TOPIC – A STUDY OF TIME RATE SYSTEM AND PIECE RATE SYSTEM UNDER

MINIMUM WAGES ACT,1948

PSDA

Subject Name – LABOUR LAW - II

Subject Code - LLB 404

Faculty Name – Ms. Richa Srivastava

Submitted by-

Anhad Chaitya

B.A. LLB

02417703816

VIII- A

VIVEKANANDA SCHOOL OF LAW AND LEGAL STUDIES, VIPS

DELHI

2020
 LIST OF CASES

1. Hassan Jan v State of Bihar

2. Bijoy Cotton Mills v. State of Ajmer
3. Chandra bhavan Boarding and Lodging, Bangalore v State of Mysore
4. MGB and AB Factories v State of Karnataka
5. Hydro (Engineers) Pvt. Ltd. V The Workmen
6. Edward Mills Co. v. State of Ajmer
7. B. Y. Kshatriya v S A T B Kamgar Union
INTRODUCTION
This research paper is inclined to discuss and analyse time rate system and piece rate system
under minimum wages act. The Minimum Wages Act, 1948 is a Central legislation aimed at
statutory fixation of minimum rates of wages in the employments where labour is prevalent with
possibility for exploitation of unorganized labour. The provisions of the Act are intended to
achieve the object of doing social justice to workmen employed in the scheduled employments
by prescribing minimum rates of wages for them. The Act aims at statutory fixation of minimum
wages with a view to prevent exploitation of labour.

RESEARCH PROBLEM
The research problem provided is “A STUDY OF TIME RATE SYSTEM AND PIECE RATE
SYSTEM UNDER MINIMUM WAGES ACT, 1948”

HYPOTHESIS
The word 'Wages’ means the amount paid periodically especially by the day or week or month
for the time during which workman or servant is at employer’s disposal. The success of a
concern largely depends upon the efficiency of the labour and efficiency of the labour is affected
by the amount of wages paid to them. This paper aims to study the time rate system and piece rate system
under minimum wages act, 1948.
REVIEW OF LITERATURE
For the purpose of deducing the given research problem we first need to understand what wages
are. The term wages may be interpreted as the packet of all kinds of remuneration, in cash or
kind, received by a worker through his employment.

Wages are a fair price in a free market for work done, just as is profit on economic price to the
employer for the services he performs. Wages can be paid on the basis of the work turned out.
They can be received either in cash or in kind. But it is difficult to assess the value of wages
received in kind. It is also difficult to say whether wages are fair or not. So wages can be taken as
any remuneration received in cash or in kind from the employer as a consideration 'for the
services rendered or time spent for the employment.

'Living Wage' that is the level of income for a worker which will ensure a basic standard of
living including good health, dignity, comfort, education and provide for any contingency.
However, to keep in mind an industry's capacity to pay the constitution has defined a 'fair wage'.
Fair wage is that level of wage that not just maintains a level of employment, but seeks to
increase it keeping in perspective the industry's capacity to pay.
LEGAL ASPECTS AND JUDICIAL RESPONSE

Fixing Of Minimum Rates Of Wages (Section 3)

According to Section 3 of the Act the appropriate Government may fix the minimum rates of
wages payable to employees employed in an employment specified in Part – I or Part – II of the
Schedule and in an employment subsequently added to the Schedule. The Government may
review the minimum rates of wages and revise the minimum rates at intervals not exceeding five
years.

Appropriate Government may fix separate minimum rates of wages for time rate and for piece
rate. Different wage rates may be fixed for different scheduled employments, different classes of
work in the same scheduled employment, for adults, adolescents, children and apprentices and
for different localities and for any one or more of the wage periods, viz., by the hour or by the
day or by the month or by such larger wage period as may be prescribed.

In Hassan Jan v State of Bihar1, the question for determination that in the absence of any rule
under the Minimum Wages Act, 1948 then fixation of wage period of one year is valid or not.
The court held that in scheduled employment it is not exceed more than one month and if it is
then possible only by effect made and published in official gazette.

Constitutional validity of Section 3 was challenged in Bijoy Cotton Mills v. State of Ajmer2, The
Supreme Court has held that the restrictions imposed upon the freedom of contract by the
fixation of minimum rate of wages, though they interfere to some extent with freedom of trade or
business guaranteed under Article 19(1)(g) of the Constitution, are not unreasonable and being
imposed and in the interest of general public and with a view to carrying out one of the Directive
Principles of the State Policy enshrined in Article 43 of the Constitution of India, are protected
by the terms of Clause (6) of Article 9.

