Wages – Historical Overview
Specialization :- Human Resource
A ‘wage’ is monetary compensation or remuneration paid by an employer to an
employee in exchange for work done. Payment may be calculated as a fixed
amount for each task completed or at an hourly or daily rate or based on an easily
measured quantity of work done. Wages are composed of two parts: the basic
wage and other allowances. The basic wage is the remuneration, which is paid or
payable to an employee in terms of his contract of employment for the work done by
him. Allowances, on the other hand, are paid in addition to the basic wage to
maintain its value over a period of time.
In India, “wages”, all the enactments cover basic wage and dearness allowance.
“wages”, refer broadly to one of the three things, namely: i) the settles wage rate
per day, week or month; ii) the gross earnings for the days worked, which would
include overtime payment, incentive payment, and allowances payable in cash; or
iii) the take-home pay, which would be the gross earnings minus deductions of all
kinds, such as social security deductions, tax deductions, if any.
The object of Payment of Wages Act, 1936 is to regulate the payment of wages to
certain classes of persons employed in industry; to pay wages in particular form and
at regular interval; and to prevent unauthorized deductions from the wages. The Act
is concerned merely with the fixation of wage periods and not with the fixation of
wages. Employees whose wages average less than rupees 6500 in a month are
covered under the Act. No wage period shall exceed one month in any case. Where
less than 1000 persons are employed, wages shall be paid before the expiry of the
7th day and in other cases before the expiry of the 10th day, after the last day of the
In India, the Royal Commission on Labour appointed in 1929 stressed the need for
fixing minimum wages for workers employed in certain industries. Similarly, the
Labour Investigation Committee also commented upon the low rates of wages
prevailing in some of the industries and recommended immediate steps to remedy
them. The Minimum Wages Bill was introduced in the Central Legislation in 1946
and was passed in 1948. Such provisions which exist in more advanced countries
are more even more necessary in India where workers’ organizations are yet poorly
developed and the workers’ bargaining power is consequently poor.
Wage Payment System Methods :-
1) Time Rate :- The Minimum wages paid for time work.
2) Piece Rate :- The Minimum wages paid for piece work.
3) Guaranteed Time Rate :- Those employed under the scheme of Piece work
but guaranteed wages will be paid on the basis of time.
4) Overtime Rate :- Time rate of piece rate will apply where the employee has
worked overtime over and above his normal working hours.
5) Payment by Results :- Payment by Results is type of public policy
instruments where payments are contingent on the independent verification
Types of Wage levels :-
1) Minimum Wage :- A minimum wage is the lowest hourly, daily, monthly
remuneration that employers may legally pay to workers. Equivalently, it is
the lowest wage at which workers may sell their skills.
2) Living Wage :- A living wage is the minimum income necessary for a worker
to meet their needs that are considered to be basic. These need include
shelter and other incidents like clothing and nutrition.
3) Fair Wage :- A fair wage is a mean between the living wage and the bare
minimum wage. Fair wage is related to fair workload and earning capacity.
The lower limit of fair wages must obviously is minimum wages, the upper
limit is equally set by the capacity of industry to pay.
Components of Wages :-
1) Basic Wage :- Basic wage means all emoluments which are earned by
employee while on duty or on leave or on holidays with wages but not
include food concession, dearness allowance, house rent allowance,
2) Dearness Allowance :- Dearness allowance, it is an additional payment by
the employer to his employee to compensate them to a certain extent for
the rise in the cost of living. It is a device to protect, to a greater or lesser
extent, the real income of wage earners and salaried employees from the
effect of a rise in price.
3) Overtime Payment :- All employees who are deemed to be workers under
the factory Act of under the Minimum Wages Act are entitled to overtime
allowance at twice the ordinary rate of their wages for the work done in
excess of 9 hours on any day or for more than 48 hours in any week.
Components of Wages :-
4) Annual Bonus :- Bonus is regarded as an incentive for regular attendance;
as an encouragement for good work or payment for some special or additional
service by workers. This payment depending upon entirely on company
goodwill which cannot be claimed as of right.
5) General Allowance :- The employers pay various sorts of allowances to their
workmen depending upon the nature of the duties and other incidents of the
employment. Travelling allowance, education allowance, lunch allowance, etc..
6) Incentive Payments :- The objective of incentive wage plans is to obtain an
ideal combination of high productivity, high wages and low unit cost. It is a
payment of further emoluments to the workmen depending not upon extra
profits, but on a extra production; as an encouragement to put in more labour
Agricultural Wage Structure :-
The wage structure in agriculture is different than industry, main difference
between them lies in the fact that industrial wages are completely motorized in
contrast to agricultural wages which are paid in kind as well. Another difference
is the irregular of payment of agrarian wages. In industry, wages may be paid
daily, weekly, fortnightly and even monthly. In agriculture, the casual laborers
whether male or female get their wages sometimes daily or by-weekly and
sometimes even weekly. The other reasons of wage discrimination, lay in the
poverty and illiteracy of agricultural Labour; the casual nature of their
employment and their ignorance of the law, all of which apply particularly to
women. Because of these handicaps, agricultural Labour as a whole and
women in particular are not able to employ methods now common to industrial
Labour to improve their bargaining power.
The wages are not uniform in all farm operations. A male laborer may receive a
little more a day in a certain farm and on a particular season, but at the same
time he may get less in other farm operations or in lean or slack season.
Minimum Wages Issues in India :-
1) Criteria for Fixing Minimum Wages :- The Supreme Court in a historic
judgment in 1992 said that, children’s education, medical requirement,
provision for old age and marriage should further constitute 25% and be
used as a guide for fixing minimum wage which is still not implemented in
India. Minimum wage policy should be revised in every 5 years which rarely
2) Enforcement :- Poor enforcement of the Act is another problem in most of
the states in India cause due to lack of awareness among the workers
about minimum wage provisions and their entitlements under the labour
laws. This is particularly in remote areas and where workers are not
unionized. As a result their wages have long since failed to keep pace with
rising costs and continue to diminish in real value over time.
Minimum Wages Issues in India :-
3) Implementation :- The main problem of minimum wage legislation in India is
Poor implementation. The Act empowers the appropriate government like
Central, State and Local to fix a minimum wage for workers in unorganized
sectors. But exemptions from the payment of minimum wages have been
granted wages to industries. Poor implementation of minimum wages does not
affect on organized sectors but more on unorganized sectors. Unorganized
workers are employed with millions of employers like small trade,
enterprise,etc… who are scattered and hence become difficult to cover them
under the Act. Also many workers for the fear of losing their jobs do not report
about lower payments than minimum wage rates. At times, these workers are
even forced by their employers to certify payments below minimum wages.
Solutions on Minimum Wages Issues in India :-
The main objective to be considered for improvements in Wages Act is,
Minimum wage rate should be two fold: 1) Social objective – this is by providing
sufficient purchase power to the worker, enable him/her to have a basic
standard of living. In long run such a step would help in abolishing labour
exploitation and poverty. 2) Economic objective - the rate of minimum wage
should be fixed at such a level which would motivate workers and enable them
to enjoy the benefits of economic growth.
Minimum Wage legislation in India requires the active support from workers,
trade unions and labour associations. It would also require sincerity on part of
the labour department in each state to determine minimum wage rate on the
basis of ethical and humanitarian concerns in order to ensure basic
subsistence to workers in unorganized sectors.