Wages or Salary (Indian context)

Regulatory Mechanisms in Industrial Relations

Origin of wage

Wage is a reward for the services rendered or remuneration for the work done and it is as old as the society itself. In the primitive days, wages were paid in kind, most common of them was grains and the food. But with the advent of industrialisation wages form a complex problem and in almost all industrialised countries it became a sensitive area of public policy. Very soon the quantum of wages assumed a common cause of friction between the employers and the wage-earners. Frequent disputes between employer and wage-earners resulted in strikes over the demand for wage-increase. The determination of adequate wages that should be justifiably payable to die workmen by the employer, was not merely an economic problem but a multidimensional phenomena, necessarily involving relevant factors like place ot industry, prices of the product, living standards, basic needs of die wage-earner and the governmental policy in a given society. The natural instinct of the employer to keep the wage-bill to a minimum and workers struggle to secure a wage-increase to meet both ends, created a chaotic situation which demanded an immediate State’s intervention to protect the weaker section of the society, namely, workers, in view of its low bargaining capacity.

Whitley Commission’s Recommendations

Whitley Commission, commonly called as Royal Commission on Labour was appointed during 1931-33 which examined various issues relating to wage-levels and reported on minimum wages, standardisation of wages, wage-incentives and suggested for collection of relevant wage-data to resolve the wage-determination. It also recommended a Minimum Wage fixation machinery for industries where workers are not well organised. The Whitley Commission also invited the attention of the Govt, towards certain unfair deductions made by the employers from the wages and emphasised the need to prevent them by recourse to necessary legislation. Thus the Payment of Wages Act, 1936 was enacted to incorporate the recommendations of the Whitley Commission.

The Payment of Wages Act, 1936  Section 2
(vi) "wages" means all remuneration (whether by way of salary allowances or otherwise) expressed in terms of money or capable of being so expressed which would if the terms of employment express or implied were fulfilled by payable to a person employed in respect of his employment or of work done in such employment and includes -

(a) any remuneration payable under any award or settlement between the parties or order of a court;
(b) any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period;
(c) any additional remuneration payable under the terms of employment (whether called a bonus or by any other name);  (d) any sum which by reason of the termination of employment of the person employed is payable under any law contract or instrument which provides for the payment of such sum whether with or without deductions but does not provide for the time within which the payment is to be made;
(e) any sum to which the person employed is entitled under any scheme framed under any law for the time being in force, but does not include -

(1) any bonus (whether under a scheme of profit sharing or otherwise) which does not form part of the remuneration payable under the terms of employment or which is not payable under any award or settlement between the parties or order of a court;
(2) the value of any house-accommodation or of the supply of light water medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the State Government;
(3) any contribution paid by the employer to any pension or provident fund and the interest which may have accrued thereon;
(4) any travelling allowance or the value of any travelling concession;
(5) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; or
(6) any gratuity payable on the termination of employment in cases other than those specified in sub-clause (d).


Meaning and Definition of Wage

In the ordinary language the term wages implies 'reward' to the labourers for the services rendered by them. It may be paid daily, weekly, fortnightly, monthly, per hour or per unit. Services rendered by the labourer include both physical and mental services.

In the words of Benham. "Wages are a sum of money paid under contract by an employer to a worker for services rendered."

According to ILO " Wages refer to that payment which is made by the employers to the labourer for his services hired on the conditions of payment per hour, per day, per week or per fortnight."

Appropriate Definition:
Wages refer to that reward which is received from the employer for the services rendered by the labourer per week, per month, per fortnight or per unit It includes allowances also.

Classification of wages

Subsistence Wage: - The wage that can meet only bare physical needs of a worker and his family is called subsistence wage.

Minimum Wage: - Justice Higgin propounded the concept of minimum wage as the irreducible level of wage paid to an unskilled worker, considering him a human being living in a civilised society. In this single sentence, he indicated three important considerations, namely, (i) that minimum wage is an irreducible level which cannot be further reduced; (2) secondly, it is paid to an unskilled worker who has not undergone any expensive training to acquire skill, (3) thirdly, the worker is to be considered a “human being living in a civilised society and therefore he is entitled to same basic needs of food, clothing and shelter which any other human being requires. Thus according to Justice Higgins a minimum wage is that irreducible wage, which should enable the worker to get three basic necessities of life, namely, food, clothing an shelter.

Further expanding his concept, Justice Higgins described the essential components of the three basic needs of food, clothing and shelter and said that the food does not merely mean any stuff to satisfy the hunger, should have the essential nutritious value to retain the health of wolker preserve his efficiency as worker. Medically speaking, a normal human body daily needs 3,500 calories in his food to retain his health. Therefore a wage which does not provide for a quality of food containing 3,500 calories cannot be strictly described as minimum wage.

Similarly clothing does not refer to any body-covering but it should be sufficient to protect the workers from the severity of seasons, say soft clothing in summer and warm clothing in winter. It should also satisfy the natural instinct of the wearer to be respected in the society as he is considered a human being living in a civilised society. Thus the moral responsibility is also imposed on the civil society.

Thirdly the shelter is also further required to be sufficient to accommodate the family of the worker comfortably and it should not be a den to dump the workers’ family therein.

Fair Wage: - Fair wages is an adjustable step that moves up according to the capacity of the industry to pay, and the prevailing rates of wages in the area of industry.

Living Wage:- Having described the minimum wage to provide for food, clothing and shelter as a basic and irreducible level of wage, Justice Higgins developed his concept of living wage as one which should not only provide for food, clothing and shelter but for some frugal comfort of life, good education to children, some amusement and provision for sickness and old-age including some measure of social security. Again die frugal comfort should be such as measured at the changing values at a given time.

Thus according to Justice Higgins “Living Wage is one appropriate for the normal needs of the average employee, regarded as a human being living in a civilised society. It must provide not merely for the absolute essentials such as food, clothing and shelter, but for a condition of frugal comfort estimated by current human standards”. It must be sufficient to ensure the workmen food, clothing, shelter, frugal comforts, provision for evil days etc. as well as regard for the special skill of an artisan if he is one. Marriage is an usual fate of adult man, a wage which does not allow of the matrimonial condition and the maintenance of about five persons in a home would not be treated as a living wage. It is pertinent to note that the above concept of living wage, as described by Justice Higgins is also endorsed by Supreme Court in the Express Newspaper (P) Ltd. v. Union of India -Therefore die living wage should enable the wage-earner to provide for himself and his family not only for the three basic necessities of life, namely, food, clothing and shelter, but also for frugal comforts, good education to children, protection against ill-health and a measure of insurance against the more important misfortune including old-age.

In any even the minimum wage must be paid irrespective of the extent of profits, the financial condition of the establishment or the availability of workmen at lower wages. The wages must be fair, i.e. sufficiently high to provide standard family with ,food, shelter, clothing, medical care and education of children appropriate to the workmen. A fair wage lies between the minimum wage and the living wage which is the goal. Wages must be paid on an industry wise and region basis having due regard to the financial capacity of the unit.