WAGE FIXATION

LESSON 14: WAGE FIXATION

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bargaining, the workmen in some concerns have succeeded in Moreover, they can make a contribution towards the

obtaining, exorbitant increase in wages. development of improved industrial relations practices which

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In this connection, it is quite pertinent to refer to the broad will lead not only to a substantial improvement in the

guidelines issued by the Bureau of Public E nterprise to the

utilisation of physical resources but to more satisfying working

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public sector undertakings. These units have been asked to keep lives. Negotiation of a comprehensive productivity agreement

the following points in view which negotiating future wage gives management, perhaps for the first time , an opportunity

agreements to restructure it industrial relations in a company or plant. It

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also provides the basis for an improved managerial control and

A (a) wage grants should not exceed ten per cent of the existing

can be the starting point of a managerial policy designed to level:

create a positive motivational framework for management and

E (b)dearness allowance neutralization should be at the rate of

employees.

one rupee per point

St at ut ory Wage Fixat ion

(c) there should not be any retrospective operation of wage The Minimum Wages Act was passed in 1948 to provide for agreements; and

machinery for statutory fixation and revision of minimum (d)the agreements should be for a period of three years.

wages in the scheduled employments, including plantations and The parties concerned in collective bargaining need detailed

agriculture. It is a piece of social legislation, which provides statistics of wage rates, earnings, bonuses and other

protection to workers in employments in which they are supplementary benefits, compensation of employees, labour

vulnerable to exploitation on account of the lack of cost, the snare of wages in the value added by economic activity-

organization and bargaining power.

vis-a-vis profits. Factual, impartial and authentic statistical data The main object of the Act is to prevent the payment of reduce the areas of uncertainty and enable meaningful

unduly low wages to workers employed in scheduled discussion between the different parties, thereby facilitating the

employments and to secure certain basic conditions of work collective bargaining process. Conversely, the lack of relevant and

and employment such as hours of work, overtime wages, reliable statistics has often proved a serious handicap to efforts

weekly off. The Act was initially made applicable to agriculture for the settlement of industrial disputes.

and 12 other industries ( listed in the Schedule to the Act )

Product ivit y Bargaining

where sweated labour conditions prevailed. Recently, the concept of productivity bargaining has gained

The scope of the Act has been gradually extended to cover new considerable momentum in addition to conventional wage

scheduled employments/industries. The Ministry of Labour bargaining. In wage negotiations, emphasis is given primarily to

has fixed/revised minimum wages under the Minimum Wages output-per man-hour rather than to productivity.The positive

Act in respect of 39 scheduled employments under the purview outcome of productivity bargaining is productivity agreement.

of Central Government. Most of the State Governments have Productivity agreement is a systematic attempt at securing

taken advantage of the Act and have fixed wages for greater efficiency and economy in the utilization of.. resources,

employments specified in Part I of the Schedule. They have also both physical and human.

extended the application of the Act to some other industries

The features of productivity bargaining

besides those scheduled under the Act. Firstly, it is based on the concept of exchange and self-interest

The scheduled employments covered by the flexible minimum which is beneficial to both parties.

wage has benefited work-people engaged in such diverse Secondly , it lays down specific and direct contribution of

employments/industries as printing presses,, rice and dal mills, labour towards improving productivity.

engineering industries, oil mills, plastic industry, cement Thirdly, it differs from conventional collective bargaining

products, lime kilns for fuel coke ( all in Madhya Pradesh), agreement as it is based on cost benefit analysis.

refractoriness, fire bricks and ceramics industry and cinema

F ourthly , it is a “package deal” between the workers and industry (all in Bihar), power loom industry (in Tamil Nadu), management wherein a number of changes in the work

cinchona, rubber, tea or coffee plantations (in Karnataka and practices are made in exchange for a variety of rewards.

Kerala), oil mills, tanneries and leather manufactory, clothing

A comprehensive productivity agreement will often have as a dyeing and cloth printing in (Gujarat and Maharashtra), bakeries major objective the rationalisation of the wage structure, and

and confectionaries, restaurants, shop and commercial the introduction of more appropriate and more effective bonus

establishments (in Uttar Pradesh and Maharashtra). systems. The productivity agreements pose certain problems for

The Minimum wages Act does not provide any guidance to the managements and unions. In the short-term, the problems of

wage fixing authority in regard to the content of a minimum adapting to a changed climate. Furthermore, there is a problems

wage, factors to be taken into account while fixing the of sharing the gains of productivity between labour and capital.

minimum wage rates, size of the family unit for which This often leads to industrial unrest or dispute between

minimum rates have to be fixed, weight age to be given to- workers and employers, loss of work time, and loss of

different factors like cost of living, needs of t6e workers etc.. It production. Nevertheless, managements must take the lead in

is, therefore, left to the individual committee or the productivity agreements because they are basically concerned

Government to determine their own standards and arrive at with the efficient use of resources to produce the best results.

conclusions.

