MODULE III WAGE ADMINISTARTION IN INDIA . Wage policy in India . Methods of wage determination in India .

. Wage Boards: Structure, Scope and function . Role of Collective Bargaining in Wage determination . The minimum wages Act . The pay commission . Method of Payment . Payment of wages Act . Payment of Bonus Act Wage Policy in India: Wage policy is a complex and sensitive area of public policy. This is because the relative status of workers in the society, their commitment to industry and attitude towards management, their morale and motivation towards productivity, their living standard and in fact their way of life are all conditioned by wages. Hence a policy dealing with this crucial problem cannot be simply economic, as it has to reckon with the realities of multi dimensional social phenomenon, in which besides the workers and the management, the consumer and the society at large, and the consequences the state, are all vitally interested. Objective of wage policy: The real purpose of wage policy is to protect workers against exploitation or unduly low wages, improve workers efficiency and performance, encourage acquisition of newer skills, provide an incentive to labor mobility, stabilize prices, and acceleration of the nations development process. Wage policy was considered as means of promoting investment, internal price stability, worker efficiency, a more effective distribution of the labor force, the international competitiveness of economy, an influx of foreign capital, etc. Formulation of wage policy in India: Before independence, Indian governments attitude to labor problems was that of least interference. The provision of adequate living wage and recognition of the principle of equal remuneration for work of equal value

figured prominently among the objective of the ILO, set forth in the preamble to its constitution. In 1928, the international labor conference adopted a convention urging the creation of machinery for fixing minimum wages keeping in view a suitable standard of living for workers and related considerations. The whitely commission, for the first time, recommended the setting up of a machinery for the fixation of minimum wages in keeping with certain requirements so as to avoid sweating in Indian industries. The Second World War imposed unusual burdens and pressures on the Indian economy and caused a phenomenal rise in prices. The fifth Indian Labor conference (1943) and the standing labour committee (1944) discussed the problem of minimum wages fixation. In order to neutralize the price rise and to sustain the real wages, the government initiated a system of DA, which has since become an important component of wages in the Indian economy. In 1946, the government formulated a three-fold wage policy which recommended: a. statutory prescription of minimum wages in sweated industries and occupations and in agriculture b. promotion of fair wages agreement c. steps to secure for workers in plantations a living wage. Policy in the Post Independence period: Soon after Independence, the government embarked upon a series of legislative and other measures for the amelioration of the pathetic conditions of the working class. Industrial Dispute Act, 1947 has played a significant role in the field of wage fixation. In India, evolution of wage policy started with the Industrial Truce Resolution unanimously adopted in a tripartite conference in December 1947. The resolution stated that the system of remuneration to capital as well as labour must be so devised that while in the interest of the consumers and primary producers, excessive profit should be prevented by suitable measures of taxation and otherwise, both will share a product of their common effort after making provision for payment of fair wages of labour, a fair return on capital employed in the industry and reasonable reserves for the maintenance and expansion of the undertaking.

Method of Wage Determination in India: Wage and salary incomes in India are determined through several institutions. These are: . Collective bargaining . Statutory Wage Fixation . Industrial wage boards . Government appointed pay commission, . Adjudication by court and tribunal. Collective Bargaining: The phrase collective bargaining originated in the writing of Sydney and Beatrice Webb. This term relates to those arrangements under which wages and conditions of employment generally are decided by agreement negotiated between the parties. Broadly the following factors affect the wage determination by collective bargaining process: 1. Alternate choices and demands 2. Institutional necessities e.g. if ratification of an agreement requires a majority vote of employees, the character of wage settlement would have to be such as it would be acceptable to majority. 3. The right and capacity to strike. In a modern democratic society wages are determined by collective bargaining in contrast to individual bargaining by workers in the past. When wages are determined by individual bargaining, each individual worker bargains separately with his employer. The way in which wages are determined by such bargaining can be understood more clearly on the alternative assumption of the existence of the two extreme conditions of perfect competition and monopoly in the labour market. Collective bargaining practices vary in accordance with such factors as the historical development of unions within an industry and economic characteristics of the industry. Sometimes, groups of employers will bargain together as a unit. Bargaining may also take place at the enterprise level and the plant level. It may be conducted through a union and an association representing

