Minimum Wage Rate Fixation Procedure

Under Section 5 of Minimum Wages Act, 1948 there are basically two method of fixation/revision of Minimum Wages (1) Committee Method (2) Notification Method. Revision of Minimum Wages should not exceed an interval of 5 years. Section 3 empowers appropriate Government to fix the minimum rates of wages in the scheduled employments.

Minimum rate of the wages fixed or revised consists of the following :

* A basic rate of wages and a special allowance, viz., cost of living allowance;

* A basic rate of wages with or without cost of living allowance and cash value of concessions for supplies of essential commodities;

* An all inclusive rate, i.e. basic rate, cost of living allowance and cash value of concessions.

The Minimum Wage rate may be fixed at a) time rate, b) piece rate, c) guaranteed time rate and d) overtime rate.

The Act provides that different Minimum Wage rate may be fixed for a) different scheduled employments, b) different works in the same employment, c) adult, adolescent and children, d) different locations or e) male and female.

Also, Government may fix such Minimum Wage by a) an hour, b) day, c) month, or d) any other period as may be prescribed by the notified authority.

Norms for fixing Minimum Wage :

Three consumption units per earner,
Minimum food requirement of 2700 calories per average Indian adult,
Cloth requirement of 72 yards per annum per family,
Rent corresponding to the minimum area provided under the Government's Industrial Housing Scheme and
Fuel, lighting and other miscellaneous items of expenditure to constitute 20 % of the total Minimum Wages
Children education, medical requirement, minimum recreation including festivals/ceremonies and provision for old age, marriage etc. should further constitute 25% of the total Minimum Wage.

Cost of Living Allowance :

The Minimum basic wages fixed are linked to consumer price index as a counter measure against inflation. The cost of living is set twice in a year. The Commissioner of Labour notifies the rate 1st of April and 1st of October. The rates are fixed on the basis of the average rise in the State industrial workers consumer price index numbers for half year ending December and June respectively.

Variable Dearness Allowance :

Dearness Allowance is payable to monthly, daily and piece rate earners. Every six months the respective State Governments issues the Cost of Living Index number for each and every scheduled employment.


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