Lecture 09

Learning Objective

• To know the concept of Statutory, Bare or Basic Minimum Wage

• To understand Fair Wage • To understand Living Wage • The Need-Based Minimum Wage Some new terms have gained currency in India after independence. There are:

Statutory Minimum Wage It is the wage determined according to the procedure prescribed by the relevant provisions of the Minimum Wages Act, 1948. Once the rates of such wages are fixed, it is the obligation of the employer to pay them, regardless of his ability to pay. Such wages are required to be fixed in certain employments where “sweated” labour is prevalent, or where there is a great chance of exploitation of labour. Bare or Basic Minimum Wage It is the wage, which is to be fixed in accordance with the awards and judicial pronouncements of Industrial Tribunals, National Tribunals and Labour Courts. They are obligatory on the employers. Minimum wage, and fair wage and living wage are the terms used by The Report of the Committee on Fair Wages, set up by the Government in 1948 to determine the principles on which fair wages should be based and to suggest how these principles should be applied. According to this Committee, the minimum wage should represent the lower limit of a fair wage. The next higher level is the fair wage, and the highest level of the fair wage is the living wage.

These issues are very difficult to decide. Moreover, since the cost of living varies with the price level, it follows that this index should be periodically reviewed and modified. However, the principles for determining minimum wages were evolved by the Government and have been incorporated in the Minimum Wages Act, 1948, the important principle being that minimum wages should provide not only for the bare sustenance of life but also for the preservation of the efficiency of the workers by way of education, medical care and other amenities.

Living Wage This wage was recommended by the Committee as a fair wage and as ultimate goal in a wage policy. It defined a Living Wage as “one which should enable the earner to provide for himself and his family not only the bare essentials of food, clothing and shelter but a measure of frugal comfort, including education for his children, protection against ill-health, requirements of essential social needs and a measure of insurance against the more important misfortunes, including old age.” In other words, a living wage was to provide for a standard of living that would ensure good health for the worker, and his family as well as a measure of decency, comfort~ education for his children, and protection against misfortunes. This obviously implied a high level of living. Such a wage was so determined by keeping in view the national income, and the capacity to pay of an industry. The Committee was of the opinion that although the provision of a living wage should be the ultimate goal, the present level of national income did not permit of the payment of a living wage on the basis of the standards prevalent in more advanced countries.

A Minimum Wage It has been defined by the Committee as “the wage, which must provide not only for the bare sustenance of life, but for the preservation of the efficiency of the worker. For this purpose, the minimum wage must provide for some measure of education, medical requirements and amenities.”

The goal of a living wage was to be achieved in three stages. In the first stage, the wage to be paid to the entire working class was to be established and stabilized. In the second stage, fair wages were to be established in the community-cum-industry. In the third stage, the working class was to be paid the living wage.

In other words, a minimum wage should provide for the sustenance of the worker’s family, for his efficiency, for the education of his family, for their medical care and for some amenities.

The living wage may be somewhere between the lowest level of the minimum wage and the highest limit of the living wage, depending upon the bargaining power of labour, the capacity of the industry to pay, the level of the national income, the general effect of the wage rise on neighboring industries, the productivity of labour, the place of industry in the economy of the country, and the prevailing rates of wages in the same or similar occupations in neighboring localities.

The question of determining the minimum wage is a very difficult one for more than one reason. Conditions vary from place to place, industry to industry and from worker to worker. The standard of living cannot be determined accurately. What then should be the quantum of the minimum wage? What is the size of the family it should support? Who should decide these questions?

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Fair Wage According to the Committee on Fair Wages, “it is the wage which is above the minimum wage but below the living wage.” The lower limit of the fair wage is obviously the minimum wage; the upper limit is set by the “capacity of the industry to pay.”

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COMPENSATITION MANAGEMENT

LESSON 9: INTRODUCTION TO MINIMUM, FAIR AND LIVING WAGE

COMPENSATITION MANAGEMENT

Between these two limits, the actual wages should depend on considerations of such factors as: a. The productivity of labour; b. The prevailing rates of wages in the same or neighbouring localities;

Labour Bureau Government of India

c. The level of the national income and its distribution; and d. The place of industry in the economy of the country.

