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The Minimum Wages Act, 1948

Learning objectives are to know:

 Concept and justification of statutory minimum wages

 Scope and application of the Act
 The manner of fixing and revising minimum rates of wages
 Settlement of claims and disputes by the employees

Introduction

In India, the Royal Commission on Labour appointed in 1929 stressed the need for fixing
minimum wages for workers employed in certain industries. The Labour Investigation
Committee commented on the low rates of wages prevailing in some of the industries and
recommended immediate steps in this behalf. The question of statutory fixation of
minimum rates of wages was discussed in the sessions of the Indian Labour Conference
in 1943,1944 and 1945. In the year 1945, the Conference approved the enactment of law
on minimum wages. Accordingly, the Minimum Wages Act came into force in the year
1948.

The Act is founded on the concept of social justice to the workmen employed in certain
scheduled employments. These employments were called the sweating industries because
of the painstaking manual work carried on in such industries. It is a piece of social
legislation which provides protection to workmen in employments in which they open to
exploitation by the employers due to their unorganised character and poor bargaining
power.

The Statement of Objects and reasons of the Bill on this Act states – “The justification for
statutory fixation of minimum wages is obvious. Such provisions as exist in more
advanced countries are even more necessary in India where workers’ organisations are
yet poorly developed and the workers’ bargaining power is consequently poor.”

Contract of employment between employer and employees is not an ordinary commercial

contract where the parties enjoy the freedom to stipulate the terms and conditions as per
their wish. A commercial contract is the result of negotiations and bargaining between the
parties where the pre-supposition is that both the parties are equal in strength. Contract of
employment is one where one party, namely the employees, has always been week from
many generations and it is pointless to expect that employees, particularly unskilled
employees, would refuse to enter into contract of employment because the consideration
offered by the employers (i.e. wages) is not reasonable or upto their expectations. It is a
Hobson’s choice for large number of employees in India where either they have to accept
employment on the terms of the employer or go without employment.
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Hence the Supreme Court of India also stressed the need of the Act when its
constitutionality was challenged in the case of Bijoy Cotton Mills v/s State of Ajmer in
the year 1955. The Supreme Court observed that the intervention of the Government is a
must and the matter of wage-fixation cannot be left to be decided by the parties alone. If
so left to the parties, the exploitation of employees is guaranteed.

Scope and application

The Act extends to the whole of India. It is applicable to the employment, which are
included in the schedule appended to the Act. The Schedule contains 79 different types of
employments. The Central and State Governments are empowered to add to this Schedule
by inserting the name of any employment or class of employment, if it is of the opinion
that the Act should be made applicable to such employment.

Some of the employments, which are included in the Schedule and hence covered under
the Act are employments in any factory, plantations, mines, shops and commercial
establishments, woolen, carpet making or shawl weaving establishment; rice mill, floor
mill or dal mill; tobacco manufactory or bidi making; Stone breaking or stone cutting;
public motor transport; leather manufactory; glass industry; plastic or rubber industry;
cinema halls; hotel, restaurants or eating places; local authority; and others.

Important definitions

Appropriate Government means the Central Government, in relation to any scheduled

employment carried on by or under the authority of the Central Government or a railway
administration or in relation to a mine, oil field or major port or any corporation
established by a Central Act. In relation to other scheduled employments, the Appropriate
Government is the State Government.

Cost of living index number, in relation to employees in any scheduled employment in

respect of which minimum rates of wages have been fixed, means the index number
ascertained and declared by the competent authority by notification in official gazette to
be the cost of living index number applicable to employees in such employment.

Employer means any person who employs, whether directly or through another person,
or whether on behalf of himself or an other person, one or more employees in any
scheduled employment in respect of which minimum rates of wages have been fixed
under this Act, and includes,

 Manager, in the case of a factory;

 Persons nominated by the Government, in the case of a scheduled employment

under the control of the Government, or the head of department;
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 Persons nominated by the local authority in the case of a scheduled employment

under the control of any local authority, or the chief executive officer; and

 In any other case, the person who is responsible to the owner for the supervision
and control of the employees.

Wages means all remuneration, capable of being expressed in terms of money which, 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 –

 The value of any house-accommodation, supply of light, water, medical

attendance or any other amenity or any service excluded by general or special
order of the Appropriate Government;

 Any contribution paid by the employer to any pension fund or provident fund or
under any scheme of social insurance;

 Any travelling allowance or the value of any travelling concession;

 Any sum paid to the person employed to defray special expenses entailed on him
by the nature of his employment; or

 Any gratuity payable on discharge.

