Constitutional Perspective,

UNIT 5 CONSTITUTIONAL International Labour Standards and

Norms for Wage Determination
PERSPECTIVE, INTERNATIONAL
LABOUR STANDARDS, AND
NORMS FOR WAGE.
DETERMINATION
Objectives

After going through this unit, you should be able to:

 understand and appreciate the relevant provisions contained in the Preamble,
Fundamental Rights and Directive Principles of State Policy concerning wages,
 know the International Labour Standards on Minimum Wage Fixation Machinery,
protection of wages and Equal Pay, and
 appreciate and evaluate the norms for wage determination.
Structure
5.1 Wages: A Constitutional Perspective
5.2 International Labour Standards on Wages
5.3 Norms for Fixation of Wages
5.4 Wage Revision
5.5 Review Questions
5.6 Suggested Readings
5.1 WAGES: A CONSTITUTIONAL PERSPECTIVE
The Constitution of India, in its Preamble, seeks to secure inter alia, to all its citizens :
Justice, Social, economic and Political. The Preamble has been amplified and
elaborated in Part IV of the Constitution which deals with the Directive Principles of
State Policy.
"The Directive Principles ..., inter alia, envisage an end to economic exploitation and
staggering inequalities and inequities and cast upon the State the duty to secure a just
social order." Thus Article 38 which is the key of the Directive Principles lays down
that "the State shall strive to promote the welfare of the people by securing and
protecting as effectively as it may a social order in which justice, social, economic
and political shall inform all the institutions of national life." Article 39 inter alia,
secure to: (i) right to an adequate mean of livelihood; (ii) equal pay for equal work
for both men and women; and (iii) the health and strength of workers, men and
women, and the tender age of children are not abused and that citizens are not forced
by economic necessity to enter avocation unsuited to their age or strength. Article 41
requires that "the State, shall within the limits of its economic capacity and
development, make effective provisions for securing the right to work, to education
and to public assistance in cases of unemployment, old age, sickness and
disablement, and in other cases of undeserved want". Under Article 43 "the State
shall endeavour to secure by suitable legislation or economic organisation 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 ...".
Although labour policy and the goals laid down in the Directive Principles of State
Policy seeks to provide for high standards of wages, the choices of the legislature in
seeking to achieve the objective are not unqualified. Wage legislation is subject to
various limitation, namely if it is inconsistent or derogatory to a fundamental right
the legislation is void.
Part III. of the Constitution contains the fundamental rights which "represents the basic 13
Legal Framework of Wage
and Salary Administration values cherished by the people of this country". The fundamental right having
bearing on wages may broadly be categorised in six heads:
i). The right to equality before law and equal protection of laws (Article 14).
ii). Prohibition of discrimination on the ground, inter alia of sex (Article 15).
iii). Equality of opportunity in matters of public employment (Article 16).
iv). The right to practice any profession or occupation (Article 19).
v). Right to Life and Personal Liberty: Article 21 which affords protection to life
and personal liberty provides that no "person shall be deprived by his life or
personal liberty except according to procedure established by law".
vi). Right against exploitation : Article 23 which prohibits traffic in human being
and forced labour inter alia, provides :
1 Traffic in human beings and begar and other similar forms of forced labour
are prohibited and any contravention of this provision shall be an offence
punishable in accordance with law."
People's Union for Democratic Rights v. Union of India, (1982) 2 L.L.J. 454 (SC), is
an epoch-making judgment. Here the Court has given a new dimension to several
areas, such as minimum wage, employment of children, enforcement of labour laws
and public interest litigation. The Court has enlarged the contours of the fundamental
right to equality, life and liberty, prohibition of traffic in human beings and forced
labour, and prohibition of employment of child labour.
The case arose out of the denial of minimum wages to workmen engaged in various
Aside projects and non-enforcement of the Minimum Wages Act, 1948 and among
others Equal Remuneration Act, 1976. For the purpose of analysis, the Court's
decision may be considered under the following headings:
The Court was directly called upon to decide inter alia two issues:
i). Is a writ petition under Article 32 maintainable for mere violation of labour laws
and. not for breaches of any fundamental right?
ii). What is the true scope and meaning of the expression "traffic in human beings
and begar and other similar forms to forced labour" in Article 23 ?
The Supreme Court answered the questions in the affirmative and observed:
(i) Maintainability of the Writ Petition under Article 32
The Court held that the complaint of non-observance of the provisions of the Equal
Remuneration Act, 1976 is in effect and substance a complaint of breach of the
principle of equality before law in Article 14 of the Constitution.
(ii) Prohibition of Traffic in Human Beings and Forced Labour:
The Court ruled that Article 23 is "designed to protect the individual not only against
the State but also against other private citizens". It prohibited traffic in human beings
and hegar and other similar forms of forced labour practised by anyone else.
Explaining the scope of the expression "traffic in human beings and begar and other
similar form of forced labour", the Court observed:
What Article 23 prohibits is "forced labour" that is labour or service which a
person is forced to provide and "force" which would make such labour or
service "forced labour" may arise in several ways. It may be physical force
which may compel a person to provide labour or service to another or it may
be force exerted through a legal provision such as a provision for
imprisonment or fine in case the employee fails to provide labour or service
or it may be force exerted employee fails to provide labour or service or it
may even be compulsion arising from hunger and poverty, want and
destitution ... The word "force" must, therefore, be construed to include not
only physical or legal force but also force arising from the compulsion of
economic circumstances which leaves no choice of alternatives to a person in
14 want and compels
 him to provide labour or service even though the remuneration received for it is Constitutional Perspective,
less than the minimum wage. International Labour Standards and
Norms for Wage Determination
The Court added:
Where a person provides labour or service to another for remuneration which is
less than the minimum wage, the labour or service provided by him clearly falls
within the scope and ambit of words "forced labour" under Article 23. Such a
person would be entitled to come to the Court for enforcement of his
fundamental right under Article 23 by asking the Court to direct payment of the
minimum wage to him so that the labour or service provided by him ceases to be
".forced labour" and the breach of Article 23 is remedied.