Report Onevaluation studies on implementation of The minimum wages act, 1948 In bidi making establishments in Madhya pradesh

The Need-Based Minimum Wage The Indian Labour Conference, at its 15th session held in July 1957, suggested that minimum, wage fixation should be needbased, and should meet the minimum needs of an industrial worker. For the calculation of the minimum wage, the Conference accepted the following norms and recommended that they should guide all wage-fixing authorities, including the Minimum Wage Committee, Wage-Boards, and adjudicators: i.

The standard working class family should be taken to consist of 3 consumption units for the earner; the earnings of women, children and adolescents should be disregarded;

ii. The minimum food requirements should be calculated on the basis of the net intake of 2,700 calories, as recommended by Dr. Akroyd, for an average Indian adult of moderate activity. iii. The clothing requirements should be estimated at a per capita consumption of 18 yards per annum, which would mean, for an average worker’s family of four, a total of 72 yards; iv. In respect of housing, the norms should be the minimum rent charged by the Government in any area for houses provided under the Subsidized Housing Scheme followincome groups; and v. Fuel, lighting and other miscellaneous items of expenditure should constitute 20 per cent of the total minimum wage. Ever since the I.L.C. made its recommendations on the needbased minimum wage, attempts were made by several government and private agencies and trade union organizations to work out is monetory equivalent. These estimates have varied considerably.

Tutorial Activity 1.1 Questions 1. What are the different types of wages? 2. What is the difference between minimum wage, living wage and fair wage? 3. What do you understand by the term need-based minimum wage and explain the importance of it in compensation management? 4. Identify an organization, study it’s compensation package and find out the kind of wage level offered by it to it’s employees.

Tutorial Activity 1.2 Now let us study from the notification below “The minimum wages notified by the Government of Madhya Pradesh” and the employees covered under it. 58

Wages, Earnings and Hours of Work 5.1 Introduction 5.1.1 The Minimum Wages Act, 1948 is both a protective and beneficial legislation guaranteeing the payment of minimum rates of wages to the workers in the various Scheduled Employments scattered over different parts of the country. Although the Act does not provide for registration of establishments, yet it is applicable to employments where the workers are particularly vulnerable to exploitation, due to ignorance, poverty, illiteracy and lack of bargaining power. The workers in bidi industry are scattered over large areas and do not have collective bargaining power. Therefore, they are in need of protection. The Act empowers both the Central and the State Governments to fix and revise the minimum rates of wages in the Scheduled Employments falling under their respective jurisdictions. The bidi making establishments fall under the Scheduled Employment “Tobacco” (including Bidi Making) Manufactories’ in the State Sphere. Therefore, the responsibility for implementation of the provisions of the Minimum Wages Act, 1948 rests with the State Governments. They notify the minimum wages for bidi workers within their jurisdiction. 5.1.2 In Madhya Pradesh, the rates of minimum wages for Bidi Rollers are fixed on a piece rate basis (number of bidis rolled), the traditional measure being per thousand bidis. However, fixation and revision of minimum wages is of no consequence unless these are actually paid to them. The problems of the bidi workers continue to be a cause of concern for the labour administrators and enforcement authorities as the workers often complain of the unfair treatment at the hands of manufacturers, Contractors and agents in matters of rejection of finished products, issue of inadequate quantity and poor quality of raw material (tendu leaves, tobacco, thread, etc.) as well as the violation of the provisions of the Bidi and Cigar Workers (Conditions of Employment) Act, 1966, the Minimum Wages Act, 1948 and the Equal Remuneration Act, 1976. The Regional Labour Ministers Conference held during 1994-95 had endorsed the recommendations of the Ministry of Labour for the Constitution of a Tripartite Standardisation and District Level Vigilance Committee and had made the following recommendations in respect of bidi workers:-

