Wages are a remuneration paid to labourers for its services in production. Labour refers to all kinds of workers, skilled and unskilled, physical and mental, etc. They may receive wages, salaries, fees, commission etc.
Wages means all remunerations (whether by way of salary, allowance or otherwise) expressed in terms of money or capable of being so expressed which would, if the terms of employment express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment.
Wages also include
a] Any remunerations payable under any award of settlement between the parties or order of a court.
b] Any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period.
c] Any additional remuneration such as bonus etc. which form a part of remuneration payable under the terms of employment, such as an incentive for additional production.
d] Any sum payable to a worker under any scheme framed under any law.
e] Any sum payable by the terms of agreement for the termination of employment.
Money wages and real wages.
Wages paid in the form of cash are known s money wages or nominal wages. The purchasing power of money wages is known as real wages. In other words what labourers can purchase with money wages is real wages.
Money wages therefore is the purchasing capacity of the workers or their claim over goods and services in the market.
“The satisfaction that a labourer gets from spending money/nominal wages is real wages”.
Real wages therefore depends on prices of goods, working hours, regularity of employment, nature of job, future profits, traditional benefits in kind etc.
Wage concepts that have acquired importance since 1948 are
1] The statutory minimum wage – originated in the provisions of the minimum wages act of 1948.
2] The basic minimum wage – this term was used in awards and judicial pronouncements.
Besides these two the three terms introduced in the report of the committee of fair wages are
3] The minimum wage.
4] The fair wage.
5] The living wage.
The resolution of the 15th session of the Indian labour conference in July 1957 introduced the concept of -
6] The need based minimum wages.
According to the committee of fair wages
- The minimum wages represents the lower limit of the fair wages
- Beyond this was the fair wages
- Beyond the highest level of fair wages was the living wages.
The minimum, fair and living wages are not static and inflexible concepts. They vary according to the economic development and compulsions of social justice.
The concept of minimum wages connotes different standards in different countries.
According to the fair wage committee, “in india the level of national income is so low at present that it is generally accepted that the country cannot afford to prescribe by law a minimum wage which would correspond to the concept of a living wage, – - – - we consider that the minimum wage must provide not merely for the bare sustanence of life, but for the preservation of the efficiency of the worker. For this purpose the minimum wages must also provide for some education, medical requirement and amminities.”
Therefore “minimum does not imply a wage which provides only bare subsistence as implied by the subsistence wage theory. It does not aim at merely keeping the body and soul of the worker together but also at better habits, which give a chance for better development, of greater sense of self-respect and which betoken a higher regard for the place occupied by the worker in the scheme of citizenship.”
In simpler words minimum wages is one is one which could meet the “normal needs of the average employee regarded as a human being living in a civilized society.”
Minimum wages may be defined as, “wages sufficient to enable the worker to live in reasonable comfort having regard to all obligations to which an average worker would ordinarily be subject.”
The principle of minimum wages has now been widely recognized and accepted in almost all the industrially developed countries of the world.
Importance of minimum wages
Fixing minimum wages is important because it affects the industrial life, and the health, strength and morale of the workers.
1] Minimum wages ensure that the workers enjoy a reasonable and a fair standard of living from the point of view of health and wellbeing. This prevents social wrongs and therefore provides social justice.
2] Minimum wages ensures and maintains stability in the society. If wages are below minimum wages [poverty], it leads to revolutionary ideas and therefore causes a revolution in the society.
3] Minimum wages ensures industrial peace. Workers join the industry to earn, and, if he fails to earn the industry is exposed to instability.
4] Minimum wages ensures workers of their rightful share in the fruits of the industry which he is otherwise denied due to his weak bargaining strength.
5] Minimum wages promotes improved efficiency among workers which automatically solves most of the industrial problems.
6] Fixation of minimum wages prevents exploitation of workers. It secures wages according to the value of work done. And according to the productive capacity of the worker.
Fixation of minimum wages as conditions differ from place to place, industry to industry, time to time, person to person etc.
Minimum wages must be sufficient for physiological existence along with the elementary necessities [as per the subsistence plus level].
Minimum wages fixed should be adequate for the worker and his family[the average size of family is the worker, his wife and three children].
Fixing minimum wages is difficult because minimum wages have to be fixed, enforced by a central machinery and cost of living indices have to be prepared from time to time; minimum food, clothing, shelter and other requremtnts like fuel lighting etc required have to be calculated.
