What is minimum wage ?
A minimum wage is the lowest remuneration that employers can legally pay to their employees – the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20 th century, because minimum wages increase the cost of labor, many companies try to avoid minimum wage laws by using gig workers , moving labor to locations with lower or nonexistent minimum wages, or by automating job functions.
What is floor level of minimum wages?
The wage code empowers the central government to fix national floor level of minimum wages (NFLMW),below which no state can set their minimum wages. The code on wages ‘universalises” the provisions of minimum wages and timely payment of wages to all employees irrespective of the sector and wage ceiling.
Under the code on wages , which is yet to be enforced , a National Floor Level Minimum Wage will be set up by the central government to be revised every five years, while state will fix minimum wage for their regions , which cannot be lower than floor wage.
Who fixes floor wages ?
The ministry of Labor and Employment constituted an expert group to provide technical inputs and recommendations on fixation of Minimum Wages and National Floor Minimum Wages. The group has been constituted for a period of three years . It is second such expert committee formed by the Government.
How is the minimum wage calculated in India?
India offers the most competitive labor cost in Asia , with the national level minimum wage at around INR176 per day , which works out to INR 4,576 per month.
This is a national floor level wage – and will vary depending on geographical areas and other criteria.
It must be noted that India’s minimum wage and salary structure differs based on the following factors : state , area within the state based on development level(zone) , industry , occupation and skill – level. This offers foreign investors a range of options when choosing where to locate their set up.
India uses a complex method of setting minimum wages that defines nearly 2000 different types of for unskilled workers and over 400 categories of employment , with a minimum daily wage for each type of job . The monthly minimum wage calculation includes the variable dearness allowance(VDA) component, which accounts for inflationary trends , that is , the increase or decrease in the consumer price index (CPI) , and where applicable , the house rent allowance (HRA).
The calculation of minimum wage factors in the skill – level of the worker and the nature of their work. Broadly , workers in India are categorized as unskilled, semiskilled, skilled and highly skilled.
Nevertheless , since passing the wage code in 2019 , there has been no new development on implementing a national minimum wage for Indian workers.
It must be noted that India”s minimum wage and salary structure differs based on following factors : state, area within the state based on development level (ZONE) , industry , occupation and skill- level.
India uses a complex method of setting minimum wages that defines nearly 2000 different types of jobs for unskilled worker and over 400 categories of employment ,with a minimum daily wage for each type of job.
CATEGORY
UNSKILLED
SEMI SKILLED
SKILLED
HIGHLY SKILLED,
HIghly Skilled:
A highly skilled worker is one who is capable of working efficiently and supervises efficiently the work of skill.
Skilled:
A skilled employee is one who is capable of working efficiently of exercising considerable independent judgement and of discharging his duties with responsibility. He must possess a thorough and comprehensive knowledge of the trade, craft or industry in which he is employed.
Semi-skilled:
A semiskilled worker is one who does work generally of defined routine nature wherein the major requirement is not so much of the judgment, skill and but for proper discharge of duties assigned to him or relatively narrow job and where important decisions made by others. His work is thus limited to the performance of routine operations of limited scope.
Unskilled:
An unskilled employee is one who does operations that involve the performance of simple duties, which require the experience of little of no independent judgment or previous experience although familiarity with the occupational environment is necessary. His work may thus require in addition to physical exertion familiarity with variety of articles or goods.
Rate of Minimum Wages Revised for Central sphere Employees.
| Category | Above Ground | Below Ground |
|---|---|---|
| Unskilled | 431 | 539 |
| Semi-Skilled/Unskilled Supervisor | 539 | 645 |
| Skilled/Clerical | 645 | 752 |
| Highly Skilled | 752 | 840 |
Recommendation of 7th pay commission on minimum wages.
Minimum pay for government employee :
The minimum pay of a new government recruit at an entry level is now Rs 18000 per month. As for a newly recruited class I officer, the minimum salary now stands at INR. 56, 100 per month.
Minimum wage in India is expected to reach 178 INR / per day by the end of 2021, according to Trading Economics global micro models and analysts expectations. In the long term , the India National Floor Level Minimum Wage is projected to trend around 190 INR/ per day in 2022, according to our econometric models.
THINGS TO REMEMBER. List of designation ,category and area can be found in notification number186E, dated 19th january ,2017.
Variable dearness Allowances shall be adjusted by the Chief Labour Commissioner at an interval of six months.
Where in area the minimum rates of wages fixed by this notification are lower than the minimum rates of wages fixed by the state govt for the employee of the aforesaid employment in relation to which the state govt is the appropriate govt. Rates of states shall be imposed in these cases.
The minimum rates of wages include the wages for weekly day of rest.
Area A and area B shall be respectively comprise of all the places as specified in the Annexure to this notification and include all places within a distance of fifteen kilometre from the periphery of municipal corporation or municipality or cantonment board or notified area committee of a particular place.
- Government should focus on “Need Based Minimum Wage” covering nutrition, healthcare, education, housing and provisions of old-age. Therefore, guaranteed minimum wage should be treated as a fundamental constitutional right for every citizen of India.
- According to the new law, the revision of minimum wages is to be done after every 5 year, which is quite a long period considering the volatility in the market. Therefore, minimum wages should be adjusted to inflation so as to align the wages to market volatility.
- The National Commission for Labours should be formed to streamline the issues and challenges of labour market and fixing discrepancies in national level minimum wage computation.
For the minimum wage system to play a meaningful role in aligning protection with the promotion of sustainable growth, it must be properly designed, its goals clarified, and its enforcement made effective. Right now , the organized sector is highly regulated where as unorganized sector is least regulated.
NEED
Minimum wage are accepted globally to be a vital means to both combating poverty and equality crucially ,ensuring the vibrancy of any economy.
In the aftermath of the 2008 global financial crisis , the purchasing power worldwide got eroded.
Criticism
The code lacked consistency in its use of both worker and employer in terms and underlined that since minimum wage is a matter of right for every working person , a common definition of the employee /worker needs to be given in the code. However , in the Bill retained the definition as it is.
The definition of wage is confusing , too long and too difficult to determine what wage is as per this definition.
Provisions for different floor rates for different geographical area will make the concept of a national rate a deceptive play to mislead people.
CHALLENGES
Potential threat from labor official.
Less coverage of code.
Counterproductive for being transparency.
Concentrating on more than one goal.
It is hoped that the central advisory board will come up with appropriate national minimum floor wage for benefit of workers segments.
What happens if any one does not follow minimum wage ?
It is illegal for employers to pay employees less than the minimum wage. If any employer violates minimum wage laws – workers can recover the money they owed in a wage and hour lawsuit. If the violation affects numerous employees , a wage and hour class action may be appropriate. 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 violaters may be punished to pay a fine (which may be extend to 500 rupees) or imprisonment, which may be extend to a period of six months or both.
THANKS FOR READING.
Rupa Banerjee – Payroll Editor.
Email Address – rupabanerjee70@gmail.com