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The wage loss due to rejection should not be more than 2.5 percent instead of 5 percent. Alternatively, the rejected bidis should be returned to workers after deducting proportionate cost of tendu leaf and tobacco issued to them at the rates to be fixed by the State Governments from time to time alongwith wages. The State Governments as well as Welfare Commissioners have been requested to give wide publicity to the statutory provisions of the Bidi and Cigar Workers (Conditions of Employment) Act, 1966, pertaining to rejection of not more than 2.5 percent bidis of sub-standard quality and ensure that employer/ Contractor supplies tendu leaf of the optimum quality to the workers. * * Annual Report 1999-2000, Ministry of Labour, Government of India, 5.2 Prescribed Rates of Minimum Wages ‘Tobacco (including bidi making) Manufactories’ is a Scheduled Employment originally included in Part-I of the Schedule appended to the Act. The minimum wages applicable to the bidi workers at the time of the Study were notified by the State Government of Madhya Pradesh as provided under Section 3(1)(b) and Section 5 of the Minimum Wages Act, 1948.Prior to 1953, Minimum Wages were fixed at Re. 0.62 to Rs. 1.37 per thousand bidis. These wages were revised to Rs. 2.00-2.25 for the first time in 1966.Since then they have been revised several times. The latest wage revision, which was in force at the time of the study, had become effective from 1st October, 2000 vide notification No. 1/9/A/5/97/32759-33288 dated 12-10-2000. The minimum rates of wages for various categories of employees in Tobacco (including Bidi Making) Manufactories appearing in Part I of the Schedule were linked to the Consumer Price Index Numbers (Industrial Workers).The revised rates of minimum wages applicable during the period of study are given below:Prescribed Minimum rates ofWages for piece rated employees Class of Employees Minimum Wages ( in Rs.) 1. Bidi Rolling 36.17(per thousand bidis) 2. Wrapping/Packing/Labelling Rs. 19.65 per thousand bundles (a) Pasting of Slips on bidi bundles Rs. 22.00 perthousand bundles (i) Labelling, Puda Making etc. Rs. 15.85 per thousand bundles (ii) Labelling on both sides of bundles Rs. 11.26 per thousand bundles (b) Wrapping and Labelling Rs.4.76 per thousand bundles (i) Thin paper labelling Rs.5.01 perthousand bundles (ii)Thin paper sticking Rs. 68.35 perlakh bidis (iii)Labelling Rs. 81.05 perlakh bidis (iv)Puda Making Rs. 81.05 per lakh bidis ( c) Wrapping on 1000 bundle (each bundle of 25 bidis) (i) Wrapping of Horizontal & Vertical Strips (ii)Wrapping/Pasting of paper (iii)Wrapping and Pasting of Trade Mark

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In bidi making industry all the time-rated (monthly/daily paid) workers other than the above mentioned piece rated categories have been classified into three broad categories as Skilled, Semiskilled and Unskilled workers. The occupations’ which comprise these three skill categories are as under: 1. Skilled : 2.Semi-Skilled : 3.Unskilled:

Driver (Heavy Vehicle), Accountant, Munim, Cashier, Store Keeper, Head Clerk, Godown keeper Sorter/Checker, Bhattiwala, Driver (Light Vehicle), Typist, Billman, Clerk Loader, Un-loader, Chowkidar.

Puda

Maker

and

Prescribed rates of Minimum Wages (including V.D.A.) for time rated employees were as below: Sl. No.

Skill Category

1. 2. 3.

Skilled Semi-Skilled Unskilled.

Monthly Wages (Rs.) 1995.44 1828.30 1662.80

Daily Wages (Rs.) 76.75 70.32 63.95

N.B.- The wages include the variable dearness allowance. 5.2.1 These wages have been linked to 1206 points of the Labour Bureau Series of All-India Consumer Price Index Numbers for Industrial Workers (Base 1960=100).The Variable Dearness Allowance (VDA) is payable at the rate of 1 paisa per point for an increase of 930 points over 1206 points upto 30.09.2001. 5.2.2 The revised rates of minimum wages are subject to the following conditions:The variable dearness allowances shall be calculated on 1st October of every year on the basis of the average indices for twelve months i.e., July to June of the preceding year. The revised rates of daily wages are to be worked out by dividing the monthly rates by 26 days. Wherever the prevailing wages are higher, the revised wages will not have adverse effect on any employee in any case and the higher rates shall continue to be paid. An employee shall be entitled to a guaranteed minimum wage of Rs.178.00 in case the employer fails to supply sufficient quantity of raw material for rolling 5600 bidis per week. The guaranteed wage will include the actual number of bidis made by an employee during a week from the raw material supplied to him. An employee shall not be entitled to the guaranteed wages if he fails to make full use of the raw material supplied to him while the raw material so supplied is sufficient for rolling 5600 bidis per week. In case an employer fails to supply raw material due to certain conditions like fire, distress, epidemic etc., which are not under his control, an employee shall not be entitled to the guaranteed wages.