Historically, the first to lay, down the guidelines for fixation of

(9) iron ore mines,

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minimum wages was the 15th session of the Indian Labour

(10) coal mines.

Conference held in July, 1957. This was followed by the One-

(11) limestone and dolomite mines,

Man Committee headed by Shri K.L. Vidvasagar this report-

dated the 19tb December, 1966 in suggested that while fixing/

(12) working journalists,

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revising minimum wages, the following norm should

(13) non-journalists,

invariably be taken into consideration:.

(14) cotton textile (second),

(i) Prevailing wage rates in the employment concerned;

(15) cement (second),

(ii)Prevailing wage rates/statutory minimum wage rates in other

employments for similar occupations;’ E

(16) ports and docks,

(17) engineering, M

(iii)Statutory minimum wage rate of the same employment in E N

the adjacent areas; T

( 18) heavy chemicals and fertilizers,

(19) sugar (second),

(iv)family budget survey of the workers’ families employed in such employments in different centres; .

(20) leather and leather goods,

(v)maintenance of information of CPI Nos. and ACPI Nos;

(21) electricity undertakings,

(vi)general economic conditions prevailing in the industry

(22) road transport, and

including the importance of the industry;

(23) working journalists (second).

(vii)information on nutritional standards and balanced diet in

A wage board is tripartite character. It consists of an equal various areas and places;

number of representatives of employers and workers with an (viii)number of persons employed in the industry over a period

independent chairman. In addition, an economist and a and the reasons for variations, if any;

consumer’s representative, both independent, are nominated to (ix)categories of employment and the amount of skill required;

the board. The total number of members on a wage board and

including the chairman has varied form seven to nine. Representatives of employers and workers on the board are

(x)cost of production and labour cost appointed by the government after consulting the concerned

Wage Boards

organisations in the industry. The government nominates the The term ‘wage board’ covers:

chairman and the independent members. (1)a voluntary negotiating body set up by discussions between

In evolving a wage structure, a wage board according to its organised employers and workers to regulate wages, working

terms of reference is required to take into account in addition to hours and related conditions of employment by collective

the considerations relating to fair wage. (i) the needs of the bargaining, and

industry in a developing economy’s differentials in such a (2)a body set up by law or with legal authority to establish

manner as to provide incentives to workers for advancing their minimum wages and other standards of employment which

skill. Majority of the wage boards examined the question of are then legally enforceable in the particular trade or industry

need based minimum wage and concluded that it was not

to which the board’s decision relate. th feasible to implement the norms approved at the 15 session

of ILC because of one or more of the following reasons; (a) it The concept of wage board was first enunciated by the fair

would be beyond the capacity and the industry in the to pay (b) wages committee. It was commended by the first five year plan.

it would unduly affect the relativity of wages among industries The second five year plan also considered the wage board to be

in the same region. (c) it would result in excessive and abrupt “ a more acceptable machinery for settling wage disputes”, a

increase in wages and (d) it would be extravagant at the cost of machinery “ which gives to parties themselves a more

the consumer on whom the burden of increased wages and responsible role in reaching resisions.” the fifteenth session of

salaries would fall.

Indian labour conference reiterated that wage boards should be the appropriate machinery for the fixation of wage rates.

A major criticism of wage board is its delay in submission of its report to the government and in implementing the board’s

Since their inception in 1957, wage boards were appointed for recommendations. The most serious consequence of these the following industries/employments:

long delays is reflected in worker dissatisfaction and agitation by (1) cotton textiles,

labour unions. In some cases they have interpreted their terms (2) sugar

of reference narrowly and recommended wage and dearness (3) cement,

allowance increases with considering their possible effects on the economy of the country. Moreover there are also problems

(4) jute, associated with the implementation of their recommendations, (5) tea plantations,

as they are non-statutory. The government can apply simply (6) rubber plantations,

moral pressure and persuasion on the employers to ensure (7) coffee plantations,

compliance. Another frequently encountered problem is the reluctance of some employers to implement even ‘unanimous’

(8) iron and steel, recommendations of the boards. This had led to considerable (8) iron and steel, recommendations of the boards. This had led to considerable

The NCL recommended for the continuation of wage boards as they have done some useful work. In this context, it made certain recommendations to make them more effective. Some of its recommendations are:

(i) the wage boards should normally be required to submit their recommendations within one year of their appointment;

(ii)the recommendations of a wage board should remain in force for a period of five years;

(iii)unanimous recommendations of the wage boards should

be made statutorily binding; (iv)a manual of procedure for wage boards should be prepared. 7 Tripartite wage boards provided a forum for collectiv4e

bargaining and constituted an important element in the Indian system of wage determination. This institution has come to be widely accepted in our country as a viable wage-setting mechanism. They have succeeded in promoting industry-wide negotiations; furthermore, in addition to encouraging greater participation by the parties and freedom in the decision making, the boards have apparently functioned with responsibility, restraint and maturity. As the system of tripartite wage boards is essentially a sound one, they may be revived afresh by removing the defects in their working.