5.2 INTERNATIONAL LABOUR STANDARDS N AGES

The International Labour Organisation from the time of its establishment in 1919 has
paid considerable attention in setting international labour standards inter alia on
minimum wage fixation, protection of wages and Equality of Remuneration. These
standard set by the ILO have been instrumental in ensuring better standard of living
for the workers. These standard have greatly influenced the labour legislation in
India, as else where in the world.

As per the ILO on wages-a workers' Education Manual "in 1928 the International
Labour Conference adopted a Convention (No. 26) and a Recommendation (No. 30)
on minimum wage-fixing machinery, the application of which was restricted to
industry and commerce, while in 1951 a Convention (No. 99) and Recommendation
(No. 89) covered agriculture. The Wages, Hours of Work and Manning (Sea)
Convention, 1946 (No. 76), and its revising Convention of 1949 (No. 93) and of 1958
(No. 109) deal with the basic wages to be paid to able seamen. Particular mention
must also be made of the Protection of Wages Convention, 1949 (No. 95), and the
Recommendation (No. 85) of the same year; the Labour Clauses (Public Contracts)
Convention, 1949 (No. 94), and the Recommendation (No. 84) of the same year; the
Equal Remuneration Convention, 1951 (No. 100), and the Recommendation (No. 90)
of the same year; and the Holidays with Pay Convention, (No. 52), the
Recommendation (No. 98) of 1954, and the Holidays with Pay (Agriculture)
Convention., 1952 (No. 101)."

Fixation of Minimum Wages

ILO, Workers' Education Manual states that the international labour Conventions on
minimum wage-fixing machinery leave each government free to decide the kind of
machinery it considers most suited to the needs of its own country but provide that
representatives of employers and workers in the branches of industry concerned shall
take part in equal numbers in the operation of the system. Although Convention No.
26 of 1928 does not indicate the basis to be used for fixing minimum wages,
Recommendation No. 30, adopted in the same year, states that the minimum wages
should enable the workers to maintain a suitable standard of living. For this purpose
consideration should be given to the rates of wages paid for similar work in trades
where the workers are adequately organised and have concluded effective
agreements. If no such rates have been fixed then the general level of wages in the
country or the particular locality should be used as a guide.

Protection of Wages

ILO Convention No. 95 concerning the protection -of wages seeks to provides that
wages shall be paid (i) only in legal tender; and (ii) directly to workers concerned.
Further deduction would be permitted only under conditions and extent prescribed by
national law.

Moreover wages may not be attached or assigned. Recommendation No. 85

concerning protection of wages is more comprehensive. It comprehensively provides 15
for deduction from wages and Periodicity of wages payments.
Legal Framework of Wage
and Salary Administration Equal Remuneration for men and women Workers

In its 34th session the ILO adopted a convention concerning equal remuneration for
men and women workers for work of equal value, known as equal Remuneration
Convention, 1951. The Convention on Equality of Remuneration was complemented
by Recommendation No. 90 of ILO (1951). The latter stressed that the achievement
of equality of remuneration should be accompanied by more extensive measures than
the mere fixing of pay rates. In 1958 the ILO concluded Convention No. 111 against
discrimination in matters of employment and profession.

