Introduction

The economic policies and labour laws complement each other in India. To ensure
the social justice and economic well-being of the workers, the Parliament enacted
the Minimum Wages Act, 1948. Enacted to address the growing concerns of worker
exploitation and inequality, the Act has far-reaching implications for both
employees and employers. The primary objective of the Minimum Wages Act, 1948
is to safeguard the interests of the workers by providing a mechanism for ensuring
a bare minimum level of remuneration.

From agriculture and manufacturing to the service industry, the Act plays a pivotal
role in establishing equitable compensation structures. Additionally, there are
various challenges in implementing and adhering to the stipulated minimum wages,
considering the dynamic nature of economic landscapes and the diverse needs of
an expanding workforce.

The Act categorises the workers into skilled, semi-skilled and unskilled labourers
and provides the mechanism for fixing separate minimum wages for each class of
labour. In this article, an attempt has been made to analyse the important
provisions of the Act, along with the important judicial pronouncements by various
Courts of the country. Further, the provisions of the Act have been compared with
the provisions of the Code on Wages, 2019, in order to ascertain what changes
would be implemented through the new legislation.

Need for minimum wages

The exploitation of labourers in India became a norm at one point in history. Be it
the Mughal period or the British rule, the labourers have always suffered
economically as well as socially. To improve the situation of the labourers in the
country, the State strives to eliminate poverty. By fixing the minimum wages for the
labourers, the State tries to achieve the social objective of eradicating poverty of
the labourers by guaranteeing a minimum remuneration for the work done, as well
as the economic objective of motivating the workers to put in maximum efforts for
maximum benefits. These benefits include, but are not limited to, the following:

1. Protecting workers from exploitation – By providing a minimum wage for a

fixed number of hours, the exploitation of the workers shall be reduced to a
great extent.
 2. Ensuring a basic income – Minimum wages are fixed and revised based on
adequate living standards. Thus, fixing minimum wages for the workers shall
ensure a basic income for them.

3. Reducing income inequality – The disparity in income can be reduced by

fixing the minimum wages of the workers.

4. Promoting economic stability – Fixing minimum wages for the workers shall
provide a way to promote economic stability by improving the standard of
living.

5. Setting labour standards – By reducing the exploitation of workers, the

standard of work would improve to a great extent.

6. Addressing poverty – Fixing minimum wages of the employees paves the way
for poverty eradication by encouraging more people to undertake work of any
kind.

History of minimum wages

With the onset of the Industrial Revolution, the gap between the rich and the poor
became wider. The poor were forced to work in factories and establishments to
sustain themselves. This was the period when the need to have a law to protect the
workers was felt. The Industrial Revolution in India arrived as late as 1854 when
India was still a colony of the British. The first discussion in India regarding
minimum wages followed its international counterpart, i.e., the Draft
Convention adopted at the International Labour Conference, 1928, in the form of
the Royal Commission on Labour. The Commission pointed out the need to adopt a
structured wage system for the labourers. The question of wage-fixing machinery
was again raised at the third and fourth meetings of the Standing Labour
Committee held in 1943 and 1944 respectively. Lastly, the Minimum Wages Bill was
introduced in 1946 and enacted in 1948.

Objectives of Minimum Wages Act, 1948

The main objectives of the Minimum Wages Act, 1948 are as follows:

1. To fix and revise the minimum wages to be paid by the employer to the
employees in certain employments;

2. To fix an adequate minimum wage for all employees in the interest of the
public;

3. To fix the daily working hours of an employee according to the employment

type;

4. To prevent exploitation of the workers;

 5. To resolve any issues pertaining to the non-payment or less payment of
wages;

6. To establish and provide the powers and duties of inspectors;

7. To establish and provide the powers and duties of labour commissioners and
other important labour officers;

8. To provide the powers to make rules to the appropriate government.

Application of Minimum Wages Act, 1948

The Minimum Wages Act, 1948, is applicable to the whole of India as provided
under Section 1 of the Act. The appropriate government may fix minimum wages for
scheduled employment if more than one thousand employees are employed in the
given industry in the whole State, as provided under Section 1A of the Act.
However, it is pertinent to note that this is not a mandatory condition for the
application of the Act. The appropriate government may fix and revise minimum
rates of wages for employment wherein less than one thousand employees are
employed.

