JAMIA MILIA ISLAMIA

FACULTY OF LAW

LABOUR LAW II

PROCEDURE FOR FAIR WAGES & LIVING WAGES

SUBMITTED TO SUBMITTED BY
Dr. SAMIA KHAN MOHD GULAM GAUS
ROLL NO –38

B.A. LL. B. (Hons.), Sem-VI, S/F

Student ID - 20185481

ACKNOWLEDGEMENT

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I would like to acknowledge the beneficence of Dr. Samia Khan in his guidance throughout
the course of completion of this project. It is for this reason I was able to advocate this work
with resources informative as much as concise.

Likewise, I would also like to take this opportunity to extend my gratitude to friends and
family for enhancing my emotional well-being and providing with financial sufficiency to
ensure I would not have to cobble for resources in my quest of penning down this work.

Lastly, may it be known that THE ALMIGHTY is the reason above all for the good deeds
found herein.

CONTENT

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 S.N TOPIC Pg.
O

1) INTRODUCTION 4

2) 4

3) 6

4) 7

5) 9

6) 10

7) CONCLUSION 12

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INTRODUCTION
Wage is a reward for the services rendered or remuneration for the work done and it is as old
as the society itself. In the primitive days, wages were paid in kind, most common of them was
grains and the food. But with the advent of industrialization wages form a complex problem
and in almost all industrialised countries it became a sensitive area of public policy. Very soon
the quantum of wages assumed a common cause of friction between the employers and the
wage-earners. Frequent disputes between employer and wage-earners resulted in strikes over
the demand for wage-increase. The determination of adequate wages that should be justifiably
payable to die workmen by the employer, was not merely an economic problem but a
multidimensional phenomenon, necessarily involving relevant factors like place of industry,
prices of the product, living standards, basic needs of die wage-earner and the governmental
policy in a given society.

"Wages".-'Wages' means all remuneration, capable of being expressed in terms of money, which would
if the terms of the contract of employment, express or implied, were fulfilled, be payable to person
employed in respect of his employment or of work done in such employment and includes house rent
allowance. Wages do 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 or special order of the appropriate
Government;
ii) any contribution paid by the employer to any Pension Fund or Provident Fund or under any scheme
of social insurance;

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iii) any travelling allowance or the value of any travelling concession. Where a trip allowance was
prescribed by a notification, the notification was held to be invalid because trip allowance is meant to
compensate the extra cost which an employee is likely to incur when he moves out of his headquarter
in connection with his employment, it clearly partakes of the character of travelling allowance and
travelling allowance according to the definition of the expression "wages" cannot form a component of
the wages.'
iv) any sum paid to the person employed to defray special expenses entailed on him by the nature of his
employment; or
v) any gratuity payable on discharge.

Prerna Sahyog v. Authority Under Minimum Wages Act and others 1“on receiving a complaint of
non-payment of wages, the Authorities under the Minimum Wages Act, 1948 ordered payment of eight
times of wages as compensation. The Supreme Court held that the award of compensation was too
excessive and hence it was reduced to equivalent of wages awarded to the workman”.

In Management of Ram Krishna Pharmaceutical, Hyderabad v. State Authority under Minimum

Wages Act, 1948 and Joint Commissioner of Labour, A.P. Hyderabad and another 2, a G.O was
issued fixing basic wages and the first respondent directed the petitioner to deposit certain amount
towards the difference in minimum wages payable under the G.O. and actual wages being paid by the
management. The petitioner company impugned the order of the Authority directing it to deposit the
difference in minimum wages payable under G.O. and the actual wages paid. The High Court quashing
the impugned order observed that the petitioner and the second respondent (employees) had entered
into a statutory settlement under Section 12(3) of the Industrial Disputes Act, 1947 and as the total pay
packet thereunder was higher than the minimum by the G.O., the impugned order could not be
sustained. It was not open to the wages second respondent employees to separate one component,
namely, minimum fixed basic wage and contend that the basic wages are less than the wages
prescribed under the G.O.

