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 Concept of Minimum Wage, Fair Wage, Living Wage and Need Based Minimum Wage.
According to economic theory, wages are defined broadly as any economic compensation paid
by the employer to his laborers under some contract for the services rendered by them. In its
actual sense which is prevalent in the practice, wages are paid to workers which include basic
wages and other allowances which are linked with the wages like dearness allowances, etc
In the Indian context, soon after the independence, Government of India set up a Committee on
Fair Wages in 1948 which has defined various concepts of wages which govern the wage
structure in the country specially in those sectors which can be termed as underpaid and where
workers do not have bargaining power through unions. These concepts are: minimum wage,
living wage, and fair wage. Later, the concept of need-based minimum wage was added
According to Section 2(h) of the Minimum wages Act, 1948 the term 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 a person employed in
respect of his employment or of work done in such employment and includes house rent
allowance but does 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 person fund or provident fund or under any
scheme of social insurance;
(iii) any traveling allowance or the value of any traveling concession;
(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;

 Minimum Wage

A minimum wage is one which has to be paid by an employer to his workers irrespective of his
ability to pay. According to the M.W committee report Minimum wage is the wage which must
provide not only for the bare sustenance of life, but for the preservation of the efficiency of the
workers. For this purpose, minimum wage must provide some measure of education, medical
requirements and amenities. This is the type of wage provided for bare subsistence so that the
workers can maintain a decent standard of living such as providing for education, medical
requirements and an adequate level of comfort.

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Therefore any employer who is unable to pay this minimum wage to workers has no right to
exist. Where a person provides labor or service to another for remuneration which is less than
the minimum wages, such labor is 'forced labour' within the meaning of Article 23 of the Indian
Constitution and thereby entitles the person to invoke Article 32 or Article 226 of the
Constitution of India.

 Living Wage:
A living wage is one which should enable the earner to provide for himself and his family not
only the bare essentials of food, clothing and shelter but a measure of frugal comfort including
education for his children, protection against ill-health, requirements of essential social needs
and a measure of insurance against the more important misfortunes including old age. Living
wage is more than the concept of minimum wage. Such a wage is determined keeping in view
the national income and paying capacity of industrial sector

 Fair Wage:
Fair wage means which is something more than the minimum wages. It is a mean between the
minimum wage and the living wage. So, the lower limit of the fair wage must surely be the
minimum wage whereas the upper limit is the fair wage which is capacity of the industry to pay
further the comparisons definitely with the average payment of same work in other occupations
or trades which requires the same amount of ability. Basically, it is economic position and its
future prospects on which fair wage depends.

Further, there are certain factors like minimum wages, capacity of the industry to pay, level of
national income and its distribution, productivity of labour, the place of the industry in the
economy of the country and prevailing wage rates in the same or similar occupations in the
same or neighbouring localities on which fair wage depends.

Fair wages mean the remuneration which is paid to the workers for the jobs requiring equal
efficiency, difficulty and pains, it’s always more than the minimum wages.

 Need Based Minimum Wages:

The need-based minimum wage is also a level of fair wage and represents a wage higher than
the minimum obtaining at present in many industries, though it is only in the lower reaches of
the fair wage. It, therefore, hold that in fixing the need-based minimum, the capacity to pay will
have to be taken into account.

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 Constitutional Validity of the Minimum Wages Act, 1948.

The Minimum Wages Act, 1948 giving both the Central government and State government
jurisdiction in fixing wages. The act is legally non-binding but statutory. If Wage amount is paid
less than fixed minimum wage rate amount to forced labour. Constitute the Wage Board for
analyze the capacity of employer to pay and fix such amount of wage that they at least cover a
family’s basic need. But on some grounds, the constitutional validity of this Act was challenged.
It was said that as the above Act violates Article 14 and 19(1)(g) of the Indian Constitution.