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COMPENSATITION MANAGEMENT

The minimum quantity of raw material to be issued should be 800 grams of tendu leaf of standard average quality and 300 grams of tobacco for 1000 bidis of standard size.

COMPENSATITION MANAGEMENT

5.3 Mode of Payment 5.3.1 Section 3(2) of the Minimum Wages Act, 1948 empowers the Appropriate Governments to fix the minimum rates of wages either for time rated work or for piece-rated work. In bidi making establishments employers have adopted both the systems of payment of wages i.e., ‘time rate’ and ‘piece rate’. Wages for bidi rolling, wrapping, packing and labelling operations are paid on ‘piece rate basis’ while those in all other operations on ‘time rate basis’.The stratum-wise system of payments is shown in Table 5.1. Table 5.1 Percentage Distribution of Employees by Stratum and System of Payments Sl. No.

Stratum/ District

1

Stratum I Sagar Stratum II Jabalpur, Satna Stratum III Gwalior, Datiya and Vidisha Stratum IV Balaghat Stratum V Bhopal, Indore, Devas, Ujjain& Hoshangabad

2 3 4 5 All Strata

Percentage of employees paid on the basis of Time-rate Piece-rate 16.0 84.0 17.4

82.6

19.2

80.8

24.1

75.9

20.8

79.2

18.5

81.5

5.3.2 It is evident from the Table that major proportion (81.5 percent) of employees were paid on piece rate basis and only 18.5 percent were paid on time rate basis. The proportion of employees paid on piece rate basis in different Strata oscillated between 84.0 percent and 75.9 percent the former being in Stratum I and the later in Stratum IV. Inter-stratum variation was attributed to the fact that Stratum-I was the largest bidi producing area dominated by the smaller establishments of agents and middlemen engaged in getting the bidis rolled for passing on to bigger or Trade Mark Establishments for wrapping, packing and marketing. 5.3.3 The category-wise system of payment of wages is given in Table 5.2.It will be seen from the Table that all the Bidi Rollers, Packers, Labellers and Wrappers were paid on piece rate basis.All other workers, like,Sorters, Furnace Men, Raw Material Distributors, Clerks, etc., were paid on time rate basis. Table 5.2 Percentage Distribution of Bidi Employees by their Categories and by the System of Payments: Sl. No.

Categories of Employees

1. Wrapper/Labeller/Packer 2. Taraiwala (Sorter)/Checker 3. Furnaceman (Bhattiwala) 4. Clerk 5. Raw Material Distributor 6. Bidi Roller All Categories

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Percentage of Employees paid on the basis of Time-rate Piece-rate 100.0 100.0 100.0 100.0 100.0 100.0 18.5 81.5

5.4 Wage Period 5.4.1 Section 3 (3b) of the Minimum Wages Act, 1948 provides for different wage periods ranging from hour to month. The minimum wages notified by the Government of Madhya Pradesh for different types of operations were either time rated or piece rated. The wage periods adopted by the bidi manufacturers for different categories of employees covered by the study are presented in Table 5.3. Table 5.3 Percentage Distribution of Bidi Employees According to Wage-periods Sl. No.

Categories of Employees

1 2

Wrapper/Labeller/Packer Taraiwala (Sorter)/ Checker Furnaceman (Bhattiwala) Clerk Raw Material Distributor

3 4 5.