In order to improve relations between labour and management, “the industrial truce act” was passed in 1947 which provided for the payment of fair wages to the workers.
To implement this part of the resolution the Government of India appointed a “Fair wage committee” in 1948 to determine the principles on which fair wages should be based and suggest the lines on which these principles should be applied. The committee published its report in 1948.
It is very difficult to explain precisely what a fair wage means. The concept of fair wages differs from place to place, occupation to occupation and depends on the strength of trade unions etc.
In India in spite of expansion, trade union does not have a strong influence on wage determination and therefore it is entrusted to the State machinery. According to the fair wage committee, minimum wage is less than the living wage. It recommended that, while the lower limit of the fair wage must obviously be the minimum wage, the upper limit should be equally set by the capacity of the industry to pay. The fair wage should be decided on the considerations of
1] Productivity of the worker.
2] The prevailing wage rate in the same or neighbouring locality.
3] The level of National Income and the distribution of National Income.
4] The place of the industry in the economy of the country.
According to the committee on fair wages, living wages represent the highest level of wages. Therefore it should include all amenities which a citien living in a modern civilized society was entitled to expect when the economy of the country was sufficiently advanced and the employer was able to meet the expanding aspirations of the worker.
After considering various observations made by the Indian and foreign authorities, the fair wfe committee stated that, “living ages should enable the male earner to provide for himself and his family the bare essentials of food, clothing and shelter; a measure of frugal comfort including education for children, protection against ill health, requirements of essential social needs and a measure of insurance against the more important misfortunes including old age.”
However for this the committee felt that the considerations of National Income and the capacity of the industry to pay has to be taken into account and that the living wage should be made the ultimate goal.
It has ben seen that our present National Income does not permit the payment of living wages on the standards prevalent in the advanced countries.
However the goal of living wages may remain a mere goal at any point of time since changing conditions and attainment of higher general standards of living may shift the goal of living wages further and therefore, “living wages may be an ever receding goal, a guiding star and not a destination itself.”
According to the fair wage committee, living wage standard is the upper limit of wage fixation and the minimum wages is the lower limit of wage fixation.
Wage and salary structure/ preparation of wage structure
Wage and salary structure should be based on
1] Job requirements eg skill responsibility, safety etc.
2] General level of wages in the market.
3] Ability of the worker especially at higher levels.
4] Equal pay for equal work.
5] Advise of trade unions.
6] Wage structure should be flexible and wage revisions should be made by a committee rather than an individual..
7] Prompt and on time wage payments.
8] There should be a procedure for hearing and adjusting wage complaints
Wage policy in India
Most commonly used wage policy is payment of wages on a monthly basis.
Basic salary is decided, and on the basis of the basic salary all other allowances are given, eg increment per year, dearness allowance, HRA, travel allowance etc.
Wage policy is based on various legislations like payment of wages act 1936, minimum wages act, bonus act etc.
Objectives of wage policy
1] to obtain for the workers a just share for their efforts.
2] to get minimum wages for the workers as their bargaining strength is weak.
3] to bring about a more efficient allocation and utilization of human resources through wages and salaries differentials.
4] to abolish malpractices in payments of wages and salaries.
Wage Management refer to the establishment and implementation of sound policies and practices of emoplyee compensation It includes evaluation, surveys of wages and salaries, analysis of relevant organizational problems jobs, development and maintenance of wage structure, wage payments, incentives, profit sharing etc.
Objectives of wage Management
The main aim of wage management is to establish and maintain an equitable wage and salary structure.
Secondary objective is to establish and maintain an equitable labour cost structure.
A sound wage management tries to achieve
A] For employees
1] Employees are paid according to their job requirements eg skilled, unskilled, duration of job, safety in job etc.
2] Minimization of favouritism.
3] Job sequences and lines of promotions established where ever they are applicable.
4] Wage programme based on facts will motivate the employees and increase their morale.
B] For employers
1] Employers can plan and control their labour costs.
2] Since the wage programme is based on systematic analysis of job, interaction with trade union id amicable.
3] It reduces the friction and grievances over wage inequalities.
4] It increases the productivity and efficiency of employees thereby increasing profits.
5] It attracts qualified employees by ensuring adequate payments for all jobs.