period when work was available, does not constitute a permanent status
unless there exists posts and regularization is done. Under these circumstances
the tribunal and the high court are not right in holding, that the respondents are
entitled to be absorbed on regular basis as regular employees. Therefore, their
orders were set aside. However, the Supreme Court made it clear that the
appellant shall take the services of all the workmen existing as on date as and
when the work is available and during the period of seasonal operation. As and
when the vacancies arise, regularization of the employees should be made in
order of their seniority and till the employees are regularized, they are not to be
retrenched.
State of Haryana Vs Tilakraj and others6 - where daily wages filed petition in
the high court claiming that they were entitled to regularization in view of their
long period of service put in by them and also claimed same salary as paid to
regular employees since the nature of work done by them was similar. The
petition was allowed by the high court with the following observation:
4
AIR 1992 SC 713, 1992 LablC 395, 1991 (2) SCALE 777, 1993 Supp (1) SCC 525
5
Laws sc 2001 7 124
6
[2003] 265 SC
"The petitioners would be entitled to the relief, but again not the regular pay
scale which their regular counter parts are receiving. The petitioners would be
entitled to the minimum of the pay scale with D.A. alone".
In appeal the Supreme Court observed that the principle of equal pay for equal
work is not always easy to apply. There are inherent difficulties in comprising
and evaluating the work done by different person indifferent or" organizations,
or even in the same organization. This is a concept, which requires for its
applicability complete and whole sale identity between group of employees
claiming identical pay scales and the other group of employees who have
already earned such pay scales. The problem about equal pay cannot always be
translated into a mathematical formula.
A scale of pay is attached to definite post and in case of a daily wager he holds
no posts. The respondent workers cannot be held to hold any post to claim even
any comparison with the regular and permanent staff any or all purposes
including a claim for equal pay and allowances. To claim a relief on the basis of
equality, it is for the claimants to substantiate a clear-cut basis of equivalence
and a resultant hostile discrimination before becoming eligible to claim rights
on par with the other group alleged discrimination. The impugned
judgements of the high court is clearly indefensible hence set aside. However,
the appellant state has to ensure that the minimum wages are prescribed for
such workers and are paid to them.
As a matter of fact, minimum wage are fixed to provide necessaries of life
which include food, clothes, shelter, education and medical care the concept of
'necessaries' is depend upon the standard of living of persons concerned in a
particular area or region. It is therefore left to the government to prescribe
minimum wages keeping in view various factors as indicated above sec. 3,4,5
authorise the appropriate government to fix the minimum rate of wages. In other
words if the wages fixed by contract are found to below, authority is conferred
on the app government to increase them so as to bring them to the level of what
the said government regards as the M.W. in the particular scheduled
employment in the particular area concerned.
Wages: The Minimum Wages Act defines wages under Sec. 2 (h) which reads
as under:
"Wages means all remuneration, capable of being expressed in terms of money,
which could 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 include 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 and special order of
the App. Govt.
(ii) Any contribution paid by the employer to any pension fund or provident
fund or orders any scheme of social insurance.
(iii) Any travelling allowance or the value of any travelling concession.
(iv) Any some paid to the person employed to defray special expense s entailed
on him by the nature of his employment; or
v) The gratuity payable on discharge
The analysis of this Section Indicate that the following essentials requirements
are necessary for wage:
1) Wages include all remuneration paid to an employee including house rent
allowance.
2) Wage must be payable of being expressed in term of money,
3) Wage become due when there is a contract between employer and employee.
However the contract may be expressed and implied.
4) The term and conditions of contract must be fulfilled, or he must have done
work assigned to him under such employment.
But the term wage does not include the value of;
A) Any house accommodation, supply of water, light and medical attendance,
or
B) Any other amenity an d service excluded by general and special order of the
App. Gov. it doe s not include any contribution to pension fund or payment
under scheme of social insurance travelling allowance, sum paid to defray
special expense s or any gratuity payable on discharge.
The term "Wage" has a composite meaning which including all remuneration
and other payments payable to an employee, which are not expressly excluded
by the provision of the Act.
There are three kinds of wages minimum wage, fair wage & living wage. At the
bottom of the ladder there is the minimum basic wage which the employer of
any industrial labour must pay in order to be allowed to continue in industry.