Important provisions of Minimum Wages Act, 1948

Important definitions

Appropriate Government

Since labour law is a subject under the Concurrent List in the Seventh Schedule to
the Indian Constitution, both the Central Government and the State governments
are authorised to legislate on the subject. Section 2(b) of the Act defines an
appropriate government. In relation to industries such as railways, oilfields, major
ports, or any establishment under central legislation, the Central government is the
appropriate government. In every other industry, the State government is the
appropriate government for the purpose of the Act.

Cost of Living Index Number

Section 2(d) of the Act defines the cost of living index number as an index number
as ascertained by the appropriate government in the Official Gazette in relation to
the employees. Under the Act, the appropriate government determines the
scheduled employment, in respect of which it notifies the minimum wages to be
paid by the employer to the employees. The minimum wages are determined on the
basis of the cost of living index number. The cost of living index number signifies
the cost of a constantly changing standard of living.

Wages

Section 2(h) of the Act provides an inclusive definition of wages, including all
remuneration capable of being expressed in terms of money that the employer pays
to the employee during the course of employment. It also includes house rent
allowance. However, it does not include any accommodation, supply of light, water,
medical attendance, or any other amenity as the appropriate government may
deem fit; any contribution of the employer towards the Pension Fund or Provident
Fund; travel allowance; defrayed special expense; and any gratuity payable on
discharge of the employee.

In Workman represented by Secretary v. Reptakos Bret & Company Ltd. & Anr.
(1992), the Hon’ble Supreme Court took into consideration the Tripartite Committee
of the Indian Labour Conference of 1957. The report of the Committee stated that
the structure of the minimum wage policy has to be nothing more than at a
subsistence level.

In Municipal Corporation of Delhi v. Ganesh Razak (1995), the Supreme Court held
that the entitlement to minimum wages under the Act is an existing right of the
workman and does not require any further adjudication than that of the Labour
Court.

Employee

Section 2(i) of the Act defines an employee as any person who is engaged to do any
skilled or unskilled, manual or clerical work, in respect of which minimum rates of
wages have been fixed. It is an important definition under the Act as it defines the
scope of its application. Not all employer-employee relations are governed by the
Minimum Wages Act. Moreover, not all kinds of employees would fall under the
ambit of claiming the benefits of minimum wages fixed by the appropriate
government.
Fixing Minimum Rates of Wages

Section 3 of the Act provides for fixing the rates of the minimum wage by the
appropriate government. Sub-section (1) provides that the appropriate government
shall fix the minimum rate of wages payable to the employees in employment
mentioned under Part I or Part II of the Schedule to the Act (Scheduled Employment)
and review the minimum wages for a period of five years. Sub-section (1A) provides
that the appropriate government may refrain from fixing minimum wages for any
Scheduled Employment where the number of employees in the whole State is less
than one thousand until such number remains less than one thousand.

Sub-section (2) provides that the appropriate government may fix:

1. Minimum time rate;

2. Minimum piece rate;

3. A guaranteed time rate; and

4. An overtime rate.
Sub-section (3) provides the power to the appropriate government to fix different
rates of minimum wages for the following:

1. Different scheduled employments;

2. Different classes of work in the same scheduled employment;

3. Adults, adolescents, children and apprentices; and

4. Different localities
These minimum wages can be fixed either on an hourly basis, by the day, by the
month, or by any other time period as prescribed by the appropriate government.

Section 4 of the Act provides the minimum rates of wages. Minimum rates of wages
shall consist of either:

“(i) a basic rate of wages and a special allowance at a rate to be adjusted, at such
intervals and in such manner as the appropriate Government may direct, to accord
as nearly as practicable with the variation in the cost of living index number
applicable to such workers (hereinafter referred to as the “cost of living
allowance”); or
(ii) a basic rate of wages with or without the cost of living allowance, and the cash
value of the concessions in respect of supplies of essential commodities at
concessional rates, where so authorised; or

(iii) an all-inclusive rate allowing for the basic rate, the cost of living allowance and
the cash value of the concessions, if any.”

