MINIMUM WAGE LEGISLATION AND FAIR COMPENSATION

ABSTRACT

The concept of fair compensation is a fundamental aspect of labor rights and social justice, aimed at ensuring that every worker receives a wage sufficient to meet basic living standards. Minimum wage legislation serves as a legal safeguard against exploitation and unequal bargaining power between employers and employees. In India, the journey of wage regulation began with the enactment of the Minimum Wages Act, 1948, and has since evolved with the introduction of the Code on Wages, 2019. This Code consolidates various wage-related laws and aims to establish a uniform framework applicable to all sectors and employment types. Even with progressive laws, enforcement problems continue, especially in the informal economy, where wage abuses are widespread and enforcement tools are still weak. The study also investigates the potential of technology, awareness, and policy reforms to enhance the wage protection system. This paper recommends an integrated approach involving legal, administrative, and social measures to achieve the constitutional guarantee of fair wages and dignity of labor.

KEY WORDS: Minimum Wage and Fair Compensation -Code on Wages, 2019 – Labor Law and Wage Regulation – Judicial Interpretation of Wage Laws – Informal Sector and Wage Protection – ILO Standards and Wage Rights

INTRODUCTION

The right to fair compensation is a fundamental pillar of labor welfare, rooted in the principles of human dignity, equality, and social justice. Wages are not merely a measure of economic exchange but a recognition of labor’s contribution to national development. However, in the absence of legal safeguards, many workers especially in low-skilled or unorganized sectors remain vulnerable to exploitation, underpayment, and poor working conditions. It is in this context that minimum wage legislation plays a vital role in ensuring economic fairness and equitable growth. Historically, the development of minimum wage legislation was a reaction to the power imbalance between employers and workers, especially during the industrial revolution. In India, this imbalance was corrected by the Minimum Wages Act, 1948, which authorized the government to determine and revise from time to time wages for specific categories of employment. Nevertheless, the Act had various drawbacks, such as limited coverage, administrative lag, and lack of uniformity across states and industries. As part of its effort to consolidate labor laws, the Indian government passed the Code on Wages in 2019 to reduce these disparities.  This Code aims to create a national floor wage, universalize the right to minimum wages, and provide more open procedures for setting and disbursing salaries.  It seeks to safeguard all workers, regardless of industry or pay level, and to harmonize wage legislation.

CONSTITUTIONAL AND STATUTORY FRAMEWORK

Constitutional Mandates

The Indian Constitution, being a living document, reflects the aspiration of a just and equitable society. Although the right to minimum wage is not explicitly mentioned as a fundamental right, various constitutional provisions lay the foundation for fair compensation and wage justice. Article 14 of the Constitution provides a guarantee of equality before the law and equal protection of the laws, which bars discriminatory wages among comparably situated workers. It makes sure that everyone is in an equal position and receives a fair treatment from the State and the employers. Article 23 prohibits forced labor, which includes begar and other exploitation. The Supreme Court, in People’s Union for Democratic Rights v. Union of India, AIR 1982 SC 1473, held that non-payment of minimum wages constitutes a case of forced labor and thereby directly included the issue within Article 23. Article 39(a) of the Directive Principles of State Policy orders the State to take steps to ensure that a vast mass of the citizens, namely men and women, are provided with adequate means of living. Article 43 also stresses the obligation of the State to provide for a living wage and a decent standard of life with conditions of work. Although the Directive Principles are non-justiciable, the Supreme Court has time and again read them harmoniously with the Fundamental Rights, especially in labor jurisprudence, giving them significant persuasive value in policymaking and interpretation.

Statutory Provisions

• The Minimum Wages Act, 1948

The Minimum Wages Act, 1948 was one of the earliest labor welfare legislations enacted in independent India. Its primary objective was to protect workers in scheduled employments from being paid unduly low wages. It empowered both the Central and State Governments to fix minimum rates of wages for certain employments listed in the schedule to the Act. The key features of this act includes Fixing minimum rates of wages (basic + cost of living allowance), Periodic revision of wages (at least once every five years), Prohibition of payment below the notified minimum wage and Penal provisions for non-compliance.

However, its effectiveness was limited due to Lack of universal coverage across all sectors, Bureaucratic delays in wage revision, Weak enforcement mechanisms, especially in the informal sector.

