Components of Wage & Salary

Administration

Sritama M Dasgupta
The Bare Subsistence / Minimum wage

• The Bare minimum wage is a "wage would be

sufficient to cover the bare physical needs of
the worker and his family, i.e., a rate which has
to be paid to the worker irrespective of the
capacity of the industry to pay".
• (Crown Aluminium Works v. Their Workmen, op. cit.; see also
Express Newspapers Pvt. Ltd. v. Union of India, (1961) 1 L.L.J.
339 (SC).)
 MINIMUM WAGE
• The Committee on Fair Wages stated that the
minimum wage must provide not merely for
the subsistence of life,' but for the
preservation of the worker.
• For this purpose -some measure of education,
medical requirements and amenities.
 MINIMUM WAGE contd.
• An industry which was incapable of paying this
minimum wage had no right to exist, and for
fixing the minimum wage, no regard should be
paid to the capacity of the industry to pay and
it should be based on the requirements of the
worker and his family, (Government. of India,
Report of the Committee on Fair Wages, p. 15
• In Hindustan Times Ltd. v. Their Workmen, (1963) 1 L.L.J. 108, the
SC explained the concept of minimum wage and observed :
• At the bottom of the ladder, there is the min basic
wage which the employer of any industrial labour
must pay in order to be allowed to continue an
industry.
• Above this -the fair wage, which may roughly be
said to approximate to the need-based minimum in
the sense of a wage which is adequate to cover the
normal needs of the average employee regarded as
a human being in a civilized society.
 Need-based Minimum Wage
• The 15th Indian Labour Conference held in
1957
• 'need-based' and should ensure the minimum
human needs of the industrial worker,
irrespective of any other considerations.
• To calculate the min wage, the committee
accepted the following 5 norms and
recommended that they should guide all wage-
fixing authorities, including minimum wage
committees, wage boards, adjudicators, etc.
• In calculating the minimum wage, the standard
working-class family should be taken to consist of
three consumption units for one earner, the
earnings of women, children, and adolescents
should be disregarded.
• (With the husband assigned 1 unit, wife, 0.8 unit
and two children, 0.6 units each, the minimum
wage needs to address 3 consumption units;)
• Minimum food requirements should be
calculation the basis of a net intake of 2,700
calories, as recommended by Dr. Aykroyd for an
average Indian adult of moderate activity.
• Clothing requirements- 5.5 meters per
month) for the average worker’s family.
• minimum rent charged by government in
any area for houses provided under the
subsidised industrial housing scheme for
low-income groups; and
• Fuel, lighting and other miscellaneous items
of expenditure should constitute 20 per cent
of the total minimum wage.
• The difficulty in this case in accepting
the need-base formula is very real. The
Reserve Bank is quite right in pointing out
that the minimum wage so fixed would be
above per capita income in our country and
that it is not possible to arrive at a constant
figure in terms of money.
• Amount of minimum wage calculated on
the need-base formula was said by the Pay
Commission to be extraordinarily high.
• All India Reserve Bank Employees ... vs
Reserve Bank Of India on 23 April, 1965
 The Minimum Wages Act, 1948