Further, Section 5 of the Act provides that the appropriate government may fix or
revise minimum wages either by appointing committees and sub-committees or by
publishing its proposal for the people likely to be affected by such proposals in the
Official Gazette.

In Standard Vacuum Refining Company v. Its Workmen (1961), the Apex Court held
that the following shall be the guiding principles for the determination of minimum
wages by all wage fixing authorities:

1. A standard working-class family should contain 3 units for every earning

member, in which the earnings of women, children, and adolescents must be
disregarded;

2. Minimum food requirement must be calculated on the basis of net calorie

intake;

3. Clothing must be calculated at the rate of 18 yards per person per annum;

4. With respect to housing, the rent corresponding to the minimum area

provided for under the Government’s Industrial Housing Scheme should be
taken into consideration; and

5. Fuel, lighting, and other miscellaneous items of expenditure must constitute

20% of the total minimum wage.
Later, in Reptakos Brett & Company’s case, the Court added another factor for
fixing minimum wages in addition to the above five. It was held that the education
of the children, medical requirements, minimum recreation, including festivals, etc.,
and provision for old age, etc. should further constitute 25% of the total minimum
wage.

With regards to the question of whether dearness allowance would constitute a part
of the minimum wages, the Bombay High Court in the case of Harilal Jechand Doshi
Ghatkopar v. Maharashtra General Kamgar Union (2000) held that the provisions of
the Minimum Wages Act, 1948 do not postulate different criteria for the calculation
of minimum wages. If the employer pays a total wage that is above the minimum
wages fixed under the Act, he cannot be held to be in contravention of the
provisions of the Act, as the total wages would comprise of basic wages and a
dearness allowance.
A similar view has been taken by the Hon’ble Supreme Court in the case
of Airfreight Ltd. v. State of Karnataka & Ors. (1999). The Court held that in cases
where the minimum wages are linked with the cost of living index, the amount paid
on the basis of dearness allowance is not to be taken as an independent component
but rather has to be considered a part and parcel of the minimum wages.

Advisory board under Minimum Wages Act, 1948

Section 7 of the Act establishes the Advisory Board. The scope of the Advisory
Board appointed by the appropriate government is the coordination of the
committees and sub-committees established under Section 5 of the Act and
advising the appropriate government on fixing and revising the minimum wages for
Scheduled Employment. A Central Advisory Board (CAB) shall be established
under Section 8 of the Act. The Central Government shall establish CAB and appoint
its members. The members shall consist of an equal number of representatives of
both the employers and the employees, along with independent members
nominated by the Central Government. The Chairman of CAB shall be an
independent member. The scope of work of the CAB is to ensure coordination with
the Advisory Board and other matters under the Act.

Mode of payment of wages under Minimum Wages Act, 1948

All the wages shall be paid in cash only, as provided under Section 11 of the Act.
However, where it has been a practice to pay the wages in kind, either wholly or
partly, authorisation from the appropriate government is necessary. This includes
concessions on essential commodities as required.

Section 12 of the Act provides the manner in which the employees have to make
the payment of the minimum wages. The provision provides that the employer shall
pay the minimum rates of wages to every employee working under him within the
prescribed time period.

Fixing hours for a normal working day under Minimum Wages Act, 1948
Section 13 of the Act provides that the appropriate government may fix the working
hours in the following manner:

1. Fix the working hours of a normal day, including one or more specified
intervals.
 2. Provide a day of rest in every period of seven days to all the employees or a
class of employees, and adequate remuneration must be provided to the
employees during the day of rest.

3. Provide payment to the employees on the day of rest, which shall not be less
than the overtime rate.
Section 14 of the Act provides that where an employee works over the specified
number of hours in a normal working day, he shall be entitled to receive such
overtime wages at the rate fixed under the Act for every hour after his normal
working hours.

In case an employee works for less number of hours in a normal working day than
prescribed, he shall still receive the minimum wages fixed under the Act. However,
this provision shall apply only if the lower number of hours of work was not caused
by the unwillingness of the employee. The provision has been provided
under Section 15 of the Act.