1
(1980) II LLJ 358 (Patna)
2
1955 1 SCR 752
In Chandra Bhavan Boarding and Lodging, Bangalore v State of Mysore3, the court held that
Article 43 of the Constitution of India, 1950 mandates that the State should by suitable
legislation or economic organization, secure the living wage to all workers whether agricultural,
industrial. The fixation of wage under this Act is the first step more and more steps needed to
implement this and it also improve the standard of living

Minimum Rate Of Wages (Section 4)

Section 4 deals with the rates of wage fixed and revised by appropriate govt. in respect of
scheduled employment consist of –

1. Any minimum rate of wages fixed or revised may consist of a basic rate of wages and a
special allowance ; or
2. A basic rate of wages with or without cost of living index and the cash value of
concessions in respect of supplies of essential commodities at concessional rates; or
3. an all inclusive rate allowing for the basic rate, the cost of living allowance and the cash
value of concessions, if any.

In MGB and AB Factories v State of Karnataka4, The court observes the object of section 4 is
that the minimum wage can be linked with the cost of living. Increase in cost of living is also
affect the minimum wage and its payment on the part of the employer. In case the employer paid
to the workmen higher wage from minimum as fixed by the govt. the he is not required to pay
any dearness allowance.

3
(1970) II LLJ 403 SC
4
(2003) III LLJ 861
COMPONENTS OF WAGE

There are four components of Minimum Rate of Wage

 A basic rate
 Cost of living allowance
 Cash value of concession
 A combination of all three components

In Hydro (Engineers) Pvt. Ltd. V The Workmen5, the court held that minimum wage is
independent from all perspectives such as profit/loss, industry big/small.

Procedure For Fixing And Revising Minimum Wages (Section 5)

In fixing minimum rates of wages in respect of any scheduled employment for the first time or in
revising minimum rates of wages, the appropriate Government can follow either of the two
methods-

[Section 5(1)(a)] This method is known as the ‘Committee Method’.

The appropriate Government may appoint as many committees and sub-committees as it

considers necessary to hold inquiries and advise it in respect of such fixation or revision as the
case may be. After considering the advice of the committee or committees, the appropriate Govt.
shall, by notification in the Official Gazette fix or revise the minimum rates of wages. The wage
rates shall come into force from such date as may be specified in the notification. If no date is
specified, wage rates shall come into force on the expiry of three months from the date of the
issue of the notification.

In case of Edward Mills Co. v. State of Ajmer6 that Committee appointed under Section 5 is only
an advisory body and that Government is not bound to accept its recommendations.

5
AIR 1969 SC 182
As regards composition of the Committee, Section 9 of the Minimum Wages Act lays down that
it shall consist of persons to be nominated by the appropriate Government representing
employers and employee in the scheduled employment, who shall be equal in number and
independent persons not exceeding 1/3rd of its total number of members.

One of such independent persons shall be appointed as the Chairman of the Committee by the
appropriate Government.

[Section 5(1)(b)] The method is known as ‘Notification Method’.

When fixing minimum wages under Section 5(1) (b), the appropriate Government shall by
notification, in the Official Gazette publish its proposals for the information of persons likely to
be affected thereby and specify a date not less than 2 months from the date of notification, on
which the proposals will be taken into consideration.

Representations received will be considered by the appropriate Government. It will also consult
the Advisory Board constituted under Section 7 of the Act and thereafter fix or revise the
minimum rate of wages by notification in the Official Gazette. The new wage rates shall come
into force from such date as may be specified in the notification.

If no date is specified, the notification shall come into force on expiry of three months from the
date of its issue. Minimum wage rates can be revised with retrospective effect. The appropriate
Government is required to appoint an Advisory Board for advising it, generally in the matter of
fixing and revising minimum rates of wages.

6
[1955] 1 S.C.R. 735
Central Government appoints a Central Advisory Board for the purpose of advising the Central
and State Governments in the matters of the fixation and revision of minimum rates of wages as
well as for coordinating the work of Advisory Boards.

Central Advisory Board consists of persons to be nominated by the Central Government

representing employers and employees in the scheduled employments, in equal number and
independent persons not exceeding 1/3rd of its total number of members. One of such
independent persons is to be appointed the Chairman of the Board by the Central Govt.

In B. Y. Kshatriya v S A T B Kamgar Union7, the provisions of Section 5 challenged on the

ground that it was ultra vires of the Constitution that an opportunity of hearing was not given to
the employer before issuance of final order and the govt. could not fix higher rate of wage. But,
the court rejected this contention and said that fixation of wage as per the advisory board and it
cannot say that there is a violation of the any rule under this Act.

