Government Employees: Understanding Minimum Wages and Bonus
Press Information Bureau
Government of India
Ministry of Labour & Employment
A
minimum wage is the lowest remuneration that employers may legally pay
to workers or it is the price floor below which workers may not sell
their labour.
The concept of minimum wages first
evolved with reference to remuneration of workers in those industries
where the level of wages was substantially low as compared to the wages
for similar types of labour in other industries. As far back as 1928,
the International Labour Conference of International Labour
Organization, at Geneva, adopted a draft convention on minimum wages
requiring the member countries to create and maintain a machinery
whereby minimum rates of wages can be fixed for workers employed in
industries in which no arrangements exist for the effective regulation
of wages and where wages are exceptionally low. Also, at the Preparatory
Asian Regional Labour Conference of International Labour Organisation
held at New Delhi in 1947 and then at the 3rd session of the Asian
Regional Labour Conference, it was approved that every effort should be
made to improve wage standards in industries and occupations in Asian
Countries, where they are still low. Thus, the need of a legislation for
fixation of minimum wages in India received an impetus after World War
II, on account of the necessity of protecting the interest of
demobilized personnel seeking employment in industries.
The
justification for statutory fixation of minimum wage is obvious. Such
provisions which exist in more advanced countries are even necessary in
India, where workers organizations are yet poorly developed and the
workers bargaining power is consequently poor.
To provide for
machinery for fixing and revision of minimum wages a draft Bill was
prepared and discussed at the 7th session of the Indian Labour
Conference in November, 1945. Thereupon the Minimum Wages Bill was
introduced in the Central Legislative Assembly. The Minimum Wages Bill
having been passed by the Legislature received the assent on 15th March,
1948. It came on the Statute Book as the Minimum Wages Act, 1948.
The
Act provides for fixation by the appropriate Governments of minimum
wages for employments covered by Schedule to the Act. The Central
Government is the appropriate Government in respect of 45 scheduled
employments in the Central Sphere. The minimum wages fixed for Central
sphere are applicable to the scheduled employments in the establishments
under the authority of Central Government, railway administrations,
mines, oil-fields, major ports or any corporation established by a
Central Act. Employments other than the scheduled employment for Central
Sphere come under the purview of the State Government and accordingly
State Government wages are applicable in such employments. The minimum
wages for Central Sphere are revised from time to time based on the
increase in Consumer Price Index effective from April and October.
According
to Section 3(1)(b) of the Minimum Wages Act, 1948, the appropriate
government shall review at such intervals, as it may think fit, such
intervals not exceeding five years, the minimum rates of wages so fixed
and revise the minimum rates if necessary.
The norms recommended
by the Indian Labour Conference, in 1957, fox fixing the minimum wages
are: (a) consumption units for one wage earner; (b) minimum food
requirements of 2700 calories per average Indian adult; (c) clothing
requirements of 72 yards per annum per family; (d) rent corresponding to
the minimum area provided for under Government's Industrial Housing
Scheme; and (e) fuel, lighting and other miscellaneous items of
expenditure to constitute 20% of the total minimum wage.
In 1991,
the Hon'ble Supreme Court delivered a historic judgement and directed
that children's education, medical requirement, minimum recreation
including festivals/ceremonies, provision for old age, marriage etc.
should further constitute 25% of the minimum wage and be used as a guide
in fixation of minimum wage.
The Act envisages appointment of an
Advisory Board, by the appropriate Government, for the purpose of
advising the appropriate Government in the matter of fixing and revising
minimum rates of wages.
The Central Government revises the wages
in the scheduled employments from time to time in accordance with the
provisions of the Minimum Wages Act, 1948. Draft Notifications for all
the Scheduled Employments in the Central Sphere were issued on 1st
September, 2016 simultaneously, in fact for the first time. The basic
rate of minimum wages for an unskilled worker in the scheduled
employment other than agriculture has been proposed at Rs.350 in Area
'C' from the current minimum wage (basic wage + variable dearness
allowance) of Rs.246 resulting in an increase of about 42%. The basic
rate of minimum wages for an unskilled worker in the scheduled
employment 'agriculture' has been proposed at Rs.300 in Area 'C' from
the current minimum wage (basic wage + variable dearness allowance) of
Rs.211 resulting in an increase of about 42%.
The proposed revision in the rates of basic minimum wages would indeed provide much needed solace to the labour fraternity.
Bonus
Bonus payment is an extra payment given for doing one's job well also known as performance related pay or pay for performance.
The
practice of paying bonus in India appears to have originated during
First World War when certain textile mills granted 10% of wages as war
bonus to their workers in 1917. In certain cases of industrial disputes
demand for payment of bonus was also included. In 1950, the Full Bench
of the Labour Appellate Tribunal evolved a formula for determination of
bonus. A plea was made to raise that formula in 1959. At the second and
third meetings of the eighteenth Session of Standing Labour Committee
(G.O.I) held in New Delhi in March/ April 1960, it was agreed that a
Commission be appointed to go into the question of bonus and evolve
suitable norms. A Tripartite Commission was set up by the Government of
India to consider in a comprehensive manner, the question of payment of
bonus based on profits to employees employed in establishments and to
make recommendations to the Government. The Government of India accepted
the recommendations of the Commission subject to certain modifications.
To implement these recommendations the Payment of Bonus Act, 1965 was
enacted, which came into force on 25.9.1965.
The objective of the
Payment of Bonus Act, 1965 is to provide for the payment of bonus to
the persons employed in certain establishments on the basis of profits
or on the basis of production or productivity and for matter connected
therewith.
It applies to (i) Every Factory; and (ii) Every other
establishment in which 20 or more persons are employed on any day during
an accounting year subject to the exemptions under section 32. Every
employee shall be entitled to be paid by his employer in an accounting
year, bonus, in accordance with the provisions of this Act, provided he
has worked in the establishment for not less than thirty working days in
that year. While the minimum bonus is 8.33% of the salary or wage
earned by the employee during the accounting year, the maximum bonus is
20% of such salary or wage.
Two ceilings are available under the
said Act generally known as eligibility limit and calculation ceiling
respectively. Clause 13 of Section 2 of Payment of Bonus Act, 1965
defines an employee based on salary or wage per mensem. This is usually
taken as the '
eligibility limit' for computation of
bonus. Similarly, Section 12 of the Payment of Bonus Act, 1965 provides
for calculation of bonus of an employee based on salary or wage per
mensem. This is known as '
calculation ceiling'.
The
two ceilings are revised from time to time to keep pace with the price
rise and increase in the salary structure. At present, the calculation
ceiling has been enhanced to Rs.7000 or the minimum wage for the
scheduled employment, as fixed by the appropriate Government, whichever
is higher and the eligibility limit has been enhanced to Rs.21,000/-.
Due
to this revision, additional 55 lakh workers would be benefited. This
would indeed, be a good gesture on the part of the Government towards
the labour fraternity.
Source : PIB