• The Code on Wages, 2019

As part of its broader labor law reform agenda, the Government of India consolidated 29 existing labor laws into four comprehensive labor codes, one of which is the Code on Wages, 2019. This Code replaces and unifies four earlier legislations: the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. The Code on Wages is designed to streamline and modernize the legal framework governing wage and remuneration issues across all sectors. One of its most notable aspects is universal coverage—while the Minimum Wages Act, 1948, was limited to scheduled employments, the new Code covers all employees, irrespective of the character of their employment or industry. It provides for a National Floor Wage under Section 9, which authorizes the Central Government to fix a minimum standard, thus ensuring that no State fixes a lower wage. Section 3 of the Code also reiterates the equal remuneration principle, which forbids wage discrimination based on gender for work of equal value. The Code also provides a consistent definition of “wages” under Section 2(y), making it easier to calculate wages and increasing clarity in compliance. The Code also creates Central and State Advisory Boards (Sections 42–44) to advise the government on wage determination and implementation, and it requires the timely and complete payment of wages, as specified in Chapter III.  By supporting digital record-keeping and e-inspections, the Code intends to simplify compliance and promote transparency in wage regulation.  In general, this reform aims to do away with the disparities and incoherence of earlier wage laws and establish a unified and efficient legal framework that improves administrative effectiveness and better safeguards workers’ rights.

Judicial Recognition of Wage Rights

The Indian judiciary has consistently upheld the legitimacy of minimum wage legislation as a necessary tool of social welfare. In Unichoyi v. State of Kerala, AIR 1962 SC 12, the Supreme Court recognized the constitutional validity of fixing minimum wages and ruled that it does not infringe upon the right to trade or business under Article 19(1)(g). Similarly, in Reptakos Brett & Co. Ltd. V. Workmen, AIR 1992 SC 504, the Court introduced the concept of a “living wage”, arguing that minimum wages should not be based solely on subsistence but also consider education, medical needs, and a decent standard of living. These interpretations, read with the constitutional framework, underscore that fair compensation is not a mere contractual matter but a fundamental component of human dignity and economic justice.

INTERNATIONAL  AND COMPARATIVE PERSPECTIVES

Minimum wage legislation is a global phenomenon, widely recognized as an essential tool to combat poverty, reduce income inequality, and ensure workers’ dignity. Various international instruments and practices influence national policies on fair compensation, and comparing India’s approach with other jurisdictions offers valuable insights into best practices and challenges.

International Standards:

Internationally, the framework for minimum wage regulation is significantly influenced by the norms and conventions established by the International Labour Organization (ILO). Among the most relevant is the ILO Minimum Wage Fixing Convention, 1970 which, although not ratified by India, provides key guidelines for setting and implementing minimum wages. The Convention emphasizes the need to consider both the socio-economic conditions of workers such as the cost of living and the needs of their families and broader economic factors like productivity, employment levels, and economic development. It also stresses the importance of periodic wage revision and mandates tripartite consultation involving governments, employers, and workers’ organizations to ensure a balanced and inclusive wage-setting process. In addition, the Universal Declaration of Human Rights (UDHR), under Article 23(3), asserts that everyone has the right to just and favorable remuneration that ensures an existence worthy of human dignity. These international standards collectively frame fair compensation not just as an economic policy but as a fundamental human right, thereby reinforcing the moral and legal imperative for countries like India to establish and enforce effective wage laws.

Comparative Analysis

• United States: In the U.S., the Fair Labor Standards Act (FLSA), 1938 provides the federal minimum wage, which coexists with state-level minimum wages. States have the liberty to set higher minimum wages than the federal rate, creating a competitive wage environment. The U.S. system is decentralized but strictly enforced through the Department of Labor and courts, with significant penalties for non-compliance.
• United Kingdom: The UK’s National Minimum Wage Act, 1998 and the National Living Wage framework ensure wage protection across age groups. The UK also established the Low Pay Commission, an independent body that advises the government on wage rates. Its recommendations are based on economic evidence and stakeholder consultations, ensuring both wage protection and economic balance.
• Germany: Germany introduced a statutory minimum wage in 2015 under the Minimum Wage Act (Mindestlohngesetz). The wage is revised annually by the Minimum Wage Commission, which includes equal representation from employers and trade unions. The emphasis is on maintaining competitiveness while protecting low-income workers, reflecting a balanced social market economy approach.
• Australia: Australia follows one of the most comprehensive wage systems through the Fair Work Act, 2009. The Fair Work Commission determines minimum wages based on a combination of economic indicators and social justice concerns. The system is robust in coverage, enforcement, and adaptability, often cited as a global benchmark.

IMPLEMENTATION AND ENFORCEMENT CHALLENGES

Despite strong legal backing, enforcement of minimum wage laws in India remains weak due to several reasons:

• Informal Sector dimensions: Over 90% of India’s workforce is in the informal sector and outside formal wage regulation.
• Awareness: Most workers are not aware of their rights and so fail to report violations.
• Lack of Inspections: Labor inspections are scarce, and penalties for violations are under enforced or unenforced.
• The problem of Gender Disparity: Women are paid less for doing the same work as a man.
• Disparity and Migration Issues: Minimum wages prescribed by different states differ, hence causing disparity and migration problem.

RECENT DEVELOPMENTS AND REFORM MEASURES

The Code on Wages, 2019, is a welcome reform, aiming to simplify and unify the wage laws. It proposes a National Floor Level Minimum Wage and ensures more transparency and accountability. The use of technology for wage payments and record-keeping is being promoted, especially through the Shram Suvidha Portal. The central government has notified the draft rules under the Code, and some states have started implementing them. However, full implementation is still awaited.