WAGE-STRUCTURE
Broadly speaking the wage structure can be divided into three categories-
i) ‘The basic minimum wage' which provides bare subsistence and is at poverty line-level.
ii) 'Fair wage' a little above.
iii) ‘The living wage’ which comes at a comfort level.

1
(2002) II LLJ 205 (SC)
2
(2002) II LLJ 1075 (AP)

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Certain principles on which wages are fixed have been stated by the Supreme Court in Kamani Metals
and Alloys v. Their Workmen3.
"Broadly speaking the first principle is that there is a minimum wage which, in any event must be paid,
irrespective of the extent of profits, the financial condition of the establishment or the availability of
workmen or lower wages. This minimum wage is independent of the kind of industry and applies to all
alike big or small. It sets the lowest limit below which wages cannot be allowed to sink in all humanity.
The second principle is that wages must be fair, that is to say, sufficiently high to provide a standard
family with food, shelter, clothing, medical care and education o children appropriate for the workmen
but not at a rate exceeding his wage earning capacity in the class of establishment to which he belongs.
A fair wages is thus related to the earning capacity and the workload. It must however, be realised that
"fair wage" is not "living wage" by which i meant a wage which is sufficient to provide not only the
essential above mentioned but a fair measure of frugal comfort with an ability to provide for old age
and evil days. Fair wage lies between minimum wage, which must be paid in any event, and the living
wage, which is the goal".

MINIMUM WAGES
The expression "minimum wages" is not defined in Act presumably because it would not be possible to
lay down a uniform minimum wages for all industries throughout the country on account different and
varying conditions prevailing from industry to industry and from one part of the country to another. It
was held in Hydro (Engineers) Private Lt v. The Workmen 4, that : "The concept of minimum wages
takes in the factor of the prevailing cost of essential commodities whenever such minimum wage is to
be fixed The idea of fixing such wages in the light of cost of living at a particular juncture of time and
neutralising the rising prices of essential commodities by linking up scales of minimum wages with the
cost of living index cannot, therefore, be said to be alien to the concept of minimum wage Furthermore
in the light of spiralling of prices in recent years, if the wage scales are to be realistic it may become
necessary to fix them so as neutralise at least partly the price rise in essential commodities".
Components of a minimum wage.-A minimum wage must provide n merely for the bare subsistence of
life but for the preservation of the efficiency of the worker, and, so it must also provide for some
measure of education medical requirements and amenities. The concept of minimum wage does n mean
a wage that enables the worker to cover his bare physical need and keep himself just above starvation.
The capacity of the employer to pay is irrelevant in fixing minimum wage. Therefore, no addition shall
be made to the components of the minimum wage, which would take the minimum wage near the
lower level of the fair wage.

3
AIR 1967 SC 1175
4
AIR 1969 SC 182

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In Unichay v. State of Kerala5, it was held that "the Act contemplates that minimum wage rates should
be fixed in the scheduled industries with the dual object of providing subsistence and maintenance of
the worker and his family and preserving his efficiency as a worker"

The Tripartite Committee of the Indian Labour Conference (1957)

the following five norms for the fixing of 'minimum wage':
(i) In calculating the minimum wage, the standard working-class family should be taken to
consist of 3 consumption units for one earner; the earnings of workmen, children and
adolescents should be
(ii) Minimum food requirement should be calculated on the basis of a net intake of calories, as
recommended by Dr. Aykroyd for an average Indian adult of moderate activity.
(iii) Clothing requirements should be estimated at per capita consumption of 18 yards per
annum which would give for the average workers family of four, a total of 72 yards.
(iv) In respect of housing, the rent corresponding to the minimum area provided for under
Government Industrial Housing Scheme should be taken into consideration in fixing the
minimum wage.
(v) Fuel, lighting and other ' miscellaneous' items of expenditure should constitute 20% of the
total minimum wage.