Above this is the fair wage, which so the living wage must provide not merely
the bare essentials of food, clothing and shelter but also a measure of frugal
comfort, including education for the children, protection against ill health,
requirement of essential social needs and a measure of insurance against the
most important misfortunes, including old age. As regards fair wage, it involves
a rate sufficiently high to enable the worker to provide a standard family with
food, shelter, clothing, medical care and education of children. As regards the
minimum wage, it has been understood in two different senses, the first being
an industrial minimum wage which the employer of any industrial labour must
pay in order to be allowed to continue an industry, the second being a statutory
minimum wage, it provide not merely for the bare substance of life but also
some measure of education, medical requirement and amenities.
MINIMUM WAGE
The term minimum wages has not been defined under the provision of the
Minimum Wages Act, 1948 presumably because it would not be possible to lay
down a uniform minimum wage for all industries throughout the country on
account of different and varying conditions prevailing from industry to industry
and from one party country to another.
The legislature also thought it inexpedient to apply the Act to all industries at a
time. In order to understand the concept of minimum wage. It would be
desirable to know the meaning as such. Wage is 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.
The Fair Wages Committee formulated the concept of living wages, fair wages
and minimum wages. The Fair Wages Committee Report published by the
Government of India in 1949 has been broadly approved by the Supreme Court
in Express News Paper (p) Ltd v/s Union of India and Standard Vacuum
Refining Co. of India V/s Its Workmen living wage i.e. at the apex a political
aim and in view of the level of national income a distant goal to be achieved in
the course of years, at bottom is the minimum wages which must provide not
merely for the bare sustenance of life but for the preservation of efficiency of
worker. For this purpose, minimum wage must also provide for some measure
of education, medical requirements and amenities. On the basis of decided cases
the concept of minimum wages may be simplified. As a matter of fact, there are
three concepts in this regard, i.e. living wage, fair wage and minimum wage. It
would be desirable to discuss these concepts in some details in order to bring
out the clear meaning of the concept of minimum wage.
Living wages
The term living wage has not been defined under the provision of the Minimum
Wages Act. However, "an instance of statutory definition of living wage is
provided in South Australian Act 1912 which states the living wage" means a
sum sufficient for the normal and reasonable needs of the average employee
living in a locality where the worker under consideration is done or is to be
done". In the famous Harvester case, The Commonwealth Arbitration Court ha s
visualized a living wage as a sum which is adequate to satisfy the normal needs
of the average employee regarded as human being in a civilized community.
The living wage, according to the Committee on Fair 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. It pursuit belongs
to the same category as "sparing the circle".
In Hindustan Time Ltd. V/S Their Workman K.C. Das Gupta J. wistfully
observed: "While the industrial adjudication will be happy to fix a wage
structure which would give the workmen generally a living wage, economic
consideration make that only a dream for future, that is why the industrial
tribunals in this country generally confine their horizon to the target of fixing a
fair wage".
In a latter case viz, All India Reserve Bank Employee Association V/S
Reserve Bank of India. In the same strain, 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
then the general average".
Directive Principles enshrined in the constitution make it the duty of the state to
strive and secure living wage for the working class. This however cannot be
achieved at one stroke for, the interests of the industry and its survival is an
important as the betterment of the standard of living of the working class. All
the same unless there is a continuous and progressive trend towards securing
better living conditions for labour which would , necessarily in its turn cell for a
determination of progressive higher minimum wage. It is only likely that the
goal may never be reached.
Fair Wage:
Fair wage is a mean between the living wage & the minimum wage. Express
Newspaper Ltd. V/S 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 is a human being in a civilized society.
In Express Newspaper (P) Ltd. V/S Union of India Bhagwati described fair
wage as a mean between the living wage and minimum wage. Marshall would
consider the rate of wage prevailing in an occupation as 'fair' if it is about on
level with the average payment for tasks in other trades which are of equal
difficulties and disagreeableness which require equally rare natural abilities and
an equally expensive training.
In All India Reserve Bank of Employees 'Association V/S R.B.I. Ltd. The
court said that the Fair wage is thus related to fair workload and the earning
capacity. It is a step lower than the living wage.
The concept of fair wage therefore, involves a rate sufficiently high to enable
the worker to provide a standard family with food, shelter, clothing, medical
care and education of children appropriate to his status in life but not at a rate
exceeding the wage coming capacity of the class of establishment concerned.