Explanation

The definition is somewhat similar to the definition of wages under the Payment of wages
Act. The analysis of the definition reveals that the term wages means all the kinds of
remuneration which become payable to an employee, if the express or implied terms of
employment are fulfilled. If the employer extends any amenities or services to the
employees in lieu of wages, the value of such services shall also be treated as wages.
However, the types of remunerations, which are specifically excluded, are not wages.

Employee means any person who is employed for hire or reward to do any work, skilled
or unskilled, manual or clerical, in a scheduled employment in respect of which minimum
rates of wages have fixed; and includes an out-worker to whom any articles or materials
are given out by another person, to be made up, cleaned, washed, altered, ornamented,
finished, repaired, adapted or otherwise processed for sale for the purposes of the trade or
business of that other person where the process is to be carried out either in the home of
the out-worker or in some other premises not being premises under the control and
management of that other person and includes, for the purposes of claims and offences
under the Act, any person who has been an employee and who has ceased to be so by
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reason of superannuation, retirement, dismissal, removal, discharge, termination of

service or otherwise howsoever and also includes an employee declared to be an
employee by the Appropriate Government but does not include any member of the
Armed Forces of the Union.

Explanation

The term employee, in the first instance, means and includes a person who is employed
for remuneration to do any skilled or unskilled, manual or clerical work for the employer.
The definition further includes a person to whom any material is given by the employer
for the purpose of carrying out any process on the same at any place other that the place
belonging to the employer. Such person is called an out-worker.

There are certain employments where the employees do not work on the premises of the
employer. For example, in the Bidi Manufacturing, the employees are given the tobacco
and tendu leaves every day in the morning by the employer. The material is taken home
by the employees, bidis are rolled and formed into bundles. By the evening, the
employees bring the bundles back to the employer and they are paid remuneration on the
basis of the number of bundles are made. Such persons are called out-workers. No
employer can deny the employer-employee relationship with such persons on the ground
that they do not work either on his premises or under his supervision and control. The
definition of employee specifically covers the out-workers and therefore the employer of
such persons is under obligation to pay the remuneration not below the rates of minimum
wages fixed for such employment.

Fixing of minimum wages

Section 3 of the Act empowers the Appropriate Government to fix the minimum rates of
wages for the scheduled employments. It provides as follows:

 The Appropriate Government shall fix the minimum rates of wages payable to
employees in the scheduled employment in the prescribed manner.

 The State Government may fix the different minimum rates of wages for different
parts of the State or different classes of employments.

 The minimum rates of wages so fixed shall be reviewed periodically but at least
once in five years, and if necessary, they shall be suitably revised.

 If the total number of employees in any scheduled employment in the whole State
is less than one thousand, the State Government shall refrain from fixing
minimum rates of wages in respect that employment. However, if at any time,
after inquiry, it comes to a finding that the number of employees has risen to one
thousand or more, it shall proceed to fix the minimum rates of wages for them.
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 The Appropriate Government may fix –

a. A minimum rate of wages for time work – called a minimum time rate;

b. A minimum rate of wages for piece work – called minimum piece rate;

c. A minimum rate of remuneration to apply in the case of employees

employed on piece work for the purpose of securing to such employees a
minimum rate of wages on a time work basis – called a guaranteed time
rate,

d. A minimum rate, whether time rate or piece rate, to apply in substitution

for the minimum rate which would otherwise be applicable in respect of
overtime work done by employees – called overtime rate.

 If any industrial dispute relating to rates of wages payable to any of the employees
employed in a scheduled employment, the rates of minimum wages fixed or
revised under this Act shall not apply to such employees as long as the industrial
dispute is pending or the order issued by the Authority hearing the industrial
dispute is in operation.

Similarly, if the industrial dispute relates to all the employees in a particular

scheduled employment, the Government shall not fix or revise the rates of
minimum wages during the said period.

 In fixing the or revising the rate of minimum wages different rates may be fixed
for –

a. Different scheduled employments;

b. Different classes of work in the same scheduled employment;
c. Adults, adolescents, children and apprentices; or
d. Different localities.

 Minimum rates of wages may be fixed by the hours, by the day or by the month.
(A larger wage period is not allowed under the Payment of wages Act)

Minimum rate of wages

 A minimum rate of wages fixed by the Appropriate Government may consist of –

a. A basic rate of wages and a special allowance. The rate of special

allowance is adjusted periodically as per the variation in the cost of living
index number.
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b. A basic rate of wages with or without the cost of living allowance and the
cash value of the concessions in respect of supplies of essential
commodities at concession rates, where so authorised.

c. An all inclusive rate allowing for the basic rate, the cost of living
allowance and the cash value of the concessions, if any.