Compliance under Minimum Wages Act, 1948

Section 18 of the Act mandates the maintenance of records and registers by every
employer under the Act. The records shall contain the particulars of the employees
employed by the employer, the work performed by them, the wages paid to them,
the receipts given by them, and any other information prescribed by the
appropriate government. The employer also has to keep an exhibit of the factory,
workshop, or place where the scheduled employment is carried out. Such registers
and records may be perused by the inspector appointed by the appropriate
government under Section 19 of the Act. The inspector may:

1. In order to examine the register, a record of wages, etc., the inspectors may
enter the premises or places within the local limits of their authority where
the employees are employed to work and for which minimum rates of pay
have been determined under the Act.

2. Examine any person whom the inspector may have reasons to believe is an
employee.

3. Require any contractor to provide information relating to the employees.

4. Seize or make copies of the wage registers, etc., which he may have reasons
to believe were committed by the employer.

5. The appropriate government may provide any other powers or duties under
the Act.
Every inspector under the Act shall be deemed to be a public servant as prescribed
under the Indian Penal Code, 1860.
Claims under Minimum Wages Act, 1948
The appropriate government may, by notification to the Official Gazette, appoint
any Commissioner for Workmen’s Compensation or any officer of the Central
Government exercising functions as a Labour Commissioner for any region, or any
officer of the State not below the rank of Labour Commissioner, or any other officer
with experience as a judge of a Civil Court or as stipendiary Judicial Magistrate to be
the Authority to hear and decide for any specified area all claims arising out of
payment of less than the minimum rates of wages or in respect of wages not paid
within the prescribed time limit. A Block Development Officer, Tahsildar, Additional
Tahsildar, or Naib Tahsildar can also be appointed as an Authority by the State
Government by notification in the Official Gazette.

For the procedure under an application under Section 20 of the Act is made to the
Authority, both the employers and the employees shall be granted an equal
opportunity of being heard. Under this Section, every direction of the Authority shall
be binding and final. The Authority appointed under the Act shall have the powers of
a Civil Court under the Code of Civil Procedure, 1908 for the purposes of taking
evidence, enforcing the attendance of witnesses, production of documents, etc.

Procedure before the Authority

The following is the procedure to be followed before the Authority under the Act in
cases relating to non-payment or payment of less than minimum wages fixed under
the Act, as prescribed under Section 20:

 Both the employers and the employees shall be granted an equal opportunity
to present their case.

 The Authority shall direct the refund of such amount of wages as has not been
paid by the employer to the worker or has delayed in paying the wages, along
with compensation to the extent of damages suffered by the worker.

 However, if the employer proves that the delay in payment of wages was due
to a bona fide error, the Authority shall not direct any payment of
compensation. An example of a bona fide error could be that the person
authorised to make the payment of wages did not pay such wages even after
due diligence of the employer.

Penalty under Minimum Wages Act, 1948

For a malicious or vexatious application of a claim under the Act, a penalty of not
more than fifty rupees may be levied on the applicant to be paid to the employer,
as has been provided under Section 20(4) of the Act. Sub-section (5) of Section 20
of the Act provides the mechanism for recovery of the penalty. If the Authority is a
Magistrate, the penalty may be recovered by the Authority as if it were a fine
imposed by the Magistrate. If the Authority is not a Magistrate, the Authority has to
make an application to the Magistrate and the penalty shall be recovered by the
Magistrate as a fine imposed by such Magistrate.

For employers who have paid less than the minimum wage under the Act, or who
are in contravention of an order passed under Section 13 of the Act, the punishment
may extend to a term of not more than six months or a fine of not more than five
hundred rupees may be imposed, subject to the amount of compensation awarded
to the Applicant under Section 20 of the Act.

