Evolution of Wages Law in India

To serve as an employer's expense for doing business, wages serve as a source of revenue for workers. In a broader sense, wages refer to any financial compensation provided to employees by an employer pursuant to a written agreement in exchange for services rendered. In this method, wages include advantages like financial assistance, family allowance, and emergency pay. In contrast, wages are only considered to be proper or performance wages when used in the restricted sense, where they are the cost of the labor used in the manufacturing process.

Wage Definition

The term "wages" is defined in Section 2(h) of the Minimum Wages Act of 1948 as "all remuneration capable of being expressed in terms of money which would be payable to a person employed in respect of his employment or of work done in such employment, including house rent allowance but excluding" Some.

Beginning of Wages

The concept of "wage," which dates back to the dawn of mankind, is payment for services provided or compensation for labor. When salaries were first paid, food and grains were the most popular options. However, as industrialization progressed, salaries became a difficult issue and were viewed as a delicate topic of public policy in practically all industrialized nations. The amount of pay quickly became a frequent source of conflict between employers and wage earners. Strikes were called in response to the demand for salary increases due to frequent disagreements between employers and wage employees. The determination of adequate wages that should be justifiably paid to the employees by the employer was more than just an economic issue; it was a multifaceted phenomenon that required consideration of pertinent factors like the location of the industry, the cost of goods, living conditions, the basic needs of the wage earner, and the governmental policies in the society in question.

Wages / Pay Variation

  • Regional

  • Time

  • Industrial

Payment of Wages Act, 1936

An act to control the payment of wages to specific types of employed persons is known as the Payment of Wages Act, 1936 (the Payment of Wages Act). The Payment of Salaries Act aims to protect employees working in establishments from improper wage deductions and to ensure that companies pay wages to workers in a timely manner.

All wages must be paid in current coins, currency notes, or both, as per the Payment of Wages Act. The employer, however, is permitted to pay the employee's wages by check or by crediting the employee's bank account after getting the employee's written consent.

Case Laws 1

  • Ludhiana Hands Tools Association v. Union of India − The Disaster Management Act gives the committee the authority to battle disasters; the act was not created to give the government the authority to require employers to pay employees' wages during a lockdown, according to a Public Interest Litigation filed in the Supreme Court. As a result, this order is not covered by the law that it was passed under.

    Additionally, the above-mentioned interpretation of Section 10(2)(1) of the Disaster Management Act of 2005 is arbitrary and in violation of Articles 14 and 19(1)(g) as well as Section 300 A of the Constitution. even though the Supreme Court in this instance granted the temporary remedy and ordered that no coercive measures be utilized against the petitioners.

  • Twin City Industrial Employers Association v. Union of India − The same reasons were raised in this case, but the Supreme Court did not intervene in the Ministry's ruling preventing small-scale businesses from having to pay their workers any wages.

However, in the first instance, the Payment of Wages Act's provisions are being violated since the workers' wages are not being paid on time, despite the Supreme Court's inconsistent rulings in the two cases.

Minimum Wages Act, 1948

The Minimum Wages Act of 1948 (the Minimum Wages Act) establishes minimum wage rates for a number of occupations. Under the applicable state's Minimum Wages Rules, the minimum wage is set by the state through announcements published in the state gazette.

An employee is defined as follows under the Minimum Wages Act

  • Anyone hired for hire or reward to perform any work, skilled or unskilled manual or clerical, in scheduled employment for which minimum rates of wages have been fixed;

  • An outworking, to whom any articles or materials are given by another person to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted, or otherwise processed for sale for the purposes of that other person's trade.

The term "wages" has been defined to mean all remuneration that can be expressed in terms of money and that would be due to a person employed in respect of his employment or work performed in such employment, if the terms of the employment contract, express or implied, were fulfilled. This includes house rent allowance but excludes −

The worth of −

  • Any housing accommodations or the provision of light, water, and medical care; or any other amenity or service disallowed by a general or particular order of the relevant government;

  • Any contributions made by the employer to a person's personal account, provident fund, or social insurance plan.

  • Any travel reimbursement or the value of any travel perk.

  • Any amount provided to the employee to cover any additional costs brought on by the nature of their job; or Any gratuity due upon termination.

Case Laws 2

  • In the 1956 case involving the State of Madras and P.N. Ram Chander Rao, the court determined that any notification that does not define how and how often a special allowance is payable is defective and impaired by an obvious legal error.

  • The high court found that the government is not bound by the Advisory Board's report in the Cashew Manufacturers and Exporters Association v. State of Kerala case in 1999.

  • In the case involving S.D. Basha versus the State of Madras, it was decided that a committee would be null if its members were inexperienced and unqualified. A committee made up of persons without the knowledge or experience is forbidden.

Payment of Bonus Act, 1965

Except for certain kinds of workers, the Bonus Act applies to factories and other companies with 20 or more employees on any given day throughout the year. The Payment of Bonus Act requires that bonuses be given to all employees covered by the Act. Additionally, everyone who has worked there for at least 30 days is paid no more than Rs. 10,000 each month. Employees are entitled to a minimum bonus under this Act of 8.33% of their base pay, or Rs. 100, whichever is higher. However, even if the business is not profitable, this amount must be paid after five years. The bonus is paid at a rate of 20% of the salary if the allocable surplus exceeds the minimum bonus. Every business is required to provide an employee a bonus within eight months after the end of the fiscal year. The registrar should also be kept up to date on the bonus amount that is assignable to and due to each employee.


The Payment of Wages Act has evolved in the modern era to include the necessary elements for supporting the efficient operation and the payment of wages to workers. They have broadened the scope of this act's applicability to many employees who have been their families' sole source of income by raising the bar. The COVID-19 crisis and the Ministry's ruling have had an impact on how the act is being implemented because numerous employers have filed PILs and the Supreme Court has granted them temporary relief as a result.

Given the current situation, it is crucial to take into account and put into practice the Payment of Wages Act's provision for the prompt payment of wages to all workers and employees. This circumstance had a significant influence on the livelihood of numerous workers. Despite the fact that both companies and employees have experienced financial hardship as a result of this circumstance, it is necessary to balance their respective rights.


Q1. What is meaning of minimum wages?

Ans. Minimum wages defined as the lowest amount of money that an employer is legally required to pay to an employee or worker for their work.

Q2. Who does fix or decide the minimum wages?

Ans. The minimum wage is set by the government and is intended to ensure that workers are paid a fair and livable wage for their labor. However, the minimum wage is usually set for a specific occupation, industry or region, and it is adjusted periodically to keep pace with inflation and the cost of living.

Q3. Which Act in India defines the minimum wages?

Ans. In India, the Minimum Wages Act 1948 is the main legislation that governs the setting and enforcement of minimum wages. The act provides for the fixing of minimum rates of wages in certain employments which are scheduled employments under the act. The Central and State Governments are responsible for fixing and revising the minimum wages for scheduled employments.

Updated on: 15-Feb-2023


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