Procedure for fixing and revising minimum wages

Section 5 of the Act lays down the procedure for fixing and revising the rate of minimum
wages by the Appropriate Government for any scheduled employment. The analysis of
the provision shows that there are two approaches to fixing and revising the rates of
minimum wages by the Appropriate Government. They are as follows:

 Under the first method, the Appropriate Government may appoint as many
committees and sub-committees as it considers necessary to hold enquiries in
respect of fixation or revision of minimum rates of wages. After considering the
advice of the said committees, the Appropriate Government shall issue a
notification in the Official Gazette fixing or revising the minimum rates of wages
for any particular scheduled employment. Such minimum rates shall come into
force and become effective on the expiry of three months from the date of
publication of the notification, unless a different date is specified in the
notification.

The Committees and Sub-Committees shall consist of persons to be nominated by

the Appropriate Government who represent employers and employees in the
scheduled employments and they shall be equal in number. It shall also consist of
independent persons who shall not be more than one third of the total number of
members. One such independent member shall be the chairman of the committee
or sub-committee.

 Under the second method, the Appropriate Government publishes its proposal in
the Official Gazette about the fixation or revision of the minimum rates of wages
in respect of any scheduled employment. It is for the information of all the
concerned who are likely to be affected by such wage fixation or revision. It shall
invite representations from the concerned persons and fix a date for hearing the
representations. Such date shall be at least two months after the date of the
notification.

After considering the representations as above, the Appropriate Government shall

decide on the fixation or revision of minimum rates of wages and shall
accordingly issue a notification to that effect. The minimum rates so fixed or
revised shall become effective after the expiry of three months after the date of
the notification unless a different date has been specified.
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Advisory Boards

For the purpose of co-coordinating the work of committees and sub-committees

appointed by the Appropriate Government, an Advisory Board shall be appointed to
advise the Appropriate Government and giving advice to the Appropriate Government in
the matters of fixing and revising the minimum rates of wages.

The Advisory Board shall consist of persons to be nominated by the Appropriate

Government representing employers and employees in the scheduled employments and
they shall be equal in number. It also consists of other independent members and of such
independent members is the chairman of the Board.

The committee or the Advisory Board can only tender advice which is not binding while
fixing or revising the minimum rates of wages. The Government is expected to take that
advice squarely into consideration and act, but it is not bound to do so.

The Advisory Board can adopt its own procedure for making recommendations to the
Appropriate Government. Its primary duty is to collect data for fixing and revising
minimum wages for any scheduled employment. A notification issued by the Appropriate
Government on the basis of the recommendations of Advisory Board shall not be set
aside by any Court unless there are exceptional reasons for doing so.

Central Advisory Board

 For the purpose of advising the central and State Government in the matters of the
fixation and revision of minimum rates of wages and other matters under this Act,
and for co-coordinating the work of the Advisory boards, the Central Government
appoints a Central Advisory Board.

 Such Board consists of persons nominated by the Central Government who

represent employers and employees in the scheduled employments. They are
equal in number. There are also independent persons in the Central Advisory
Board who are not more than one third of the total number of members. One of
such independent persons is the chairman of the Board.

Wages in kind

It is customary in many employments in India that part of the wages payable to

employees are paid in kind i.e. in the form of goods or articles. However, there are many
malpractices by the employers in such payment particularly with respect to determining
the value of the goods supplied to employees. Therefore the Act provides as follows:
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 Minimum wages payable under this Act shall be paid in cash.

 Where it has been the custom to pay wages wholly or partly in kind and the
Appropriate Government is also of the opinion that such system is necessary
under the circumstances, it may authorise the payment of wages in kind, either
wholly or partly.

 The Appropriate Government shall determine the cash value of the commodities
supplied in lieu of wages, in the prescribed manner.

Fixing hours for a normal working day

Fixing of minimum wages for any scheduled employment would be a meaningless

exercise unless the number of working hours is also determined under the Act. If an
employer is permitted to require his employees to work for longer hours, the objective of
fixing the minimum rates of wages in that employment would obviously be frustrated.

The Act therefore empowers the Appropriate Government to:

 Fix the number of hours of work which shall constitute a normal working day,
inclusive of one or more specified intervals;

 Fix the number of hours of work which shall constitute a normal working week;

 Provide for a day of rest in every period of seven days which shall be allowed to
all employees or to any specified class of employees and for the payment of
remuneration in respect of such days of rest; and

 Provide for payment for work on a day of rest at a rate not less than the overtime
rate.