some or all of the employers in an industry in an area, a region, or a nation. Through the mechanism of collective bargaining, workers representatives achieve a voice in the establishment of wages, hours and other conditions of employment. Wages and related questions are usually the central issues of collective bargaining. The collective agreements actually arrived at reflect the play of many forces. Unionism is one such factor. Variation in Regional and local labour conditions, Method of wage payment, Establishment size, Technical efficiency of firms, General business condition, Capacity to pay, Company wage policies, Union wage policy and union power, help to determine the structure and level of money wages. In the matter of wage bargaining, unions are primarily concerned with the . General level of wage rates . Structure of wage rates . Bonus, incentives and fringe benefits . Administration wages Statutory Wage Fixation: The minimum wages Act was passed in 1948 to provide for a machinery for statutory fixation and revision of minimum wages in the scheduled employments, including plantations and agriculture. It is apiece of social legislation which provides protection to workers in employments in which they are vulnerable to exploitation on account of the lack of organization and bargaining power. The main objective of the Act is to prevent the payment of unduly low wages to workers employed in scheduled employments and to secure certain basic condition of work and employments such as hours of work, overtime wages, weekly off. The recommendations of the National commission on Labour with regard to the statutory minimum wages were: Once the minimum rates of wages are fixed according to the procedure prescribed under the minimum wages act, 1948, it is the obligation of the employer to pay the said wages, irrespective of the capacity to pay.

The appropriate government should revise wages prescribed under the provisions of the Act at least once in every three years. If as a result of adverse price situation wage rates require adjustment within three years, the local authority should make such adjustment. The criteria in regard to minimum wage fixation will necessarily have to be flexible. Laying down a rigid, cash equivalent of content of statutory minimum wage whose coverage is essentially transitional under conditions of development would not serve any useful purpose. Industrial Wage Boards: The term wage Board covers a voluntary negotiating body set up by discussion between organized employers and workers to regulate wages, working hours and related conditions of employment by collective bargaining as well as a body set up by law or with legal authority to establish minimum wages, other standards of employment which are then legally enforceable in the particular trade or industry to which the Boards decision relate. This concept was first enunciated by the Committee on Fair Wages. The First and Second Five Year Plans gave importance to laying down principles for bringing wages in conformity with the aspirations of the working class and setting up of appropriate machinery for the application of these principles. According to them, the existing machinery for the settlement of disputes, namely the Industrial Tribunals, had not succeeded in giving full satisfaction to the parties and, therefore, they recommended authorities like Tripartite Wage Boards consisting of equal representatives of employers and workers and an independent Chairman. Accordingly, Wage Boards were set up for the following sectors: cotton textile industry, jute, plantations, mines, engineering, iron and steel, chemicals, sugar, cement, railways, posts and telegraphs, ports and docks etc. For quite some time, these Wage Boards determined the wages and other remuneration to be given to the workers in these industries. Thus wage bargaining mostly took place at the industry level, and through Government controlled wage boards. Since there were not much regional variations, this system worked well for quite some time.

