Minimum Wage in India – What You Need to Know

Minimum Wage in India – What You Need to Know

A fair day’s wage for a fair day’s work is an adage that still holds today. All employees from all sectors and walks of life are entitled to a minimum wage. Under the purview of statutory compliance, organizations must pay employees a minimum wage for work carried out.

Minimum wage is defined as a non-negotiable payment that an employer pays an employee for the work done by an employee during a specific period. An arbitrary body can previously agree upon this amount to be paid to the employee before the work commences by the employee. The standard and extent of minimum wage differ from country to country. The minimum wage also differs within a country as well.

Fixing Minimum Wage

Ensuring and calculating minimum wage can be a tricky process. However, in 1948, the Tripartite Committee on Fair Wages, appointed by the Central Advisory Council, laid down certain criteria for minimum wages in the Minimum Wages Act, 1948.

The criteria consist of 5 elements that have to be considered while fixing the salary structure of employees.

  • 3 consumption units per earner
  • A minimum food requirement of 2700 calories per average adult
  • A 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 which would effectively constitute 20% of the total minimum wage.
  • In addition to these, the Appropriate Government would have the power and mandate to fix the minimum rates of wages. It can fix the minimum rates of wages either by the hour, by the day, by the month or even for longer periods.

Classification of Workers

Given that minimum wage differs nationally, another key element in understanding how minimum wage is calculated is by worker classification. The 4 key categories are:

  • Unskilled Workers: Unskilled workers carry out operations or duties that are relatively simple. These tasks require little to no education, experience, or judgment of previous experience, along with some physical exertion.
  • Semi-skilled Worker: A semi-skilled worker carries out tasks of a defined and routine nature that require certain abilities and training beforehand, but not an advanced education or any specialized skill sets. The work that these workers or employees do is limited to routine operations of limited scope.
  • Skilled Worker: A skilled employee or worker works efficiently and has independent judgment and autonomy while discharging their duties. Skilled workers or employees must possess a comprehensive knowledge of the trade they are involved in.

(Read more: Salary Trends in India)

Code On Wages, 2019

In 2019, the code on wages, an act that consolidates, repeals, and replaces 4 key labour laws, namely:

  • The Payment of Wages Act, 1936
  • The Minimum Wages Act, 1948
  • The Payment of Bonus Act, 1965
  • The Equal Remuneration Act, 1976.

The code on wages will apply to all employees across all sectors. What must be noted is that wage-related decisions for employments such as railways, mines, and oil fields, among others, will be made by the central government, while state governments will make decisions for all other employments.

The act’s core objective is to regulate wage and bonus payments in all walks of employment where any industry, trade, business, or manufacturing is performed.

The code on wages guarantees minimum wage to a number of employees and ensures that the minimum wages are reviewed once every 5 years.

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