It was held in Workmen of Reptakos Brett & Co. Ltd. v. Management 6, that a worker's wage is no
longer a contract between an employer and an employee. It has the force of collective bargaining
under the labour laws. Each category of the wage structure has to be tested at the anvil of social
justice which is the live-fibre of our society today. Keeping in view the socio-economic aspect of
the wage structure one more component to minimum wage should be added, namely, children
education, medical requirement, minimum recreation including festivals/ceremonies and provision
for old age, marriages, etc. should further constitute 25% of the total minimum wage. It was further
held that the wage structure which approximately answers the above six components is nothing
more than a minimum wage at subsistence level. The employees are entitled to the minimum wage
at all times and under all circumstances. An employer who cannot pay the minimum wage has no
right to engage labour and no justification to run the industry.

In People's Union for Democratic Rights v. Union of India 7, it was held by the Supreme Court
that where children below the age of 14 years are employed in violation of the Employment of

5
AIR1962 SC 12
6
(1992) I LLJ 340 (SC)
7
(1992) 2 LJ 545 (SC)

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 Children Act, 1938 and minimum wages are denied either to such children or to other persons who
by reason of poverty or socially or economically disadvantageous position are unable to approach
the Court, legal redress may be sought on their behalf by any member of public.

FAIR WAGES

There is difference between minimum wages and fair wages. In case of fair wage, besides the
principle of industry-cum-region, the company's capacity to bear the financial burden must receive
due consideration. But mere hopeful observations made in the director's annual report cannot be
basis for awarding increased wages because such observations are sometimes made to inspire hope
and confidence in shareholders and they cannot be a substitute for actual audited figures. 8

S.A.F.L. Works v. State Industrial Court, Nagpur 9 is a leading case on the point. In this case the
Supreme Court observed that in fixing the paying capacity the Tribunal will have to fix the income
as well as permitted deductions and allowances properly incurred. There can be no dispute that
expenses incurred for purchase of raw material, maintenance of the factory, expenses incurred
towards rent, public charges, maintenance of the establishment and expenses incurred in marketing
of the produce should be deducted. These items are not exhaustive. As to whether a particular item
of expenditure is liable to be deducted or not have to be determined on the facts of the case. No
deduction should be allowed for payment of income tax or for allowances made for depreciation or
for making provision for reserve. So far as expenses incurred towards payment of wage bill
inclusive of dearness allowances, bonus, gratuity, etc. are concerned they will have to be deducted.
After properly determining the paying capacity of the industry the Tribunal will have to proceed to
fix fair wages which would include the fitment, scale of wages and dearness allowance. While after
fixing the above the Tribunal will have to determine as to from which date retrospective effect will
have to be given for payment of the wages thus fixed. As the paying capacity will have to be re-
determined the wage including fitment, scale of wages, dearness allowance, period during which
retrospective effect is to be given will have to be determined afresh.

It was held in Transport Corpn. of India Ltd. v. State of Maharashtra & others, that it is not for the
Labour Court or Tribunal to fix the minimum rates of wages. While fixing fair rates of wages the
courts or tribunals take into consideration the minimum rates of wages and where the Government
has not fixed the minimum rates of wages then the courts or tribunals ascertain for themselves what
would be the minimum rate of wages. In fact minimum rate of wages are fixed by the Government.

8
Sangam Press v. Workmen, AIR 1975 SC 2035
9
AIR 1978 SC 1113

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 Courts or tribunals merely ascertain what are the minimum rates of wages for the purpose of
deciding 'fair wages'.

LIVING WAGE

The Fair Wage Committee in its report published by Government of India, Ministry of Labour in
1949 defined the living wage' as under :
"The living wage should enable the male earner to provide for himself and his family not merely
the bare essentials of food, clothing and shelter but a measure of frugal comfort including
education for children, protection against ill-health, requirements of essential social needs, and a
measure of insurance against the more important misfortunes including old age".