In September 1958, India ratified the ILO Convention No. 111 concerning equal
remuneration for men and women workers for work of equal value which requires a
member-State ratifying the Convention to promote as well as ensure the application
of the principle of equal remuneration to all workers through national laws or
regulations, legally established or recognized machinery for wage determination,
collective agreements between employers, machinery for wage determination,
collective agreements between employers and workers, or a combination of these
measures.

5.3 NORMS FOR FIXATION OF WAGES

It has now been well settled that the ultimate objective of wage fixation may be to
provide social and economic justice but the immediate task of industrial wage
determination is to satisfy both labour as well as employer, after taking into account
various factors. However, capacity to pay is not the least important in case of
statutory wage fixation (See Chandra Bhan Boarding and Lodging v State of Mysore,
AIR 1970 SC 2042). A survey of decided cases reveals that he Tribunals and Courts
have taken into accounts the following factors while fixing wages :
(i). total capital invested by the concern.
(ii). the extent of its business.
(iii). the order of profits made by employer.
(iv). the dividends paid.
(v). the number of employees employed in concern and
(vi). standing of industry in which it belongs, should be considered.
Capacity of the Industry to Pay

The capacity of industry to pay has to be adjudged on one or more of the following
considerations :
(a) Adjustment of wages to the total productivity of industry,
(b) Selling price of the market,
(c) Cost of materials,
(d) Rates agreed to by a large majority of employers,
(e) Rates fixed by competitors,
(f) Rates of profits.
In Express Newspapers Ltd v. Union of India, (1957) SCR 12, the Supreme Court
ruled that in fixing rates of wages which include within the compass the fixation of
scales of wages, capacity of industry to pay is one of the essential circumstances
which should be considered except in case of bare subsistence of minimum wage
where employer is bound to pay the same irrespective of such capacity.

The proper measure for gauging the capacity of industry to pay is take into account
elasticity of demand for the product the possibility lightening up the organisation so
that the industry could pay higher wage without difficulty and the possibility of
increase in the efficiency of the lowest paid workers resulting increase in production
16 considered in conjunction with the elasticity of demand.
Industry-cum-Region Basis Constitutional Perspective,
International Labour Standards and
The capacity of industry to pay should be judged on industry-cum-region basis after Norms for Wage Determination
taking a fair cross-section of the industry.

In French Motor Co. Ltd. v. Their Workmen, (1962) 2 L.L.J. 744 (SC), it was held
that comparison should be made in the some line of business and a small concern
cannot be compared even in same line of business with a large concern when there is
large disparity in the concerns in the same business.

In Greaves Cotton and Co. Ltd v. Their Workmen, (1964) 1 L.L.J.142 (SC), the
Supreme Court observed that while applying it tribunals should lay stress on industry
part of formula if there are large number of some concern in the region.

Other Considerations

In Killick Nixon Ltd v. Killick and Allied Companies Employees' Union (1975-11
LL.T 53), the Supreme Court has laid down that the following important aspects (i)
condition of the wage scale prevalent in the Company; (ii) condition of the wage
level prevalent in the industry and the region; (iii) the wage packet as a whole of each
earner in the company with all amenities and benefits and its existence, consistent
with his status in society, responsibilities, efficiency at work and industrial peace;
(iv) the position of the company viewed in relation to other comparable concerns in
the industry and the region; (v) pre-emotive necessity for full neutralisation of the
cost of living at the rock-bottom of wage scale if at or just above the subsistence
level; )vi) the rate of neutralisation which is being given to the employees in each
salary slab; (vii) avoidance of huge distortion of wage differentials, taking into
reckoning all persons employed in the concern; (viii) degree of sacrifice necessary
even on the part of workers in general interest; (ix) the compulsive necessity of
securing social and distributive justice to the workmen; (x) capacity of the company
to bear the additional burden; (xi) interest of national economy; (xii) repercussions in
other industries and society as a whole; (xiii) the state of the consumer price index at
the time of decision; (xiv) forebodings ahd possibilities in the foreseeable future as
far as can be envisaged; and (xv) it cannot be contended that unless there is a ceiling
on profits, there cannot be a ceiling on dearness allowance.

Whether the same principles of wage fixation apply to industries in public and
private sector

This question was answered in affirmative in Hindustan Antibiotics v. Its Workmen,

