wage presentation india

7/31/2019 Wage Presentation India

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Wage Measurement andconnected issues in India

Presentation byBiju Varkkey

Indian Institute of Management AhmedabadIndia


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PROFILE OF INDIATotal no: of States and UnionTerritories

28 States and 7 UnionTerritories

Total no: of revenue districts 602Total population 1028 million (2000)

Annual Per capita income Rs. 10,254 / US $ 520(for 2000-01)

GDP Rs. 18,95,843 crores (for2000-01

Total workforce 315 millionOrganized 29.61 millionUnorganized 285.39 million


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INDIA : HUMAN DEVELOPMENTINDEX

Life expectancy at birth (years) (HDI), 2002 63.7 y

Adult literacy rate (% ages 15 and above)(HDI), 2002 61.3

GDP per capita (PPP US$) (HDI), 2002 2,670
http://hdr.undp.org/statistics/data/indic/indic_1_1_1.htmlhttp://hdr.undp.org/statistics/data/indic/indic_2_1_1.htmlhttp://hdr.undp.org/statistics/data/indic/indic_2_1_1.htmlhttp://hdr.undp.org/statistics/data/indic/indic_4_1_1.htmlhttp://hdr.undp.org/statistics/data/indic/indic_4_1_1.htmlhttp://hdr.undp.org/statistics/data/indic/indic_2_1_1.htmlhttp://hdr.undp.org/statistics/data/indic/indic_2_1_1.htmlhttp://hdr.undp.org/statistics/data/indic/indic_1_1_1.html


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Employment : Organized Sector.Nos in million

Factories 10.47

Mines 0.49

Plantations 1.09

Shops and Establishments 5.00

Motor Transport 0.71

Services 3.86

Ports 0.022

Central/State Governments 7.000

Total 27.762

Year (1999-2000)


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Employment: Unorganized

It is difficult to correctly arrive at theemployment numbers, under differentcategories in the unorganized sector.

However, agriculture & related activitiescontinues to be the dominating sector

accounting for 70% of unorganized sectoremployment. Construction will be the nextlargest sector.


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Differences: organized andunorganized sectors.

The organized sector enjoys better conditions ofwork, protection under labor laws, are betterunionized and most enjoy collective bargainingrights when compared to their unorganizedsector counter parts.

On the other hand, the degree of protection &trade union rights available for unorganizedsector is limited : however, varies dependingon extend of unionization/political climate of thestate. (Kerala/West-Bengal). In such cases theyenjoy near equal protection.


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Differences: Government, Public and Privatesector workers.

Government workers enjoy high level of job protection,trade union representation without collective bargainingrights.

Public Sector workers enjoy trade union and collective

bargaining rights. Private sector workers enjoy trade union and collective

bargaining rights like public sector. Current trend to non-union workplaces.

Right to strike for government employees prohibited by Supreme Court of India in 2002 .Officers/executives in any sector no trade union,collective bargaining rights.


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Framework for wage calculation Organized Sector:-

The `day, `week and `month are the basic units for wages calculation. Used in combination.

Normal working week is five days (for government)five half days/ six days.`Hour is generally not a unit for wage calculation. (Innewer sectors like IT, ITES hour is becoming astandard).

Wage payment is made monthly.Unorganized sector :`Day is the common unit of calculation. In certain cases

piece rate wages is in vogue, as well as hourlywages.


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CONSTITUTION of India ONWAGES

Directive Principles

Article 39

There is equal pay for equal work for both men and women;

Article 43

Living wage, etc., for workers .- `The State shall endeavor tosecure, by suitable legislation or economic organisation or in anyother way, to all workers, agricultural, industrial or otherwise, work, aliving wage, conditions of work ensuring a decent standard of lifeand full enjoyment of leisure and social and cultural opportunitiesand, in particular, the State shall endeavour to promote cottageindustries on an individual or co- operative basis in rural areas.


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Government and Wages inIndia.

Government has been intervening fromtime to time, but the process was slow.

For unorganized sector legislations andfor others through various institutions.

Initial interventions (modern) were byBritish 1860 (though different kings too

had their own rules) Committee on Fair Wages : 1946,provided a modern framework.