Not violative of Article 19 of the Constitution

The constitutional validity of the Minimum Wages Act, 1948 was first challenged in the
case, Bijay Cotton Mills Ltd. v. The State of Ajmer, 1954. In this case, there was an industrial
question between the industry and the workers regarding the improvement of wages. The
company alleged before the court that the provisions of the Act are illegal since it puts
unreasonable restrictions on the employer as he is deterred from resuming his trade or business
unless he is ready to pay the minimum wages to the workers. The rights of the employees are
also limited, as they are disabled from working in any trade or industry unless the terms are
agreed to between them and their employers. Therefore, the Act is violative of Article 19(1)
(g) of the Indian Constitution which guarantees freedom of trade and business. However, the
Supreme Court of India held that the provisions of the Act are not unreasonable and
permissible under Article 19 of the Indian Constitution, moreover, the provisions of the Act have
been imposed for the benefit of the general public as the Directive Principles of State Policy
embodied under Article 43 of the Constitution.
Thus, it can be said that because of certain provisions of the Act the employers might find it
difficult to carry on or start a business, but it is done in order to protect the general interest of
the public and so the Act can not be deemed unreasonable or stuck down on such grounds.
Similarly, in the case Bhikusa Yamasa Kshatriya v. Sangamner Akola Bidi Kamgar Union, 1958,
the Bombay High Court held that the constitution of the committees and the Advisory Boards
under the Minimum Wages Act, 1948 did not contravene the statutory provisions of the
prescribed legislature and further on careful examination of the Act it was noticed that Section
3(3)(iv) of the Act does not contravene Article 19(1) of the Indian Constitution neither does it
violate equal protection of the law guaranteed by the Constitution.

Not violative of Article 14 of the Constitution

Furthermore, the Act is not violative of Article 14 of the Constitution which states equality before the
law. It was brought into light by India’s Union Labour and Employment Minister Shri Mallikarjuna
Kharage that the variation of minimum wages of workers in different states is due to the different socio-

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economic conditions, prices of commodities, paying capacity, productivity, etc. which impacts the wage
rate paid to the workers in a particular state. In the case, N.M. Wadia Charitable Hospital v. State of
Maharashtra, 1986, it was held by the Bombay High Court that fixing different rates of minimum wages
for different localities is permitted under the Constitution and the labour laws of the country, thus fixing
different rates of minimum wages for different areas is not discriminatory and not violative of the
Constitution.

 Procedure for Fixation and Revision of Minimum Wages.

In India, the fixation of minimum wages is governed by the Minimum Wages Act, of 1948. The
Act provides for the fixation and enforcement of minimum wages for various scheduled
employments across different industries and sectors. The Act categorizes specific employments
into schedules based on the nature of work, industry, and geographic region. Each schedule
includes different occupations or industries for which minimum wages need to be fixed. The
number and nature of scheduled employment may vary from state to state.

As far as section 5 of the Minimum Wages Act is concerned, there are two modes of procedures
for fixing and revising the minimum wages. One common thing among both of the procedures is
to empower the Government in reaching a favourable result regarding the fixation of minimum
wage.

 Procedure for fixing and revising minimum wages.–


(1) In fixing minimum rates of wages in respect of any scheduled employment for the first
time under this Act or in revising minimum rates of wages so fixed, the appropriate
Government shall either–

(a) appoint as many committees and sub-committees as it considers necessary to hold

enquiries and advise it in respect of such fixation or revision, as the case may be, or

(b) by notification in the Official Gazette, publish its proposals for the information of persons
likely to be affected thereby and specify a date, not less than two months from the date
of the notification, on which the proposals will be taken into consideration.

(2) After considering the advice of the committee or committees appointed under
clause (a) of sub-section (1) or as the case may be, all representations received by
it before the date specified in the notification under clause (b) of that sub-
section, the appropriate Government shall, by notification in the Official Gazette,
fix, or, as the case may be, revise the minimum rates of wages in respect of each
scheduled employment and unless such notification otherwise provides, it shall
come into force on the expiry of three months from the date of its issue:

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Provided that where the appropriate Government proposes to revise the minimum rates
of wages by the mode specified in clause (b) of sub-section (1), the appropriate
Government shall consult the Advisory Board also.

The two modes of fixing and revising minimum wages can be categorized as follows:
I. Committee Method [Section 5(1)]
II. Notification Method [Section 5(2)]

1. Committee Method:
Under the Minimum Wages Act, of 1948 in India, the committee method is a mechanism
used for the fixation and revision of minimum wages for certain scheduled
employments. The committee method involves the establishment of committees that
play a crucial role in conducting inquiries, examining relevant factors, and making
recommendations for the fixation and revision of minimum wages.