6 Bidi Roller All Categories

Percentage of Employees paid Monthly Weekly Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0

-

100.0 100.0

26.5

100.0 73.5

100.0 100.0

5.4.2 It will be seen from the Table that all the factory workers and office staff viz., Wrappers, Labellers, Raw Material Distributors, and Clerical Staff, etc., were paid on monthly basis.On the other hand all the Bidi Rollers were paid on weekly basis. As such the overall proportion of bidi employees paid on weekly basis worked out to 73.5 percent, as against 26.5 percent of other workers who were receiving wages on monthly basis.It was observed that in operations like bidi rolling, wages were calculated on the basis of daily production and payments were made on weekly basis or adjusted on a monthly basis. It was also observed that because of these adjustments after a week or a month, the Bidi Rollers did not have a clear idea about their actual earnings. 5.5 Hours of Work The working hours in the Scheduled Employment ‘Tobacco (including Bidi Making) Manufactories’ are governed by the Bidi and Cigar Workers (Conditions of Employment) Act, 1966.The Act restricts the hours of work to nine per day and forty eight per week with a maximum spread over of 10.30 hours per day. Under the Act no employee can be made to work beyond five hours without a rest interval of at least half an hour. An adult employee can work in excess of the prescribed hours of work subject to the payment of over time wage rate. However, the period of work should not exceed 10 hours in a day and 54 hours in a week, inclusive of overtime work. The payment for overtime work has to be made at twice the ordinary rate of the wages or the average daily full time earnings in case of piece rate workers. The Minimum Wages Act, 1948 on the other hand only provides for fixation of normal hours of work, a weekly day of rest and payment of overtime wages in the Scheduled Employments by appropriate Government. However, all these and similar provisions of the Act are of little consequence to a major proportion of the employees in this industry comprised of a sizeable number of Bidi Rollers who roll bidis within the four walls of their houses.

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5.6 Wages and Earnings 1.6.1 During the course of Study, it was observed that although the big manufacturers were keeping records of the wages paid to premises workers and the Bidi Rollers who were directly employed by them, yet the records for Bidi Rollers engaged by the Contractors were not maintained correctly as they showed only production.As the payments were made through Contractors, there were, therefore, chances of exploitation of the Bidi Rollers at the behest of the former. 1.6.2 The employees in bidi making industry constitute a heterogeneous lot with various categories of bidi workers on the one extreme and the Bidi Rollers (home workers) engaged either directly or through the Contractors on the other.The dependants of the home workers rendering effective assistance in rolling bidis constitute a large segment of Bidi Rollers who could not be treated as employees for want of an established employer-employee relationship. Hence for properly analysing the earnings of the Bidi Rollers (home workers), it is necessary to identify and isolate the contribution of this hidden segment of Bidi Rollers.During the study, an effort was made to separate the estimated earnings of these workers from those of the registered or the identified Bidi Rollers. 5.6.2 Bidi Workers

5.6.2.1 The bidi workers constituted 26.5 per cent of the employees covered by the Study. Average daily earnings of different categories of bidi workers are given in Table 5.4. Table 5.4 Average Daily Earnings of Bidi Workers (in Rupees)

Sl. No. 1 2 3 4. 5

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Categories Wrapper, Labeller, Packers. Taraiwala/Sorter/ Checker Furnaceman (Bhattiwala) Raw Material Distributor Clerk All Categories

5.6.2.2 The above table reveals that the average daily earnings of Clerks were Rs. 89.32 per day, far above the prescribed wages in the Trade Mark Establishments, in keeping with the requirements of management and responsibilities assigned to them.For the purpose of the study, Managers have been clubbed with the clerks because wages had not been notified for the managerial staff. The average daily earnings of Clerks worked out to be the highest (Rs.122.60) in Stratum III and the lowest (Rs.76.71 per day) in Stratum II.Overall average daily earnings of Raw Material Distributors and Furnacemen worked out to Rs. 61.62 and Rs. 67.96 respectively.The average earnings of Raw Material Distributors were the lowest (Rs.57.69 per day) in Stratum III which were attributed to low wage paid areas of Datiya and Vidisha dominated by Contractors, Sattedars and Sub-Contractors. They were not only distributing raw materials but also were actively involved in collecting the bidis.Surprisingly, a system of obtaining commission from the Bidi Rollers by the Sattedars to compensate the low wages paid to them by the Trade Mark Establishments and Contractors was in vogue.For piece rated workers viz., Wrappers/Labellers/Packers the average daily earnings worked out to Rs.62.33. 5.6.3 Bidi Rollers and Helpers

5.6.3.1 In Madhya Pradesh Bidi Rollers constituted the largest segment among the bidi employees. They collected the raw material from the Employers or Contractors and rolled the bidis in their dwellings. They get a lot of assistance from their family members in rolling bidis. It is a fact that most of these helping dependants, who were skilled rollers, did not have registration in any bidi factory as the manufactures avoided registration of a large number of Bidi Rollers to evade the fringe benefits due to them .The employers met their requirements of daily production by giving huge amounts of raw material to the registered Bidi Rollers for rolling bidis with the help of their dependants. The average daily earnings of the Bidi Rollers and their helping dependants are given in Table 5.5.