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National Wage Policy for India. As of now, India does not have a formal national

wage policy, though the issue has beendiscussed several times.

The government has direct and indirect controlover wage levels, which has been exercisedthrough different institutions.

(Top salaries of PSUs and Private Sector arestrictly regulated, though the degree has beendiminishing, particularly in Private Sector Thishas led to phenomenal differentials between

Private and Public).


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Committee on Fair Wages 1946 Minimum Wage: - bare subsistence of worker,

enough for health, efficiency and workingcapability.

Fair wage: Above minimum wage

Living wage: male worker not to provide forhimself, but for family not just bare necessitiesbut frugal comfort, education for children, socialsecurity etc.

Need based minimum wage.


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Institutions involved in wagedetermination.

Wages Legislation. (covers organized/unorganized) Wage Boards (covering select private and public

sectors).Pay Commission (for government/Public Sector).Collective Bargaining (for covered workers).Government Directives/Special commissions

Salary Surveys/Compensation Consultants forprivate sector, non officer cadre.


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Wages Legislation

Minimum Wages Act 1948 Payment of Wages Act 1936.

Equal Remuneration Act 1976 Companies Act 1952.

Other (s): Payment of Bonus Act


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Definion of Wages Minimum wages Act:

Wages" means all remuneration, capable of being expressed interms of money, which would, if the terms of the contract ofemployment, express or implied, were fulfilled, be payable to aperson employed in respect of his employment or of work done insuch employment [and includes house rent allowance],

but does not include-

(i) the value of- (a) any house, accommodation, supply of light, water,medical attendance, or (b) any other amenity or any serviceexcluded by general or special order of the appropriate government;

(ii) any contribution paid by the employer to any pension fund orprovident fund or under any scheme of social insurance;(iii) any travelling allowance or the value of any travelling concession;(iv) any sum paid to the person employed to defray special expenses

entailed on him by the nature of his employment; or


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Who is eligible for Minimumwages?

"employee" means any person who is employed for hire or reward todo any work, skilled or unskilled, manual or clerical, in a scheduledemployment in respect of which minimum rates of wages have beenfixed; and includes an out-worker to whom any articles or materials

are given out by another person to be made up, cleaned, washed,altered, ornamented, finished, repaired, adapted or otherwiseprocessed for sale for the purposes of the trade or business of thatother person where the process is to be carried out either in thehome of the out-worker or in some other premises not beingpremises under the control and management of that other person;and also includes an employee declared to be an employee by theappropriate government; but does not include any member of theArmed Forces of the,8[Union].


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Calculation of Minimum Wages:

15 th Indian Labor Conference: Standard working family of 1 man(earning)+ 1 women

(wife) + 2 children.

2700 calories for adult 80% for wife and 60% for child(daily)

72 yards of cloth per annum. Government rental cost for housing

20% of above for fuel, lighting, miscellaneous.

This formed the basis for calculation.


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Minimum Wages: presentsituation.

Idea of National Minimum wages notaccepted.

Hence minimum wages determined bycenter/state government for differentoccupations. Now total 200 occupationscovered.

For same occupation , minimum wagesvary from state to state. Declared on per day basis for 8 hour work.


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Wage Indexation.

The system of DA (Dearness Allowance) to takecare of effects of inflation. (cost of living).

Indexation can be fixed or variable (indexation

value decreases as income rises). Consumer Price Index used as the basis. Clearly followed in organized sector.

On some states minimum wages revisedperiodically, so no requirement for indexisation. (Freeze in DA)


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Payment of Wages Act 1936

Introduced to ensure that wages are notwithheld, no wrongful deductions made and

payment is made in such manner that wageearner will benefit. (objective was to reduceeffects of payment in kind for work done).

Act has limitations agriculture not covered.


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Current Situation.

Payment in kind reducing. (only kind may bevery rare) combination of cash and kind.

Organized sector moving into Commercial Bank

linked transactions. (ATMs/Cheque). Non-payment of wages still a cause for industrial

dispute in organized sector.

Non-payment of wages dealt as police complaint(criminal offence) in unorganized sector.