In 1973 and 1978, Indian economy suffered two oil shocks. During these years the actual growth rates of industrial production fell far below the plan targets; unemployment rates doubled, new forms of workers protests such as: hartal, go-slow and gherao emerged. The number of strikes and the number of man days lost increased considerably. This culminated into an all India Railway Strike in May 1974 that paralyzed the entire economy. This period also saw the growth of independent plant based militant unions without any political affiliations. In order to share the monopoly gains of an industrial unit and productivity increases as a result of technological changes, such unions were organized on unit basis, and through their militancy, they were successful in obtaining much higher wages and other facilities for the workers. Slowly industry wise wage boards and wage settlements took a back seat, and company-wise negotiations and wage settlements emerged. Though there are many principles that are taken into consideration in wage determination in the unit-based bargaining system, the two main principles are: first, the capacity of the industrial unit to pay, and second, the bargaining strength of the trade union to negotiate with the management. Government appointed Pay Commission: The Pay Commissions of the Central Government took different approaches for the determination of the Minimum Wages for government employees. They were as follows: . The need based approach; . Capacity to pay approach; . Relative Parities approach; . Job evaluation approach; . Productivity approach; . Living wage approach. These various aspects have found mention and been given varying emphasis in the report of different Pay Commissions. The decision of the Pay Commissions on minimum wages was often determined by some kind of harmonization between the first two i.e., the need-based approach and the capacity to pay approach. This was essential because a minimum wage which was found to be socially desirable was not necessarily economically feasible. Job evaluation and measurement of productivity

was not found to be feasible by the earlier Pay Commissions, and fair comparisons with the public and private sector were also not conceded by them. On living wages they observed that a living wage was a desirable level towards which the State must endeavor to go. The Fifth Pay Commission after comparing public sector and private sector employees, comparisons with State Governments and considering the expectation of the employees tried to work out a minimum wage for Central Government Employees of the lowest cadre. The Commission used a modified version of the constant relative income criterion and fixed Rs: 2440/- as the salary of lowest paid employee of the Central Government. This meant more than a three-fold jump in the basic pay from Rs. 750/- to Rs. 2400. The Commission had estimated that this would mean an additional outgo to the tune of Rs. 294.1 crores every year for this category of employees. It is not necessary to describe the pressure that such a steep rise in pay scales of Government Employees causes on the Governments Budget. Adjudication by court and tribunal: Since independence, adjudication has been one of the main instruments for settlement of wage disputes, improvement in wage scales and standardization of wages and allowances. Though courts and tribunals were primarily intended to deal with settlement of industrial disputes, in practices, wage fixation has become an important element in their work and functioning. This is because of a large number of disputes concerning wages and allowances. Method of Payment: Wage payment system consists of the pay structure and the methods used to motivate and reward work force for their contribution to the goals of the organization. Various systems of the wage payments have developed in different industries and in different countries. Few of them are: . Time rate system . Piece rate system . Balance or debt system Time Rate System:

Time rate system is the oldest and the most common method of fixing wages. It refers to the payment of a pre-determined rate for normal time of work and relates to a time limit such as an hour, day, week or month. Broadly, in this system, the basic rate for a job is fixed by negotiation, by reference to local rates, or by job evaluation and only varies with time, never with output or performance. This method is generally common for clerical, supervisory and managerial personnel. The characteristics of this method are that the production of a worker is not taken into consideration in fixing the wages. An employee is paid at the settled rate as soon as the time contracted for is spent. The minimum wage rate, the need-based minimum wage, fair wage or the living wage fixed by the government or the wage board or through collective bargaining mechanism, are time rate principles. Merits: It is a simple and convenient method, for the amount earned by worker can be easily calculated. As all workmen employed for doing a particular kind of work receive the same wages, ill-will and jealously among them are avoided. As there is no limit for the execution of a job, workmen are not in a hurry to finish it and this may mean that they will pay required attention to the quality of their work. It provides a regular and steady income to the workers which enable them to adjust their budget accordingly. Due to the slow and steady pace of the worker, there is no rough handling of machinery, which is a distinct advantage for the employers. It is the only system that can be used profitably where the output per worker is not measurable, or where the job involves professional, technical or administrative skills. Demerits: It does not take into account the fact that men are of different abilities and that if all persons are paid equally, better workmen will have no incentives to work hard. As there is no specific demand on the worker to complete a piece of work within a given period of time, there is also the possibility of systematic evasion of work. This system sometimes compels a person to take up a job for which he has neither the liking nor ability.