WAGE RATES

One of the most pressing problems of industrial worker is of low wages. Workers’ earnings are
not sufficient for their proper subsistence. Industrial disputes, low standard of living,
inefficiency, indebtedness and moral degradation are some of the consequences which arise on
account of low wages. In order to establish industrial peace and goodwill, fixation of minimum
wage rate is obvious. It is all the more necessary in India, where workers' organisations are
poorly developed and workers' bargaining power is consequently poor.

The Government of India enacted "The Minimum Wages Act 1948" to protect labourers against
exploitation and to secure their welfare in the competitive market by fixing the minimum limits
of wages. The minimum wage is one which ensures not merely the bare subsistence of life but
the preservation of the efficiency of the worker by providing some measures of education,
medical requirements and amenities.

7
1962 92) LLJ 736 (SC)
SYSTEM OF WAGE PAYMENT

The success of a concern depends upon the efficiency of the labour and efficiency of the labour
is affected by the amount of wages paid to them. Low paid workers are usually inefficient.
Reasonable and fair wage allowed workers to lead to a more economic use of machines, tools
and time etc.

Systems of wage payments must include the following characteristics-

 It should be simple to operate and easy to understand

 It should guarantee a minimum wage to each and every worker
 Acceptable by the employer and employee
 Flexible enough to make future changes

Time Rate System

Under this system, the amount of remuneration or the total wages outstanding to the workers
depends on the time for which he is employed. The worker is paid on the basis of time but not on
his performance or output

Wages are paid to the workers on the basis of time which the worker spends in the factory. The
unit of time may be an hour, a day, a week or a month, etc. The formula for calculation of wages
under time wage system is W = T X R (Where W stands for wages, T for time spent by the
worker and R for rate per unit). Under this system, workers are assured of wages for the time
spent by them in the industry. This system is employed in the industries in which quality of the
work is required to be maintained and where the work could not be measured in terms of units.
Advantages

 Simplicity in calculating earnings

 Guarantee of minimum wages to the workers
 Quality production ensured
 Unity among workers
 Economical as involves less work

Disadvantages

 No incentives to efficient workers

 Go- slow policy
 Dissatisfaction among the effiecient workers
 Payment for idle time
 High cost of supervision

Piece Rate System

Wages are paid to the employees after completion of work.worker is paid on the basis of output
and not the time taken by him.

Wages are paid according to the amount of work done by the worker or the number of units
produced by the worker. Possibility of measuring the production in definite units is a pre-
requisite for the implementation of piece wage system. The formula is W = N x R (Where W
stands for wages N for number of units produced and R for rate per unit). When the output is
measured in units and where the quality is not a matter of concern, this system can be used. This
method encourages the individual efficiency. Under this system, the worker is forced and enticed
to work hard in order to earn as much as possible.
Advantages

 Simplicity
 The incentive to workers
 Ascertainment of accurate labour cost
 No payment for idle time
 Proper care and use of machines and tools by workers to ensure a good output.

Disadvantages

 Less ateention to quality

 Inefficient use of material and more wastage
 No guarantee of minimum wage
 Dissatisfaction among inefficient workers
 Adverse effect on workers health as they may work too much to earn more.
CONCLUSION

Man is always affected by his environment. His work, efficiency, psychology and health move
and develop according to environmental setting. It has been said that environment creates a man
and vice-versa. It is a well recognised fact that health and inspiring atmosphere leads the worker
for more work, while slum and unhealthy atmosphere decreases his working capacity.

Therefore, it has to be realised that there must be good working conditions for the workers in the
Industries. Mere provision of financial incentive cannot contribute to higher efficiency. The
efficiency of a worker depends directly on his health and willingness to work. In the absence of
desirable working conditions, the worker feels that his work is tough and rough one, he becomes
sluggish and it becomes difficult for him to work well. With good working conditions and
provision of welfare facilities, not only makes the worker feel happy, but the employer also gains
because of the increased production owing to greater efficiency.
BIBILOGRAPHY
PRIMARY SOURCES:

1. Dr. V.G. GOSWAMI , LABOUR AND INDUSTRIAL LAW

2. THE MINIMUM WAGES ACT,1948

SECONDARY SOURCES:

3. http://labourbureau.gov.in/MW3ch5.htm
4. http://labourbureau.gov.in/MW2K1%20Introduction.htm
5. https://www.slideshare.net/karanjaymeen/the-minimum-wages-act-1948-2
6. https://www.slideshare.net/ErGupta9/wages-system
7. https://www.kullabs.com/classes/subjects/units/lessons/notes/note-detail/5294