• “Wages" to mean: all remuneration expressed

in terms of money, , if the terms of the
contract of employment, 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 - supply of light, water, medical
attendance;
– any contribution paid by the employer to any
Pension Fund or Provident. Fund or under any
scheme of social insurance;
– any travelling allowance
– 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.
• Minimum amount of remuneration that an
employer is required to pay wage earners for
the work performed during a given period,
which cannot be reduced by collective
agreement or an individual contract.
• minimum wages exist in more than 90 per cent
of the International Labour Organisation's (ILO)
member States.
 Origins of minimum wages in the US
• In the early 1900s, there was widespread concern
about “sweatshops” in the United States, and
particularly about the working conditions of women
and children.
• Idea of a minimum wage was supported both by the
American Association for Labor Legislation and the
National Consumers’ League, a group led by women
• Minimum wages were first introduced at state level
and in most cases applied only to women and
children.
• State minimum wages were regularly
challenged in courts,-US Supreme Court
declared minimum wages to be
unconstitutional.
• In 1938, US Congress adopted the Fair Labor
Standards Act, which instituted a federal
minimum wage.
• Validated by the Supreme Court in 1941.
• Evolution of Indian labour legislation is
obviously interlaced with the history of British
colonialism.
• International Labour Conference (1928) -Draft
Convention was adopted
• Royal Commission on Labour adopted the
subject of minimum wages (1929).
• Need for establishing statutory wage fixing
machinery in India was first discussed-1929
• On 11 April 1946, a Minimum Wages Bill, was
introduced- Dr B R Ambedkar- but the
passage of bill was considerably delayed by
the constitutional changes in India. It reached
the statute book only in March 1948.
• First minimum wages law enacted in New
Zealand in 1894
 FAIR WAGE
• It is between minimum wage and living wage
• Based on capacity to pay and the region – cum –
industry
• Sufficiently high to provide standard family with
food, shelter, clothing, health and a decent
measure of education
• lower limit of the fair was must obviously be the
minimum wage, the upper limit is equally set by
what may broadly be called the capacity of the
industry to pay.
 FAIR WAGE contd.
• Actual wages will depend on: (i) the
productivity of labour; (ii)
• The prevailing rates of wages in the same or
similar occupations in the same or
neighboring localities;
• The level of national income and its
distribution
• The place of the industry in the economy of
the country.
 FAIR WAGE contd.
• The Hindustan Times Ltd. v. Their Workmen,
(1963) 1 L.L.J. 108, the Supreme Court defined
fair wage as something above the minimum
wage, "which may roughly be said to
approximate to the need based minimum
wage, in the sense of a wage which is
adequate to cover the normal needs of the
average employee, regarded as a human being
in a civilized society".
 LIVING WAGE
• Justice Higgins of the Australian
Commonwealth Court defined the living
wage as one appropriate for "the normal
needs of the average employee, … living in a
civilized community."
• “Sufficient to insure the workmen, food,
shelter, clothing, frugal comfort, provision for
evil days, etc. as well as regard for the special
skill of an artisan if he is one."
 LIVING WAGE contd.
• Article 43 of the Indian Constitution has also
adopted the following as one of the Directive
Principles of State Policy:
• The State shall endeavour to secure, by
suitable legislation or economic organization
or in any other way, to all workers, agricultural,
industrial or otherwise, work, a living wage,
conditions of work ensuring a decent standard
of life and full enjoyment of leisure and social
and cultural opportunities...
 LIVING WAGE [ CONTD]
• For : giving employees a decent standard of
living will enhance productivity and benefit
the company.
• Also will reduce turnover and prevent costly
recruitment and training costs
 LIVING WAGE [CONTD]
• Against : sets a high wage floor thereby
preventing companies from recruiting more
people.
• Increases unemployment even though people
are willing to work at lower wages
• Concept of living wage may vary from country
to country, place to place because it depends
upon the price level of necessaries of life and it
is determined by the socioeconomic conditions
of a particular country.
 THE REALITY
• Advanced european societies have implemented
concept of living wage as they are welfare states and
believe that workers must be able to live in a civilised
community
• Have set limits to competitive conditions for wage
negotiations
 TIME RATED WAGES
• Is paid based on hours and days worked, viz 8 hrs
per day, over- time hrs, 26/30 days per month
• Part – time workers are also time rated
• Is not based on quantity produced but on contact
time at workplace
• Hence, not measurable directly on output
• Encourages beginner or learner to learn
• Improved quality of work
 TIME RATED WAGES contd.
• Scientific management
• There is no close control over labour costs
because we have unequal output by workers.
• Time wage system by itself offers no incentive
for employees to put forth their best efforts,
because there is no direct incentive to
produce more, Effort and reward have no
direct positive correlation.
 PIECE RATED WAGES
• Employment where payment is based on a fixed rate
per unit produced or action performed
• It is the oldest form of performance related pay
• If quality is equal, the more productive worker gains
• This method guarantees cost per unit, useful for
planning and forecasting
• In service sector, output can be measured by no. of
operations
Completed, such as number of calls for telemarketers
 PIECE RATE [CONTD]
• Piece work originated in guild system before
industrial revolution when complete pieces
were produced by apprentices
• Could be part or complete job
• Can be individual effort or group effort
• Easier to measure and pay for
• Can be incentivized
• Variation in the earnings of the workers
 Balance Method
• Combination of Time and Piece rate
• Workers are guaranteed an hourly/ day rate with
an alternative piece rate.
• If earnings of worker calculated at piece rate
exceeds the amount that he ‘d earned if paid time
basis, he gets credit for the balance.
• If produces less than standard piece rate expected ,
the worker get paid based on time but excess
payment is carried forward as a debt against him to
be recovered frm any future balance of piece rates
on scientific basis.
 Factors affecting wage
• Demand- supply of labour
• Skill & competence
• Union bargaining power
• Prevailing market rate
• Govt outlook – affecting legislation
Shifting focus from pro-labour- pro-employer
 Reference
• Compensation Management – B D Singh
• Compensation System and Performance
Management-A M Sharma & N Rao