Piece rate System: The piece rate system is the earliest and the simplest of all the bonus plans. It is usually implemented as a production incentives scheme, where the objective is to encourage a specific group of workers to fulfill a certain target set by the company. Piece rate bonus plans are based on the physical output of the individual employees. As the output increase, the employee will also expect an increase in his salary. Individual incentive schemes such as piece rate should be used when employees have to work independently without the need top coordinate their activities with other workers, where a high level of individual performance. The piece rate has lost its attraction round the world. Such system forces the employee to focus his attention to the increase of the production volume without similar attention paid to quality. The practice of the piece rate system has also resulted in an increase of industrial accidents and a deterioration of employees health. Employees are likely to oppose changes in the product, technology or tools used for the production process because it means that they have to spend time to learn the new method, thus causing a loss in their income. It is precisely due to these disadvantages that some companies have attempted to establish hybrid of the piece rate system. Piece rate can be converted into time rate by fixing an output norm. For the adoption of piece-rate method of remuneration, the following job characteristics must exist: .The work is standardized, repetitive, and easily measurable .The work is not continually changing .Considerations of quality is predominant Balance or Debt Method: This is a combination of time and piece rate. The worker is guaranteed an hourly or a day rate with an alternative piece rate. If the earning of a worker calculated at the piece rate exceed the amount which he would have earned if paid on the time basis, he gets credit for the balance, namely, the excess piece rate earning over the time rate earning.

If the piece rate earning is equal to his time rate earnings the question of excess payment does not arise. This system pre-supposes the fixation of time and piece rate on a scientific basis. The merit of this system is that an efficient worker gets an opportunity to improve his earning. Payment of Wage Act: Concept: The payment of wage Act, 1936 regulates the payment of wages to certain classes of person employed in industry . It was enacted to ensure that the wages payable to employees covered by the Act are disbursed by the employer within the prescribed time limit and that no deductions other than those authorized by law are made by, the employers. Coverage: The Act applies to persons employed in any factory, persons employed in a railway by a railway administration, either directly or through a subcontractor. Further, the state governments are empowered to extend the provision of the Act to cover persons employed in any industrial establishment or any class or group of industrial establishment as defined in the Act. The wage limit for the applicability of the Act is s 1600/p.m. Responsibility for payment of wages: Employers, managers of factories and the persons responsible to the employer for the supervision and control of the industrial or other establishment are responsible for payment of wages. Fixation of Wage Periods: Those responsible for payment of wages shall fix the wage periods in respect of which wages are payable and such period should not exceed one month. Time of Wage Payment: Time for payment of wages is fixed under the law. In a factory in which less than one thousand persons are employed, wages should be paid before the expiry of the seventh day from the last wage period. In all other case, it is the tenth day from the last wage period. Relaxations are made in case of persons employed on dock. Where the employment of any person is terminated, the wages earned by him shall be paid before the expiry of the second working day from the day on which his employment is terminated. Payment is made on coin or currency note, or on request payment may be made either by cheque or by crediting the wages in the bank account of the concerned employee.