Average daily earnings in Stratum-I Stratum-II 63.69 66.64

Stratum-III 62.67

Stratum-IV 65.22

Stratum V 50.53

All Strata 62.33

69.29

72.89

51.83

85.17

69.98

68.98

67.93

68.29

66.62

67.13

68.89

67.96

63.96

65.23

57.69

-

61.11

61.62

89.82 71.31

76.71 69.36

122.60 69.08

80.40 75.14

86.54 65.23

89.32 69.36

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COMPENSATITION MANAGEMENT

These home workers do not have any prescribed hours of work as they roll bidis as and when they are free from their domestic chores. The premises/factory workers, however, are the real beneficiaries of these provisions. As far as the Trade Mark Establishments and the medium sized establishments are concerned, the provisions of the Act, relating to hours of work, rest interval, weekly holidays, etc. were being implemented. The time rated employees were usually working as Clerks, Raw Material Distributors, Taraiwalas, etc.

COMPENSATITION MANAGEMENT

Table 5.5 Average Daily Earnings of Bidi Rollers and their Helping Dependants(in Rupees) Sl. No.

1 2 3 4 5

Average daily earnings of Stratum/ District

Bidi Rollers

Helping Dependants

Overall

Stratum I Sagar Stratum II Jabalpur,, Satna Stratum III Gwalior, Datiya and Vidisha Stratum IV Balaghat Stratum V Bhopal, Indore, Devas, Ujjain&Hoshangabad All Strata

20.36

14.21

17.77

24.76

19.52

22.31

26.16

20.99

23.76

18.88

17.17

18.01

20.46

14.66

18.00

22.04

16.62

17.88

EXHIBIT – 8

The Bidi Rollers did not get regular employment in bidi making establishments also.They had always remained an exploited lot in the hands of petty Contractors who did not even keep the records and registers of the Bidi Rollers.The employment opportunities in agriculture had also not been encouraging enough for the Bidi Rollers to lean on. 5.6.3.3 The above table also reveals that the average daily earnings of the registered Bidi Rollers were substantially higher than their helping dependants in all the Strata except Stratum IV where it was marginally higher. It shows that these helping dependants of Bidi Rollers made a significant contribution towards the production of the bidi industry, yet they constituted a neglected lot, deprived of the benefits of various labour laws. With the modern salesmanship entering the bidi industry the margin of profit in the bidi industry is quite lucrative for the brands established in the market. There is, therefore, an urgent need for bringing this hidden work force under the labour laws with a well defined employer-employee relationship for effective enforcement of the minimum wage legislation.

Average Daily Earnings of Bidi Rollers and their Helping Dependants (Table 5.5)

5.6.3.2 It emerges from the Table that in all the five Strata the wages paid were below the prescribed wage levels. The average daily earnings of the Bidi Rollers worked out to Rs. 22.04 per day. The average daily earnings were highest in Stratum III (Rs. 26.16 per day) followed by Stratum II (Rs. 24.76 per day), Stratum V (Rs. 20.46 per day), Stratum I (Rs. 20.36 per day) and the lowest in Stratum IV (Rs.18.88 per day). In Stratum III the highest average daily earnings of Bidi Rollers were attributed to the non-availability of Bidi Rollers ( whose average daily earnings were lower than those of Bidi Workers) in the districts of Gwalior, Datiya and Vidisha where the average daily employment in the establishments was the lowest. Moreover, in the absence of any trade unions the Bidi Rollers were not strong enough to bargain for the prescribed wages. The other important reasons for low earnings were malpractices in matters of rejection of finished bidis on the ground of not conforming to quality standards, issue of inadequate quantity and poor quality of tendu leaf and tobacco by the employers or their Contractors or agents.The workers in these areas accepted whatever wages the employers gave.

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