A fair wage is thus related to the earning capacity and workload. It must
however is realized that fair wage is only living wage by, which is meant a
wage which, is sufficient to provide not only, the essentials above mentioned
but a fair measure of frugal comfort wish an ability to provide for old age and
evil days. Thus while the lower limit of fair wage must ability be minimum
wage, the upper limit is equally set by what may broadly be called the capacity
of industry to pay. This will not depend not only of the economic position of the
industry but also on its future prospects. Between these two limits, the actual
wage will depend on a consideration of certain factor viz:
i) Productivity of labour
ii) The prevailing rate of wage
iii) The level of national income and its distribution and
iv) The place of industry in the economy of the country
In actual calculation of the fair wage, the Committee on Fair Wage observed
that it was not possible to assign any definite weight to these factors. The
comm. on F.W. also recognized that the concepts of F.W. by it could not be
viewed in any since they would from time to time depending on the economics
and social development in the country.
The Minimum Wages Act, 1948 has neither defined minimum wages nor has it
laid down any norms/criteria for fixing the minimum wages. In 2017, the
minimum rates of wages for scheduled employments in the central sphere were
revised based on the norms recommended by the Indian Labour Conference, in
1957 and on the basis of judgment of the Hon’ble Supreme Court delivered in
the case of Reptakos & Co. Vs. its workers in the year 1992. The norms
recommended by the Indian Labour Conference, in 1957 for fixing the
minimum wage are as follows: -
3 consumption units for one wage earner.
Minimum food requirements of 2700 calories per average Indian adult.
Clothing requirements of 72 yards per annum per family.
Rent corresponding to the minimum area provided for under
Government’s Industrial Housing Scheme.
Fuel, Lighting and other miscellaneous items of expenditure to constitute
20% of the total minimum wage.
Subsequently in 1992 the Hon’ble Supreme Court delivered a historic
judgement in the case of Reptakos & Co. Vs. its workers directing that
children’s education, medical requirement, minimum recreation including
festivals/ceremonies, provision for old age, marriage etc. should further
constitute 25% of the minimum wage and be used as a guide in fixation of
minimum wage.
Pay is one of the work-related factors that has the biggest, most noticeable
impact on employees' daily lives, along with working hours. Wages are vital for
supporting employees and their families, but access to sufficient and consistent
pay is not always guaranteed in many regions of the world.
As per the ILO on wages-a workers' Education Manual "in 1928 the
International Labour Conference adopted a Convention (No. 26) and a
Recommendation (No. 30) on minimum wage-fixing machinery, the application
of which was restricted to industry and commerce, while in 1951 a Convention
(No. 99) and Recommendation (No. 89) covered agriculture.
The Wages, Hours of Work and Manning (Sea) Convention, 1946 (No. 76), and
its revising Convention of 1949 (No. 93) and of 1958 (No. 109) deal with the
basic wages to be paid to able seamen.
Particular mention must also be made of the Protection of Wages Convention,
1949 (No. 95), and the Recommendation (No. 85) of the same year;
the Labour Clauses (Public Contracts) Convention, 1949 (No. 94), and the
Recommendation (No. 84) of the same year;
the Equal Remuneration Convention, 1951 (No. 100), and the
Recommendation (No. 90) of the same year; and the Holidays with Pay
Convention, (No. 52), the Recommendation (No. 98) of 1954, and the Holidays
with Pay (Agriculture) Convention., 1952 (No. 101)."
Protection of Wages
ILO Convention No. 95 concerning the protection -of wages seeks to provides
that wages shall be paid (i) only in legal tender; and (ii) directly to workers
concerned. Further deduction would be permitted only under conditions and
extent prescribed by national law.
ILO standards on wages address all of these issues. They provide for the regular
payment of wages, the protection of wages in the event of the insolvency of the
employer and the fixing of minimum wage levels.
The Protection of Wages Convention, 1949 (No. 95): This convention requires
that wages be paid in legal tender at regular intervals, and that workers be free
to dispose of their wages as they choose.
The Minimum Wage Fixing Convention, 1970 (No. 131): This convention
requires that member states establish a system of minimum wages that covers
all groups of wage earners whose terms of employment are such that coverage
would be appropriate
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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