Here's an overview of the committee method under the Minimum Wages Act:

Minimum Wages Fixation Committee:

For certain scheduled employments, the appropriate government may constitute a Minimum
Wages Fixation Committee. This committee is tasked with conducting inquiries and
recommending the minimum wages to be fixed for the particular employment.

Composition of the Committee:

The Minimum Wages Fixation Committee typically consists of representatives from employers,
employees, independent experts, and government officials. The committee may include
individuals with expertise in relevant fields such as labour economics, industrial relations, or
specific industries covered by the scheduled employment.

Inquiries and Data Collection:

The committee conducts detailed inquiries and collects relevant data to inform the process of
fixing minimum wages. This may include studying factors such as the cost of living, standard
working hours, prevailing wage rates in similar employments, skill requirements, and the
capacity of employers to pay.

Examination of Factors:
The committee examines various factors that influence wage determination, considering both

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economic and social aspects. These factors may include living conditions, social needs,
productivity levels, regional variations, and the impact of proposed wage rates on workers and
employers.

Stakeholder Consultation:
The committee may engage in consultations with stakeholders such as employers' associations,
trade unions, worker representatives, and other interested parties. These consultations provide
an opportunity for stakeholders to present their views, concerns, and suggestions regarding the
fixation and revision of minimum wages.

Recommendations and Reports:

Based on the inquiries, data analysis, and stakeholder consultations, the committee prepares a
report containing its recommendations for the fixation or revision of minimum wages. The
report may outline the proposed wage rates, the rationale behind the recommendations, and
any additional provisions or considerations relevant to the scheduled employment.

Government Decision:
The government reviews the recommendations made by the Minimum Wages Fixation
Committee and takes a decision on the fixation or revision of minimum wages. The government
considers the committee's report along with other relevant factors, such as economic
conditions, legal requirements, and administrative feasibility.

Notification and Implementation:

Once the government approves the minimum wages based on the committee's
recommendations, it issues a notification specifying the minimum rates of wages applicable to
the scheduled employment. This notification provides the legal basis for employers to comply
with the prescribed minimum wages, and it includes details such as the effective date and any
other relevant provisions.

The committee method ensures a consultative and evidence-based approach to the fixation and
revision of minimum wages, incorporating the perspectives of various stakeholders and
considering factors specific to the scheduled employment. It helps in establishing fair and
reasonable minimum wages that balance the interests of workers and employers while
promoting social justice and economic well-being.

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2. Notification Method:
Under the Minimum Wages Act, of 1948 in India, the notification method is used for the fixation
and implementation of minimum wages for various scheduled employments. The notification
method involves the issuance of an official notification by the appropriate government
specifying the minimum rates of wages applicable to the scheduled employment.

Here's an overview of the notification method under the Minimum Wages Act:

Identification of Scheduled Employments:

The Act categorizes specific employments into schedules based on the nature of work, industry,
and geographic region. Each schedule includes different occupations or industries for which
minimum wages need to be fixed. The number and nature of scheduled employment may vary
from state to state.

Consultation and Advisory Boards:

Before fixing the minimum wages, the appropriate government may consult with advisory
boards or committees established under the Act. These boards consist of representatives from
employers, employees, independent experts, and government officials. Their input may be
considered in determining the minimum wages for the scheduled employments.

Determination of Minimum Wages:

The appropriate government, either the central or state government, examines relevant factors
such as the cost of living, prevailing wage rates, standard working hours, skill requirements, and
the capacity of employers to pay. Based on these considerations, the government determines
the minimum rates of wages for each scheduled employment.

Preparation of Notification:
Once the minimum wages are determined, the government prepares an official notification. The
notification specifies the minimum rates of wages applicable to each scheduled employment. It
includes details such as the effective date, the period of applicability, wage components (basic
wages, dearness allowance, etc.), and any other relevant provisions.

Publication and Legal Effect:

The notification containing the minimum wages is published in the official gazette or other
appropriate publications as required by law. Once published, the notification carries the force of
law, and employers in the scheduled employments are legally obligated to pay their workers at
least the prescribed minimum wages.