AIR 1967 SC 968, where the Supreme Court rejected the contention that any special
set of rules be followed while fixing wages for public sector undertaking. The Court
furtherbserved that such a rule if followed would violate- articles 39 and 43 of the
Constitution.
Wage Differentials
Wage differential means difference in wages belonging to different classes of
workers. Generally the differential is result of practice. Sometimes existing wage
differential are reasonable and sometimes not so reasonable. Whenever they are not
so reasonable there is need for revising them on rational basis.
In Chandra Bhawan Boarding & Lodging v. State of Mysore, (1969) 1 L.LJ. 97, the
Supreme Court has held that difference in wages for different classes of workers
while fixing minimum rates of wages are justified. It observed
The concept of minimum wage does not imply that there should be a absolute
uniform rate of wage for all workmen. There can be variation in the rate of
minimum wages according to diverse sector like the nature of work the
degree of education, training and skills, required for the job the degree of
responsibility, onerouseness of the job, the conditions under which in
addition to being relevant facts have also bearing on the efficiency of
workman. 17
Legal Framework of Wage
and Salary Administration (a) Based on occupation
In different industries different qualifications, degree of skill and different degree of
responsibility are required which may be basis of the difference in wages. Such a
differential is necessary for it induces a worker to under take more demanding, more
agreeable or dangerous jobs. Under the Minimum Wages Act also different rates for
different occupations are fixed in view of section 3.
(b) Inter regional differential
Such a difference in wages are generally due to different local and geographical
conditions of a place. The rates of wages for organised sector may differ from rates
of wages fixed for unorganised sector; difference of wage scale in agriculture from
urban area is also justified.
In T.R. Sukaram v. State of Tamil Nadu, 1979 Lab. LC. 1077 (H.C. Madras), the
State Government fixed minimum rates of wages for hotel and Restaurants and for
the purpose divided the area into three zones. This was found justified in view of
special conditions of a place from other and held that section 3 of the Minimum
Wages Act itself provided for such a differential.
(c) Based on Sex
Variation in wages on the basis of sex has been although practiced frequently by
employers; it is not justified in view of the provisions of 'equal pay for equal work ' of
the Directive Principles of State Policy.
(d) Based on Special Kind of Work
In National Carbon Co. (India) Ltd., (1992) 2 L.L.J. 669 (L.A.T.W.B.) workers were
allowed job premium which was variable according to the nature of the job. The
company in a scientific way evaluated the different jobs and fixed the wages of the
workers who performed the job according to; (i) skill, (ii) responsibility, (iii) risk,
(iv) tediousness, (v) unpleasantness.
(e) Based on size
The different rates of wages are sometime justified on the basis of size of industrial
establishments.
(f) Revision of Wages
The term revision includes both upward and downward of revision of wages. Wages
cannot be static one; they are bound to very with changing requirements and
circumstances in any particular case. Revision of wages helps (i) the worker to
maintain living with change in cost of living; (ii) it provides proper share of workers
in the profits. The tribunals have held that same rules of fixation apply in revision
which govern the initial fixation of wages, Burn & Co. Ltd. 1951 1 L.L.J. 490 (SC),
Sri Ram and Co. v State of T.N., 1979 Lab. I.C.640 (H.C. Mad.)

5.4 WAGE REVISION

(i) Reasonable Period
The object of revision is to keep pace with change in cost of living. In Hindustan
Times Ltd. v. Their Workmen, 1963 1 L.L.J. 108 (SC), case where wage scales were
same for twelve years, the Supreme Court held that in view of Article 43 which
require attainment of living wage, wage scales should be adjusted from time to time
with changing circumstances. Under Minimum Wages Act general period of 5 years
has been provided for revision although in practice it has varied.
(ii) Changes in Circumstances
18 Change in the existing circumstances may require that wage levels should be adjusted
in their accordance.
(iii) Whether wages can be revised to the prejudice of Workmen Constitutional Perspective,
International Labour Standards and
in Crown Minimum Works v. Their Workmen, AIR 1958 SC 33, the Supreme Court Norms for Wage Determination
dealt with question whether the revision of wage structure in a industry can not be
made to the prejudice of its workmen? The Court observed that while revising the
wages financial capacity of industry is accounted in view of long run difficulties,
which may involve due to over burden of increased wages on employer. On the other
hand deduction in existing wage may create discontentment among workers. And
therefore a balance should be drawn but it can not be said that wage structure by
tribunal can never be revised to the prejudice of workmen although it should be done
in rare of rerest instances.

5.5 REVIEW QUESTIONS

1 Whether non-payment of minimum wage amounts to "forced labour" under
Article 23 of the Constitution?

2 What is the role played by the International Labour Organisation on

(i). Wage Fixing Machinery
(ii). Protection of Wages
(iii). Equal pay for equal work.
3 What do you understand by "capacity to pay on Industry-cum-region basis ?

4 Is the employer bound to pay minimum wage irrespective of its financial capacity
to pay?

5.6 SUGGESTED READINGS

Constitution of India.
S.C. Srivastava, Labour Law in Factories, Mines, Plantations, Transport, Shops and
other Industrial Establishments. Printice Hall of India Pvt. Ltd., New Delhi (1992).
ILO, Wages - A Workers' Education Manual Geneva, 1994.
ILO, International Labour Standards - Papers on some selected topics, Bankok 1986.

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