CHAPTER 1 CONCEPT OF WAGES

CHAPTER 1 CONCEPT OF WAGES As a welfare state, India is committed to secure for its working population, social and economic justice which can be achie...
Author: Hubert Stanley
1 downloads 0 Views 261KB Size
CHAPTER 1 CONCEPT OF WAGES As a welfare state, India is committed to secure for its working population, social and economic justice which can be achieved through the formulation of a sound national wage policy in consonance with the directive Principles of State Policy enunciated in the Constitution India. Article 39, of the Constitution of provides the principle of equal pay for equal work for both men and women, and Art.43 provides as a directive principle of state policy that the state

must endeavour to secure for all workers a living wage and conditions of work which ensure a decent standard of life as well as full enjoyment of leisure and social and cultural opportunities. Wages: It may be defined as the aggregate earnings of an employee for a given period of time such as a day or a week or a month. Wages are basically the price paid for the services of labour in the process of production. They are composed of two parts – the basic wage and other allowances. The allowances include dearness allowance, city compensatory allowance, overtime pay, medical allowance, etc. Salary: It is a compensation to an employee for services rendered on a weekly, monthly or annual basis. It is usually associated with office staff, supervisors, researchers, managers, etc, whose performance can‟t be measured directly. Wages vs. Salary: It is a compensation to the employees for services rendered to the organisation. In case the quantum of services rendered is difficult to measure, then the payment is called salary. Sometimes, the wage period is shorter than the salary period.

The Concepts of Minimum, Living and Fair Wages Minimum Wage It may be defined as that wage which is sufficient to-cover the bare physical needs of a

worker and his family. Many people consider that a minimum wage should also provide for other essential requirements such as a minimum of education, medical facilities and other

1 OSN Academy, Lucknow

amenities. Thus, a reasonable standard of living should be permitted to the worker from the stand-point of his health, efficiency and well-being. Statutory minimum wage is fixed from this point of view.

Statutory Minimum Wage This is a wage which has got to be paid to the worker irrespective of the capacity of the industry to pay. If an industrial organisation is unable to pay to its workers at least a bare minimum, it has no right to exist.

Fair Wage It is something more than the minimum wage providing mere necessities. While

the

lower limit of the fair wage must obviously be the minimum wages, the upper limit is set by what may broadly be called the capacity of the industry to pay. Fear wage compares reasonably with the average payment for similar task in other trades or occupations requiring the same degree of ability.

Living Wage The Most popular definition of the living wage is that of Justice Higgins of the Australian Commonwealth Court of Conciliation in the Harvester case. He defined the living wage as one appropriate for “the normal needs of the average employee, regarded as human being in a

civilized community”. According to the Fair Wage Committee Report, “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 also 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. In short living wage is the target in all developing countries. Fair wage is a step toward living wage. It is definitely more than the minimum wages, but is usually lower than the living wage. Fair wage fluctuates between (a) lower limit set by minimum wage, and (b) higher limit determined by firm‟s capacity to pay. Minimum wage < Fair Wage < Living Wage

2 OSN Academy, Lucknow

Need Based Minimum Wage (Indian Labour Conference, 1957) In its 15th session held in July, 1957, suggested that the minimum wage fixation should be „need

based‟, and should ensure the satisfaction of minimum needs of the industrial worker. For calculating the minimum wage, the Conference accepted the following normal and recommended that they should guide all wage fixing authorities, including minimum wage committee, wage boards and adjudicators, etc. of need-based minimum wage. The important points of the Resolution of the Conference are as under: (i)

In calculating the minimum wage, the standard working class family should be taken to consist of 3 consumption units for the one earner, and the earnings of women, children and adolescent should be disregarded.

(ii)

Minimum food requirements should be calculated on the basis of a net intake of 2,700 calories, as recommended by Dr. Aykroyed for an average Indian adult of moderate activity.

(iii)

The annual requirement of cloth per member should be taken as 18 yards. That means a family of four members require 72 yards of cloth.

(iv)

The workers should get minimum rent as per guidelines fixed by the Government in the industrial housing policy.

(v)

The provision for expenditure on fuel, light, etc. should be 20% of the minimum wage.

Factors Affecting Wages: The wages to be paid to the different categories of workers depend upon the following factors: (i)

Demand for and Supply of Labour: The primary result of the operation of the law of supply and demand is the creation of the “going – wage rate”. In general, if anything works to decrease the supply of labour such as restriction by a particular labour union, there will be a tendency to increase the wage. If anything works to increase the employer‟s demand for labour, there will be a tendency to increase the wage. The reverse of each situation is likely to result in a decrease in employee wage, provided other factors, such as those discussed below, do not intervene.

3 OSN Academy, Lucknow

(ii)

Ability to Pay: Employer‟s ability to pay is an important factor affecting wages not only for the individual firm, but also for the entire industry. This depends upon the financial position and profitability of the firm. If the firm is marginal and cannot afford to pay competitive rates, its employees will generally leave it for better paying jobs in other organisations. But, this adjustment is neither immediate nor perfect because of problems of labour immobility and lack of perfect knowledge of alternatives.