Most of the State Governments have made the following rules relating to working hours
in respect of the scheduled employment in respect of which they are the Appropriate
Governments.

 The number of hours which shall constitute a normal working day shall be:

a) In the case of an adult – 9 hours;

b) In the case of an adolescent – 7 hours; and

c) In the case of a child – 4 ½ hours.

 However, in respect of employment in public motor transport, no adult employee

shall be required to work for more than 8 hours in a day or forty-eight hours in a
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week.

 Where an employee has worked for not less than 6 days continuously, he shall be
allowed a day of rest and he shall be paid remuneration for the same at the rate at
which he was paid for the preceding day.

 Where an employee in any scheduled employment works for more than nine
hours on any day or forty-eight hours in any week he shall be entitled to wages at
double the ordinary rate of wages in respect of the overtime work.

Inspectors

Inspectors are the persons appointed by the Appropriate Government for the defined local
limits to ensure the compliance of the provisions of the Act. Every Inspector is a public
servant within the meaning of the Indian Penal Code. The powers of Inspectors are:

 To enter any premises with his assistants where employees are employed or work
is given out to out-workers in any scheduled employment, for the purpose of
inspection of any documents;

 Examine any person who he believes to be an employee or an out-worker;

 Require any person giving or receiving out-work to give any information

regarding the names and addresses of the concerned persons;

 Seize or take copies of documents, which may be relevant when he believes that
an offence has been committed under the Act.

Wages for less than a day

Where an employee works on any day for a period less than the requisite number of hours
constituting a normal working day, he shall nonetheless be paid for the full day unless his
failure to work is caused by his unwillingness to work and not by the omission of the
employer to provide him with work

Wages for two or more classes of work

Where an employee does two or more classes of work with different rate of minimum
wages, the employer shall pay to such employee wages at not less than the minimum rate
in force in respect of each such class for the time respectively occupied in the classes of
work.
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Claims

 Judicial machinery to hear and decide the claims arising out of the provisions of
the Act is constituted by the Appropriate Government for different regions. This
judicial authority, called – “the Authority”, may either be a Labour
Commissioner, or the Commissioner under the Workmen's Compensation Act or
a Judge of a Civil Court. The Authority shall hear and decide the claims of the
employees in scheduled employments relating to payment of wages less than the
minimum rates of wages or delayed payment of wages or non-payment of wages
including non-payment of wages for overtime work or for rest day.

 The Authority shall have all the powers of a Civil Court under the code of civil
procedure for the purpose of taking evidence and enforcing the attendance of
witnesses and compelling production of documents.

 Where an employee has any claim of the above nature, the employee himself or
any officer of a registered Trade union or any Inspector may apply to the
Authority for necessary direction.

 Such application has to be filed within a period of six months from the date the
minimum wages became payable. However, late filing of the application may be
permitted if sufficient reasons are given by the applicant.

 After necessary enquiry into the application and after giving an opportunity of
hearing to the employer, if the Authority is satisfied that wages were not paid as
per the minimum rates prescribed, it shall order the payment of difference along
with the compensation upto ten times the difference.

 If the application is malicious or vexation, it shall dismiss the application with a

direction to the applicant to pay a penalty of Rs. 50/-.

 A number of employees in the scheduled employment may file a single

application instead of fling separate application before the Authority. For the
purpose of computing compensation ordered, each employee shall be deemed to
have filed a separate application.

Miscellaneous provisions

 If any amount payable to an employee under this Act cannot be paid on account
of the death of the employee or because his whereabouts are not known, the same
shall be deposited with the prescribed authority of the Appropriate Government.
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 Any contract or agreement, whether made before or after the commencement of

this Act whereby an employee either relinquishes or reduced his right to a
minimum rate of wages or any privilege or concession accruing to him under this
Act shall be null and void in so far as it purports to reduce the minimum rate of
wages fixed under the Act.

Self-assessment questions

1. Explain the need for statutory fixation of minimum wages? How would you
justify the constitutional validity of the Minimum Wages Act?

2. What are the provisions of the Minimum wages Act relating to fixation and
revision of minimum wages?

3. Explain the procedure for filing and deciding claims under the Minimum Wages
Act.

4. Explain the following under the Minimum Wages Act:

a) Powers of Inspectors

b) Normal working day

c) Different wage rates

d) Definition of wages
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