Exemption from liability in certain cases under the Minimum Wages Act, 1948
Section 23 of the Act provides that where an employer has been accused of
committing any offence under the Act, and he charges the offence upon any other
person, the employer shall be entitled to be discharged of such an offence if the
following conditions are fulfilled:

1. The employer shall make a complaint against such other person before the
Authority under the Act;

2. The employer shall bring before the Court such other person upon whom he
places the charge of the offence;

3. The employer shall satisfy the Court that due diligence for the execution of
the provisions of the Act was conducted on his behalf;

4. The employer shall satisfy the Court that such an offence was committed by
such other person without his knowledge, consent, or connivance.
In such cases, the other person shall be convicted for the offence and the employer
shall be discharged. If the Court deems it necessary, it may examine the employer
under oath.

Power to make rules under Minimum Wages Act, 1948

Section 30 of the Act provides that the Appropriate Government may, by notification
in the Official Gazette, make rules for the following purposes:

1. Term of office of members of the committees, sub-committees, and the

Advisory Board;
 2. Method of summoning the witnesses, production of documents relevant for
enquiries before the committees, sub-committees, and Advisory Board;

3. Mode of computation of cash value of wages in kind;

4. Time and conditions of payment of, and deductions permissible from wages;

5. Adequate publicity of minimum wages fixed under the Act;

6. Provide a day of rest in every period of seven days and for the payment of
remuneration in respect of such a day;

7. Prescribe the number of hours constituting a working day or week, as may be

applicable;

8. Prescribe the manner in which the wages of an employee employed for less
number of hours/days is to be computed;

9. The form of registers and records to be maintained, along with the particulars
to be entered in such registers and records;

10.Provide for the issue of wage books for wage slips and attendance cards;

11.Powers of the Inspectors under the Act;

12.Regulate the costs of proceedings under the Act;

13.Prescribe the court fee for the cases under the Act;

14.Provide for any other matter that is to be or may be prescribed.

Constitutionality of Minimum Wages Act, 1948

The constitutionality of the Act has been challenged on the grounds of violation
of Article 14 and Article 19 of the Constitution in the following cases:

Bijay Cotton Mills Ltd. v. State of Ajmer (1954)

In this case, there was an industrial dispute between the employers and employees
of the mill regarding the enhancement of wages. The dispute was taken to the
Industrial Tribunal, which dismissed the petition of the employees, stating that the
financial capacity of the mill precludes the enhancement of wages for the workers.
An appeal was preferred before the Appellate Tribunal. Meanwhile, the Government
of Ajmer implemented the provisions of the Act and prescribed the minimum wages
for industries in Ajmer. The Appellate Tribunal remanded the case and the final
award of the Industrial Tribunal was passed, wherein the basis on which the
minimum wages were fixed was rejected by the Tribunal. The minimum wages fixed
by the Commissioner were challenged by various industries on the ground that the
Act itself was violative of Article 19(1)(g) of the Constitution, as the employers were
unable to carry out their businesses due to the condition of paying the minimum
wages.

The Hon’ble Supreme Court of India, rejecting the contention of the employers, held
that the Minimum Wages Act, 1948, is not violative of the right to freedom of trade,
as it has been implemented as a part of the Directive Principles of State Policy,
specifically under Article 43 of the Constitution. While it may be difficult for certain
employers to start their business while complying with the payment of minimum
wages, the provisions of the Act have been adopted keeping the larger interests of
people in mind. Thus, the Act was held to be constitutional.

Bhikusa Yamasa Kshatriya v. Sangamner Akola Taluka Bidi Kamgar Union (1958)

In this case, the validity of the Minimum Wages Act, 1948, was again challenged
before the Hon’ble Bombay High Court. There were various claims under Section 20
of the Act on the applicability of minimum rates of wages in certain districts of the
State of Bombay. Inter alia other contentions, the employers challenged the validity
of the Act on the grounds that it was violative of Article 14 and Article 19(1)(g) of
the Constitution and that the State of Bombay did not follow the requisite procedure
for determining the minimum rates of wages.

Rejecting the contentions of the employers, the Court held that the petitioners
failed to establish that the requisite procedure was not followed by the State of
Bombay while determining and revising the minimum wages and that the provisions
of the Act were violative of Article 14 or Article 19(1)(g) of the Constitution.