Deduction: Deductions from the wages of an employed person may be made of the kinds such as fines, absence from duty, deductions for damage or loss, for house accommodation, for amenities and services, recovery of advances or loans, income tax, court order, co-operative societies, LIC premium, bonds, PMNRF, trade union subscription. The total amount of deductions in any wage period should not exceed 75% of wages in case if the deductions are made for payments to co-operative societies, otherwise 50% of wages. Fines: A notice specifying approved list of acts and omission shall be displayed in the premises. An opportunity must be given before imposition of fines. The total amount of fine which may be imposed in any one wage period shall not exceed an amount equal to 3 % of wages payable to an employee. No fine can be imposed on any person under the age of 15 years. No fine imposed on any employed person shall be recovered from him after the expiry of 60 days from the days on which it was imposed. Fine register shall be maintained. Fines collected shall be expended on approved purpose beneficial to the persons employed. Claims: Where contrary to the provisions of this Act, any deduction has been made from the wages of an employee or any payment of wages has been delayed, such person may apply for direction. Application must be made within 12 months from the date of deduction or from the date on which the payment was due. The authority has the power to accept any delayed application. The authority may after hearing both the persons direct the payment. Compensation may be ten times the amount deducted or Rs.25 in case of delayed wages. Penalties: Penalties have been provided for contravention of various provision of the Act varying from fine of Rs.500/- to- Rs.1000/. for failing to maintain prescribed registers or records, refusing to give information or furnishing false information, punishment may be fine which may extend to Rs.500/. For obstructing an inspector or refraining to produce any document to inspector or preventing anybody to appear before or begin examined by an inspector, punishment may be minimum fine of Rs.200/- which may extended up to Rs.1000/-. If any person who has been convicted is again guilty of an offence involving contravention of the same provision, he shall be punishable with imprisonment for less than one month which may extend o six months and with fine not less than Rs.500/- which may extended to Rs.3000/-

Payment of Bonus Act: The payment of Bonus Act, 1965 applies to every factory and every establishment in which twenty or more persons are employed on any date during an accounting year. The definition of the factory is the same as under the factories Act, 1948. Under the Act establishment has been defined as the place in which one is permanently fixed for business, with necessary equipment, and office or place of business. An establishment covered under the Act shall continue to be governed by this Act notwithstanding that the number of persons employed below twenty. Eligibility: Every employee shall be entitled to be paid bonus provided he has worked for at least 30 working days per month. Employee means any person employed on a salary or wage not exceeding one thousand and six hundred rupees per month. Disqualification for Bonus: Under the Act, an employee may be disqualified from receiving bonus if he is dismissed from service for fraud, riotous or violent behavior or theft, misappropriation of property of the establishment. Payment of Minimum Bonus: Every employer shall be bound to pay every employee in respect of any accounting year a minimum bonus which shall be 8.33% of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher or not the employer has any allocable surplus in the accounting year. Payment of Maximum Bonus: Where the allocable amount exceeds the minimum bonus payable to the employees, the employer shall be bound to pay every employee in respect of that accounting year bonus which shall be an amount in proportion to the salary or wage earned by the employee subject to a maximum of twenty percent of such salary or wage. Proportionate reduction in Bonus: Where an employee has not worked for all the working days in an accounting year, if the minimum bonus of one hundred rupees is higher than 8.33% of his salary or wage for the days he has worked, shall be proportionately reduced.

Computation of Working Days: For the purpose of computing proportionate bonus, an employee shall be deemed to have worked on the days on which he has been laid off under an agreement, standing orders, or industrial dispute act, on leave with salary or wage, absent due to temporary disablement, caused by accident arising out of an in the course of his employment, on maternity leave with salary or wages. Set on and set off of allocable surplus: Where all allocable surpluses exceed the amount of maximum bonus, the Act provides for carrying forward the excess for being set on in the succeeding year. If there is no allocable surplus falls short of the amount of minimum bonus payable and there is no amount of sufficient amount carried forward and set on, such minimum amount shall be carried forward for being set off in the succeeding accounting year. Special Provision for new establishments: The Act provides for protection to newly set up establishments by giving them exemption from the payment of bonus to the employees for the initial period. Customary Interim Bonus: There is no statutory recognition to Puja bonus or other customary bonus under the Act. The bonus payable under the Act is subject to deduction to the amount paid as Puja bonus or customary bonus and the employees shall be entitled to be received only the balance. Deduction form bonus: In any accounting year, if, any financial loss is caused to the employer due to misconduct of the employee, amount can be deducted from the amount of bonus payable to the employee in respect of that financial year. Time Limit: The bonus shall be paid in cash by the employer within a period of eight months from the close of the accounting year. The appropriate government may extend the period up to two years. Where there is a dispute relating to pending bonus, it should be payable within a month form the date of the enforcement of the award.