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Compliance and Enforcement:

The government designates labour inspectors or enforcement officers who are responsible for
ensuring compliance with the minimum wages specified in the notification. These officials
conduct inspections, receive complaints, and take appropriate action against employers who fail
to pay the mandated minimum wages. Non-compliance may result in penalties or other legal
consequences for employers.

Periodic Revision and Amendments:

The government periodically reviews the minimum wages and may make necessary revisions or
amendments based on changing economic conditions, cost of living, and other relevant factors.
The revised minimum wages are communicated through subsequent notifications, which
supersede the previous ones.

The notification method provides a legally binding mechanism for the fixation and
implementation of minimum wages. It ensures that employers are aware of their obligations
and workers are entitled to receive the prescribed minimum wages for their labour. The method
allows for transparency and uniformity in wage determination across scheduled employment
while facilitating compliance and enforcement.

 Procedure for Hearing and Deciding Claims.

The procedure for fixing and deciding the claims under the Minimum Wages Act, 1948 has been
given under section 20 of the Act, which can be understood by following:
I. Filing of Claims: Any employee who has not received wages in accordance with the minimum
wage rates can file a claim with the authority under the Act. This claim should be in the
prescribed manner and within the specified time limit. 20 (1)

II. Preliminary Hearing: Once the claim is filed, the authority conducts a preliminary hearing, giving
the employer an opportunity to present their side of the case and respond to the allegations
made by the employee. 20 (2)

III. Evidence and Examination: The authority examines the evidence provided by both parties,
which may include relevant documents, witnesses, and any other information that supports the
claim. 20 (3)

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IV. Opportunity to Defend: The employer is given a fair chance to defend their case and present any
evidence that disproves the allegations made by the employee. 20 (4)

V. Decision: After considering all the evidence and arguments, the authority delivers a decision
based on the merits of the case and the provisions of the Minimum Wages Act. 20 (5)

VI. Payment of Wages: If the claim is found to be valid, the authority orders the employer to pay
the outstanding wages along with any additional compensation or penalty as prescribed under
the Act. 20 (6)

VII. Appeal Process: Both the employer and the employee have the right to appeal the decision to
the appropriate appellate authority within the stipulated time frame, as specified in the Act. 20
(7)

It's important to note that the exact procedures may vary slightly based on the specific rules and
regulations of the state where the claim is being heard.

 Components of Wages: Dearness Allowance and Principle of Fixation.

Dearness Allowance is paid by the government to its employees as well as a pensioner to offset
the impact of inflation. The effective salary of government employees requires constant
enhancement to help them cope up with the increasing prices. Despite several measures by the
government to control the rate of inflation, only partial success has been achieved because the
prices move according to the market.
It, therefore, becomes essential for the government to shield its employees from the adverse
effects of inflation. As the impact of inflation varies according to the location of the employee,
dearness allowance is calculated accordingly. Thus, DA varies from employee to employee based
on their presence in the urban, semi-urban or rural sector.
DA is provided to employees to protect against the price rise in a particular financial year, it is
calculated twice every year – in January and July. DA is divided into two separate categories:
Industrial Dearness Allowance and Variable Dearness Allowance.
Industrial Dearness Allowance (IDA) applies to the Public sector employees of Central
Government. The Industrial Dearness Allowance for public sector employees undergoes
quarterly revision depending on the Consumer Price Index to help offset the impact of rising
levels of inflation.

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Variable Dearness Allowance (VDA) applies to the employees of the Central Government. It is
revised every six months according to the Consumer Price Index to help offset the impact of
rising levels of inflation.
Dearness Allowance is calculated as a percentage of an Indian citizen's basic salary to mitigate
the impact of inflation on people. Indian citizens may receive a basic salary or pension that is
then supplemented by a housing or a dearness allowance, or both. The guidelines that govern
the Dearness Allowance vary according to where one lives. Dearness Allowance is a fully taxable
allowance. The two types of Dearness Allowance are:
Dearness Allowance given under terms of employment.
Dearness Allowance not given under the terms of employment.

Notes By Fakhrul Xamaan Vitasta School Of Law