N.M. Wadia Charitable Hospital & Ors. v. State of Maharashtra & Ors. (1986)

In this case, the State of Maharashtra appointed a committee to advise on the

matter of the revision of the minimum wages payable to hospital employees.
However, the government did not adopt the rates of wages recommended by the
committee in its report but rather adopted a higher rate of minimum wages. The
notification was challenged by the petitioners on the ground that there was no
application of mind by the government.

It was held by the Court that fixing different rates of minimum wages for different
localities was permissible under the Act and did not violate any provisions of the
Constitution.
Code on Wages, 2019
In order to codify the existing labour laws and bring them in conformity with
contemporary times, the Central Government in 2019-20 consolidated 29 statutes
into four Codes, namely, the Code on Wages, 2019; the Occupational Safety, Health
and Working Conditions Code, 2020; the Code on Social Security, 2020; and
the Industrial Relations Code, 2020. Although these codes are yet to be enforced,
they hold importance in contemporary times.

The Code on Wages, 2019 consolidates four major statutes, namely, the Payment of
Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965;
and the Equal Remuneration Act, 1976. While a microscopic view of the differences
between the two statutes (the Minimum Wages Act, 1948 and the Code on Wages,
2019) would be a redundant task as the Code has not been enforced yet, a
preliminary comparison has been provided as follows:

1. The definition of cost of living index number has been omitted from the Code
and no alternative has been provided.

2. The definition of appropriate government has been changed to include certain

important industries such as air transport services, telecommunications,
banking and insurance companies established by the Central Government,
and the Central Government shall be the appropriate government for such
industries.

3. The definition of employer now includes contractors and the legal

representative of a deceased employer.

4. The scope of wages has been defined with more clarity as to what would
constitute a wage and what would not constitute a wage. For instance,
dearness allowance and retaining allowance would now be included as wages
under the Code on Wages, 2019.

5. The categorization of employment has been changed significantly. Under the

Minimum Wages Act, 1948, the categorization was based upon agricultural
and non-agricultural work. However, under the Code on Wages, the
categorization has been done on the basis of skill level, and employment has
been divided into highly skilled, semi-skilled, and unskilled. This aids in a
more systematic division of labour for the purposes of fixing minimum wages.

6. The concept of floor wage has been introduced by the Code. Floor wage shall
be the basis of the determination and fixing of minimum wages under the
Code.

7. The time frame for revising minimum wages has been reduced from five years
to three years. Moreover, the appropriate government cannot exceed the limit
of three years in any case.
 8. The Code also takes into consideration the geographical aspect, such as the
fixation of minimum wages for workers employed in hills, plains, deserts, etc.
Consequently, the minimum wages may be fixed according to time work,
piece work, or periods of hours by day or month. Another aspect that shall be
taken into consideration is the arduous nature of the job like underground
work, hazardous work conditions, etc.

The concept of Floor Wage under the Code

The concept of floor wage has been introduced under the Code on Wages, 2019,
which was not provided under the Minimum Wages Act, 1948. Floor wages can be
understood as the basis on which the appropriate government has to decide the
minimum wages. Floor wages may be differentiated on the basis of location and
type of work. For example, the floor wages of a work in the hills to be performed by
an unskilled labour may be different from a similar work to be performed in a
desert.

It is pertinent to note that the rationale behind introducing floor wages is to bring
uniformity to the minimum wages to be paid to employees. It would also help keep
the migration of workers in check.

Floor wages are to be fixed by the Central Government under Section 9 of the Code
on Wages. The Central Government may prescribe the floor wages of a particular
area. The appropriate government is obliged to follow floor wages while fixing
minimum wages. The appropriate government, under no circumstances, can fix the
minimum wages below the level of the floor wages fixed by the Central
government. Moreover, the appropriate government cannot reduce the minimum
wages already fixed if it is higher than the floor wages.

The Central Government can seek the advice of the Central Advisory Board under
the Code for the determination of floor wages. Additionally, the revision of floor
wages cannot exceed the time limit under the Code, i.e., five years.

The concept of floor wages was introduced by the Bhootlingam Committee in 1978
in the name of “National Wage.” Thereafter, in 1991, the National Commission on
Rural Labour Floor suggested the “National level floor minimum wages.” However,
the Code on Wages, 2019 is the first statute to implement this concept.