(iii)

Cost of living: Another important factor affecting the wage is the cost of living adjustment of wages. This tends to vary money wage depending upon the variations in the cost of living index following rise or fall in the general price level and consumer price index.

(iv)

Productivity of Workers: To achieve the best results from the worker and to motivate him to increase his efficiency, wages have to be productivity based. There has been a trend towards gearing wage increase to productivity increases. Productivity is the key factor in the operations of a company. High wages and low costs are possible only when productivity increases appreciably.

(v)

Labour Unions: Organised labour is able to ensure better wages than the unorganised one. Higher wages may have to be paid by the firm to its workers under the pressure of trade unions. If the trade unions fall in their attempt to raise the wage and other allowances through collective bargaining, they resort to strike and other methods whereby the supply of labour is restricted.

(vi)

Government: To protect the working class from the exploitation of powerful employers, the Government has enacted several laws. Laws on minimum wages, hours of work, equal pay for equal work, payment of dearness and other allowances, payment of bonus, etc, have been enacted and enforced to bring about a measure of fairness in compensating the working class. 4 OSN Academy, Lucknow

(vii)

Prevailing Wage Rates: Wages in a firm are influenced by the general wage level or the wages paid for similar occupations in the industry, region and the economy as a whole. External alignment of wages is essential because if wages paid by a firm are lower than those paid by other firms, the firm will not be able to attract and retain efficient employees.

State Regulation of Wages Wage payments in India are governed by the following legislations: 1. Payment of Wages Act, 1936 and Payment of Wages Act (Amendment), 2005 2. Minimum Wages Act, 1948 3. Payment of Bonus Act, 1965 4. Equal Remuneration Act, 1976 1. Payment of Wages Act, 1936: The Payment of Wages Act, 1936 regulates the payment of wages of certain classes of employed persons. It was enacted to ensure that employees are not exploited through delayed wage payments and illegal deductions. It extends to the entire country.

Provisions The following are the main provisions under this Act. 1. Responsibility for Payment of Wages: The employer is responsible for the payment of wages to all employees employed in the establishment. The Amendment (2005) further clarified that the responsibility of wage payment of employees could also be delegated to representatives of the employer like the Factory Manager, person responsible to the employer for the supervision and control of the establishment, person nominated by the employer in case of railway administration, or person designated by the contractor as the case may be. 2. Wage Period: The wage period would be fixed by the person responsible for disbursing the wages. Further the wage period shall not exceed one month. 5 OSN Academy, Lucknow

3. Time of Payment of Wages: The Act specifies that the wages shall be paid: a. Before the end of the seventh day in case the establishment employed less than 1000 workers. b. Before the end of the tenth day in other cases c. Relaxations may be made in the case of docks, wharfs, jetty or mines and in case of payment to employees whose employment is terminated. 4. Payment Mode: The Act also specifies that all payment be made in currency coins or currency notes or both but not in kind. Further, employers may after obtaining written authorisation of the employed person pay the wages either by cheque or crediting it in the bank account. 5. Deductions: The Act mandates that all wage payments should be made without deductions of any kind except: a. Fines b. Absence from duty c. Damage to or loss of goods that are in the supervision of the employed persons d. House accommodation supplied by the employer e. Recovery of advances f.

Recovery of loans made from any fund constituted for the welfare of the labour

g. Recovery of loans for house building h. Income tax payable i.

Subscription to and for repayment of the advances for any provident fund

j.

Payments to cooperative societies approved by the appropriate government, etc.

The Minimum Wage Act, 1948: It has been enacted to ensure that employed persons are not subjected to exploitative wages by the employers.

The Act defines the minimum wage payment for certain

employments. The Minimum Wages Act, 1948 extends to the entire country and is aims to provide fair wages to employed persons.

6 OSN Academy, Lucknow

Provisions The following sub-sections list out the main provisions under this Act: 1. Fixation of Minimum Wages: The appropriate government fixes the minimum wages and also revises them at regular intervals not exceeding five years. a. The government fixes the time rate, by day or month or by such other larger wage period as may be prescribed. b. The minimum wage may consist of basic rate of wages and special allowance at a rate to be adjusted to keep with the cost of living index.

2. Procedure for Fixing and Revising Minimum Wages: The appropriate government appoints committees and sub-committees to provide necessary inputs and advise for wage fixation. The government may also by issuance of gazette notification publish the proposals for the information and reaction of people likely to be affected. The persons affected are allowed two months to respond to the proposed wages.

Thus, after receiving relevant inputs, the government fixes the

minimum wage rate and communicates the same through the Official Gazette.

3. Advisory Board: The appropriate government may also appoint an Advisory Board for coordination of the committees and sub-committees appointed for the purpose of wage fixation. Besides this, the Central Advisory Board is appointed by the Central Government for advising the Central and State Governments in matters of wage fixation and revision.

4. Composition of Committees: The committees and sub-committees will be made up of persons who have been nominated by the appropriate government and represent employers and employees in equal number and independent persons not exceeding one-third of the total committee members. The Chairman of the committee will be an independent member appointed by the appropriate government.

