Minimum pay may jump 28% on government’s wage code

Updated on Nov 06, 2019 09:51 AM IST

The Code on Wages 2019 provides for a statutory national floor wage rate, below which no minimum wages can be fixed by any state body or employer. The draft will be finalised in about four months after public consultations and suggestions.

The national minimum floor wage in the country could go up by 28% from an existing non-binding guideline wage set in 2017 based on new criteria proposed by the Union government. (Representative Image)(Reuters File / Representational Image)
The national minimum floor wage in the country could go up by 28% from an existing non-binding guideline wage set in 2017 based on new criteria proposed by the Union government. (Representative Image)(Reuters File / Representational Image)
Hindustan Times, New Delhi | By

The national minimum floor wage in the country could go up by 28% from an existing non-binding guideline wage set in 2017 based on new criteria proposed by the Union government, which has framed draft rules to operationalise the Code on Wages 2019, according to calculations by multiple experts.

The draft says that a central advisory board will fix a statutory national floor wage for the first time, which will be the basis for new, multiple minimum wages at the federal and state levels.

The Code on Wages 2019 provides for a statutory national floor wage rate, below which no minimum wages can be fixed by any state body or employer. The draft will be finalised in about four months after public consultations and suggestions.

While the criteria for the floor wage have been left to an advisory board, the draft lays down the guidelines for fixing minimum wages.

According to Prof KR Shyam Sundar of the Xavier Labour Relations Institute, Jamshedpur, the floor wage calculated by following the laid-out criteria should stand between 200 and 225 per day, a raise of 14% to 28% when compared with the existing highest minimum wage of Rs175 per day in some states. The draft rules provide for nine-hour working shifts.

To be sure, the 7th Pay Commission in 2015 prescribed a minimum wage of Rs18,000 per month for all central government employees. For a 26-day working month, this works out to 692 a day.

“The 7th Pay Commission recommendation setting the minimum salary at Rs18,000 will be the notional basis for the criteria hiking the floor wage,” an official of the labour ministry said.

According to the criteria, actual minimum wages must take into account a net intake of “2,700 calories per day per consumption unit” and “66 metres cloth per year per family”, apart from house rent (10% of minimum wages), fuel, household electricity, spending on children’s education, medical needs, and recreation. Expenditure on emergencies will constitute 25% of the minimum wages.

The floor wage will take into account “an equivalent of three adult consumption units”, including “food, clothing, housing and any other factors considered appropriate by the central government from time to time”, the draft states. The floor will be revised every five years.

“The criteria set in the draft rules under section 67 of the Code on Wages 2019, a law passed by Parliament this year, is in accordance with historically determined standards,” said Prof Sundar. These include the criteria adopted at the Indian Labour Conference 1957, which was supplemented by the Supreme Court advisory in 1992 in the Raptakos and Brett case, he added.

The top court had emphasised that workers have the right to a decent wage in a dispute between workers of the firm, Raptakos and Brett, and its management.

“I would have preferred a least complex system wherein a single or multiple minimum wage rates are determined at the national and state level to ensure clarity and efficiency in administering minimum wages,” said Prof Sundar. Other experts, who concurred with the 14-28% calculation, also said the draft could have been simpler. “Given the expectations around the wage code and the criteria suggested, the basic wages will increase to at least Rs200,” said Prof SN Giri, a labour economist who advised the erstwhile Planning Commission.

Prof Sundar, however, said that the nine-hour working day limit set by the draft “defies all current legal aspects and requirements”. He said nowhere in the world do labour laws have such a work-hour limit. The architecture of wages envisaged in the draft shows that while there will be a statutory national floor wage rate, there will be a minimum wage set by the central government for sectors of the economy for subjects that fall in the Union list, such as civil aviation, ports, banking, insurance and mines, etc. States will have powers to set minimum wages for all areas that fall under their jurisdiction, as defined in the Factories Act 1948 and The Shops and Establishment Act of various states. Minimum wages at the state level will vary according to three geographical classifications: metro, non-metro, and rural areas.

Prior to this, there were no set criteria for calculating minimum wage rates, which is a common matter of dispute between workers and employers.

The national average minimum wage is 4,628 a month. On October 18, the Supreme Court provisionally allowed the Delhi government to raise it to Rs14,842 a month, after the move was challenged by various employer bodies. Trade unions, however, appeared sceptical. “A fundamental problem is that the distinction between skilled and unskilled work is linked to industry-specific jobs. But even the Supreme Court has said that over time, unskilled workers acquire more skills than they started off with,” said Brijesh Upadhyay, general secretary of the Bharatiya Mazdoor Sangh.

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  • ABOUT THE AUTHOR

    Zia Haq reports on public policy, economy and agriculture. Particularly interested in development economics and growth theories.

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