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Equal Remuneration Act 1976

Payment of equal wages for men andwomen workers for same work or work ofsame nature.

However discrimination exists in terms ofdefinition as: difficult work (men) and easy

work (work) in same workplace. Also depending on type of employmentcontracts


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Types of employment contracts.

Organized Sector

Permanent worker. Contract Worker. Badali Worker

(substitute)

Casual Worker (dailywages).

Apprentice/Trainee.

Un-organized Sector

Inherited worker.

Contract worker. Casual worker. Beck and call worker. Free labour/Help. Bonded/Child (illegal)


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Bonus Payment

Payment of Bonus Act. 8.33% minimum bonus and 20% maximum,

even for loss making organizations.

Workers earning up to Rs 3500 (?) per monthalone eligible. Government employees (earning limit applied)

also given bonus, declared yearly.

In un-organized sector, one month equivalent(during festivals) is like a norm


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Working Hours Formal sector :- Factories Act No adult workers shall be required or allowed to work in a factory for

more than forty-eight hours in any week. (51)

Subject to the provisions of section 51, no adult worker shall be

required or allowed to work in a factory for more than nine hours inany day.

The periods of work of an adult worker in a factory shall be soarranged that inclusive of his intervals for rest under section 55, theyshall not spread over more than ten and a half hours in any day :

Provided that the Chief Inspector may, for reasons to be specified inin writing, increase the spread over up to twelve hours.


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Working hours contd .

Shops and commercial establishmentsAct-

No employee in any establishment shall be

required to work for more eight hours in any dayand 48 hours in any week. ( Section X of THE KERALA SHOPSAND COMMERCIAL ESTABLISHMENTS ACT, 1960 )

Informal Sector:

Based on conventions `sunrise to sunsetunless the sector/location is unionized.

Government 45 hours.


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Overtime payment.

Workers under factories Act are eligible forovertime payment, for excess of 30minutes - at twice the rates.

Working on off days, holidays also eligiblefor overtime.

Overtime specified under Minimum

Wages Act. Government has abolished overtime ingov/Public Sector (now compensatory off).


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Wage Boards. Tripartite Wage Boards consists of equal

representatives of employers and workers andan independent Chairman.

Determined the wages and other remunerationto be given to the workers in industries, wherewage boards are formed .

Wage bargaining mostly took place at theindustry level, and through Government

controlled wage boards. First Wage Board (Divatia Wage Board) wasconstituted in May, 1956


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Pay Commission:- (governmentemployees)

GOI appoints pay commissions to determine thewages (monthly) and conditions of work ofgovernment employees, including armed forces.

Till now 5 commissions have been appointed

State Governments also appoint commissionsfor state government employees.

Central and State pay commission reportsconsidered a bench mark for organized sector.

Wage determination: Bargainable


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Wage determination: BargainableCategory in Public and Private

Sectors. PSUs collective bargaining (national/industry

level) exists but not very free. Governmentsets limits. (LCF).

Some private sector also join the PSUs (banks)for wage negotiations, if the union is common.

In private sector - enterprise level bargaining isaccepted. But they too try to keep wages undercheck.

Wage Determination: Non


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Wage Determination: Nonbarganiable category in Public

Sector. Set by the government.

Wage Determination: Non


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Wage Determination: NonBargainable Category Private

Sector. Difference between Sunrise andTraditional Sectors.

This is where freedom exists. Executive salaries have been shooting

through the roof in India, particularly insunrise sectors like IT, Bio Tech.

In fact, NRI;s from North America arecoming back since they find that earningpotential is high.


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Taxation Issues

Only in organized sector, three stage taxrate on wages. Only very few peoplecovered (or actually pay taxes).

15%, 20%, 30% depending on annualincome.

No tax below Rs 1 lakh. Reforms are progressing


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Agencies Involved in Collection ofWages Data

Government: Central Statistical Organisation. National Sample Survey Organisation

Labour Bureau under Ministry of Labour, GOI. Ministry of Agriculture Agricultural Survey.Private:

Consulting companies keep track of executiveremuneration.Comprehensive Source of wages Absent.

wage presentation india

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