7 OSN Academy, Lucknow

The Payment of Bonus Act, 1965 The chief object of the Payment of Bonus Act, 1965 as contained in its Preamble is to provide for the payment of bonus to persons employed in certain establishments and for matters connected therewith. The Payment of Bonus Act, 1965 (as amended up to date) applies to every factory and every other establishment in which 20 or more persons are employed on any day during an accounting year. An establishment to which this Act applies shall continue to be governed by the act notwithstanding that number of persons employed therein falls below 20.

Provisions 1. Eligibility for Bonus: Every employee shall be entitled for Bonus provided he has worked in the establishment for not less than 30 working days in that year. Disqualification for Bonus: An employee shall be disqualified for receiving bonus if he is dismissed from service fori.

fraud or

ii. riotous or violent behaviour while on the premises of the establishment, or iii. theft, misappropriation or sabotage of any property of the establishment.

Determination of Bonus: The Act requires 67 percent of the available surplus to be allotted for the payment of bonus in relation to a company (other than banking company) which has not made the arrangements prescribed under Income Tax Act for the declaration and payments of dividends payable out of its profit within India and in other cases 60 percent of such available surplus.

Payment of Minimum Bonus Every employer shall be bound to pay every employee a minimum bonus which shall be 8.33 percent of the salary or wages earned by him during the accounting year, whether or not the employer has any allocable surplus in that accounting year.

8 OSN Academy, Lucknow

When in respect of any accounting year the allocable surplus exceeds the amount of minimum bonus, the employer shall be bound to pay to the employee an amount in proportion to the salary earned subject to a maximum of 20 percent of salary or wages.

Set on and Set off of Allocable Surplus Set on: The excess shall subject to a limit of twenty percent of the total salary or wage of the employee employed in the establishment in that accounting year be carried forward for being set on in the succeeding accounting year upto an inclusive of the fourth accounting year to be utilized for the purpose of payment of bonus. Set off: The minimum amount of deficiency as the case may be shall be carried forward for being set of in the succeeding accounting year upto and inclusive of the fourth accounting year.

The Equal Remuneration Act, 1976 The Act provides for the payment of equal remuneration to men and women workers. It also provides for prevention of discrimination on the ground of sex, in the matter of employment and for matters connects therewith.

Provisions Payment of Remuneration at Equal Rates: Duty of employer to pay equal remuneration to men and women workers for same work or work of a similar nature: It imposes an obligation on the employer to pay equal remuneration to men and women workers for same work or work of a similar nature. The equality of remuneration is not to be achieved by reducing the rate of remuneration of any worker but by increasing it. No discrimination to be made while recruiting men and women workers (Sec.5): No employer shall while making recruitment for the same work or work of a similar nature or in any condition of service subsequent to recruitment such as promotion, training or transfer make any discrimination against women except where the employment of women in such work is

prohibited or restricted by or under any law for the time being in force.

9 OSN Academy, Lucknow

SAMPLE MULTIPLE CHOICE QUESTIONS 1. Which committee is appointed to hold enquiry and suggest minimum wages to be fixed? (a) Committee Assignment

(b) Committee Method

(b) Advisory Committee

(d) None of these

2. The scope of state regulation of wages in present scenario in India particularly, in organised sector is (a) Increasing

(b) decreasing

(c) remain same

(d) None of these

3. Which of the following factor does not affect the wages? (a) Demand and supply of labour

(b) Labour unions

(c) Population of the city

(d) Cost of living

4. Which of the following are the principles to channelize wage determination process? (a) Labour Productivity

(b) Economic Condition of Industry

(b) Economic Condition of Nation

(d) All of the above

5. In an inflationary economy like ours today which of the following components of wages becomes more important? (a) Overtime

(b) incentive

(c) Bonus

(d) Dearness Allowance

6. Which of the following is / are an authorized deduction under the Payment of Wages Act, 1936? (a) Fines

(b) Income Tax

(c) Contribution to LIC premium

10 OSN Academy, Lucknow

(d) All of the above

7. Which of the following can be said to be a correct concept of wages? (a) Wage is a reward

(b) Wage is a compensation

(c) Wage is the price of Labour

(d) Wage is an incentive

8. Wages paid to worker should be sufficient to maintain himself and his family at a reasonable level of existence. In the above statement refers to which of the following kind of wages? (a) Minimum wage

(b) Living wage

(c) Fair wage

(d) Market wage

9. Which of the following Act, has been enacted to regulate the wages? (a) The Minimum Wages Act, 1948 (b) The Equal Remuneration Act, 1976 (c) The Industrial Dispute Act, 1947 (d) All of the above

10. Which of the following is a norm for fixation wages? (a) Net intake of 2700 calories (b) 16.62 meters per year (c) Miscellaneous 20 percentage of total minimum wage (d) All of the above

ANSWERS 1

2

3

4

5

6

7

8

9

10

b

a

c

d

d

d

c

b

d

d

11 OSN Academy, Lucknow