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Wage policy
Wage policy has always been one of the most significant social and political demands. Wage policy should reflect the objectives and aspirations of the people of a particular country. Problems of wage policy should be of great concern to employees, management and the government.
Living standards Demand for higher wages and better working conditions

Wage determination
Unit V Session 1

A Vasudeva Reddy, Asst. Prof., KLU

Economic objectives of wage policy

Achievement of maximum economic welfare
National income to be maximized Equal distribution of national income among the population Fair amount of stability in the national income

Social objectives
The elimination of exceptionally low wages The establishment of fair labor standards The protection of wage earners from the effects of rising prices. The incentive for workers to improve their productive performance

Full employment and optimum allocation of all resources Highest degree of economic stability Maximum income security for all sections of the community.
A Vasudeva Reddy, Asst. Prof., KLU 3

A Vasudeva Reddy, Asst. Prof., KLU

Key considerations
To fix statutory minimum wages in selected industries and promote fair wage agreements in the more organized industries (Industrial Policy Resolution, 1948) To ensure equal pay for equal work (Constitution) To provide wage differentials To regulate wages and salaries to eliminate/reduce undue disparities To link remuneration to productivity
A Vasudeva Reddy, Asst. Prof., KLU 5

Key considerations
To compensate for the rise in cost of living The capacity to pay. Supreme Court ruled that an employer who cannot pay minimum wages has no right to exist. The basic needs of labor (15th session of Indian Labour Conference held in 1957) To secure a living wage for workers

A Vasudeva Reddy, Asst. Prof., KLU

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Wage concepts
The underlying idea is that he who works is entitled to a fair remuneration which may enable him to live a life consistent with human dignity. Wages are not an economic abstraction but an important price in society. Wages are the price of labour

Wage concepts
The Committee on Fair Wages(1948) and the Indian Labour Conference (1957) propounded certain wage concepts:
Minimum Wage: (CFW) A minimum wage must provide not merely for the bare sustenance of life but for the preservation of the efficiency of the worker by providing some measure of education, medical requirements and amenities. Need-based Minimum Wage: (ILC)
The standard working-class family should be taken to consist of three consumption units Min. food requirements should be calculated on the basis of a net intake of 27KCal. Clothing requirements 18 yards per annum/unit of consumption Housing min. rent charged by Govt. in any area for houses provided under subsidized Industrial Housing Scheme Fuel, lighting, and other miscellaneous items of expenditure should constitute 20% of total minimum wage. 8

A Vasudeva Reddy, Asst. Prof., KLU

Wage concepts
Fair Wage: (CFW) lower limit is the minimum wage; and the upper limit is set by the industry to pay.
Actual wage depend on
Productivity of labor Prevailing rates of labor in the same/similar occupations in the same or neighboring localities Place of industry in the economy National income and its distribution

Legal framework
The Payment of Wages Act, 1936
To ensure prompt payment of wages and to prevent the exploitation of the wage earner by prohibiting fines and deductions from his wages. Rate of payment for overtime and penal deductions for participation in illegal strikes (eight days wage can be deducted for one day)

Living Wage: (CFW) it represents a standard of living which is provided not merely for a bare physical sustenance but decency, protection against ill-health, requirements of essential social needs and some insurance against mote important misfortunes including old age.
A Vasudeva Reddy, Asst. Prof., KLU 9

The Minimum Wages Act, 1948:

Takes care by both Central and State Govt. to fix minimum rates of wages payable to employees in any employment.
A Vasudeva Reddy, Asst. Prof., KLU 10

Legal framework
The Payment of Bonus Act, 1965:
To provide for the payment of bonus to persons employed in certain establishments and or matters connected therein A min (8.33% of pay) and max (20% of pay) bonus and negotiable

Wage determination
Public policy and legislative framework provides the basis for wage determination.
Unilateral Pay Fixation Collective Bargaining Pay Commissions Wage Boards

The Equal Remuneration Act, 1976:

To provide for the payment of equal remuneration to men and women workers engaged in the same or similar work This Act stipulates stringent punishments for contravention of the provision of the Act.
A Vasudeva Reddy, Asst. Prof., KLU 11

A Vasudeva Reddy, Asst. Prof., KLU

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Unilateral Pay Fixation

92% of the labor force is unorganized. Majority of the unorganized sector workforce is not unionized and hence, the possibility for determining wages and working conditions through collective bargaining is virtually ruled out. This results in getting less than the min. wages and benefits under law, discrimination in wages and benefits among workers. Unilateral wage fixation by employer can be unfair to the employees.
A Vasudeva Reddy, Asst. Prof., KLU 13

Collective Bargaining;
Collective bargaining is a process whereby standards are created to govern labor relations including, particularly, wages and working conditions ILO establishes the right of workers to organize and bargain collectively. Trade Union Act does not provide for statutory recognition of collective bargaining.
A Vasudeva Reddy, Asst. Prof., KLU 14

Pay Commissions: The pay structure of the Central Government employees is based on the recommendations of Pay Commissions set up by the Central Government. Pay Commissions also cover employees of public sector. 1st Pay Commission (1947) employee must be paid a living wage. 2nd Pay Commission (1959) remuneration should not be lower than living wage.
A Vasudeva Reddy, Asst. Prof., KLU 15

3rd Pay Commission (1973) equal pay for equal work 4th Pay Commission (1984) cost of living, devised a salary structure w.r.t a certain consumer price index. 5th Pay Commission (1996) linking pay revision with work organization and man power planning. 6th Pay Commission (2008) - with a view to improving
the delivery mechanisms for providing better services to the common man

A Vasudeva Reddy, Asst. Prof., KLU

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Wage Boards
1st Wage board set up by the Government in 1957 in the cotton textile industry

Constitution of Wage Boards:

Chairperson, equal no. of representatives of employers and employees and two other independent members

Functions of the Wage Board:

Wages payable to the employees of the activity Mutual agreement
A Vasudeva Reddy, Asst. Prof., KLU 17