RECOMMENDATIONS

To achieve the goal of fair compensation, the following measures are proposed:

• Strengthen Enforcement: Deploy digital systems for tracking wages and empower labor inspectors with real-time data access.
• Widen Coverage: Bring the informal sector under the wage regulation net through social security integration.
• Enhance Worker Awareness: Mass awareness campaigns and legal aid support must be provided to vulnerable workers.
• Regular Revision of Wages: Minimum wages must be revised annually based on inflation and cost of living.
• Promote Collective Bargaining: Trade unions must be supported in advocating for fair wages.

JUDICIAL INTERPRETATION AND CASE LAWS 

The Indian judiciary has played a pivotal role in interpreting and reinforcing the right to fair wages as an integral component of constitutional and labor rights. Courts have not only upheld the validity of minimum wage laws but have also expanded the understanding of what constitutes fair, living, and just wages. Through progressive judgments, Indian courts have linked wage justice to fundamental rights such as dignity, equality, and protection against forced labor.

Unichoyi v. State of Kerala

This landmark case was among the earliest where the Supreme Court upheld the constitutional validity of the Minimum Wages Act, 1948. The petitioner argued that minimum wage fixation violated the right to practice any profession or carry on any trade under Article 19(1)(g). The Court rejected this contention and held that fixing minimum wages is a reasonable restriction in the interest of the general public. It emphasized that the legislation serves a social welfare objective, protecting workers from exploitation.

Reptakos Brett & Co. Ltd. V. Workmen

The Court enhanced the idea of a “living wage” in this ruling.  It maintained that minimum wages ought to cover more than just basic necessities, including children’s education, medical care, and a certain level of comfort.  The Court established that a fair pay must protect human dignity in addition to meeting an employee’s basic physical necessities.  The concept of fair compensation in Indian law was greatly influenced by this case.

People’s Union for Democratic Rights v. Union of India

Popularly known as the Asiad Workers’ Case, the Supreme Court interpreted Article 23 of the Constitution to include non-payment of minimum wages as a form of forced labor. The case arose out of reports that laborers working for the 1982 Asian Games in Delhi were paid below statutory wages. The Court held that any labor or service provided without remuneration consistent with minimum wage laws is tantamount to forced labor and a violation of fundamental rights.

Sanjit Roy v. State of Rajasthan

This case supported the Asiad Workers’ decision. In this case, workers who were hired under the Famine Relief Work Scheme in Rajasthan received less than minimum wages. The government claimed that the work was included in a relief measure. The Supreme Court rejected this explanation, saying that payment of less than the minimum wage is unconstitutional irrespective of the nature of the employment. The ruling underscored that economic need does not excuse exploitation, and minimum wage is a constitutional right, not a privilege.

Manganese Ore (India) Ltd. V. Chandi Lal Saha

In this case, the Court addressed the issue of wage payment compliance and held that even contract workers are entitled to the statutory minimum wage, and any violation would attract penal consequences. It reiterated that the contractual nature of employment cannot dilute the employer’s responsibility to adhere to minimum wage obligations.

State of Punjab v. Jagjit Singh

Although this case dealt primarily with equal pay for equal work, the Court’s observations reinforced the idea of wage fairness as a constitutional mandate. It held that temporary or casual workers performing duties similar to permanent employees must receive comparable wages, unless there is a reasonable classification backed by objective criteria.

These rulings collectively underscore the judiciary’s proactive role in expanding and enforcing wage rights, often stepping in where administrative or legislative mechanisms have failed. Indian courts have interpreted wage-related statutes in light of constitutional values like dignity, equality, and freedom from exploitation, thereby reinforcing that fair wages are not merely a statutory obligation but a constitutional guarantee.

CONCLUSION

Minimum wage laws are vital for ensuring economic justice, preventing exploitation, and upholding the right to live with dignity. India’s transition from the Minimum Wages Act, 1948 to the Code on Wages, 2019 reflects a stronger commitment to fair compensation for all workers. Constitutional provisions and landmark Supreme Court judgments have reinforced the importance of minimum wages, linking them to human dignity and fundamental rights. However, challenges persist especially for informal sector workers due to weak enforcement, low awareness, and administrative gaps. To make wage laws more effective, a robust strategy involving stricter enforcement, digital monitoring, regular revisions, and greater legal awareness is essential. Integrating informal labor into the formal economy remains a critical step toward ensuring fair wages for all.

REFERENCES

1. India Const. art. 14, art. 23, art. 39(a), art. 41, art. 43.
2. Code on Wages, No. 29 of 2019, 3, 6,  9,  42–44, Gazette of India, Aug. 8, 2019.
3. Minimum Wages Act, No. 11 of 1948, 3, India Code (repealed).
4. Fair Labor Standards Act of 1938, 29 U.S.C. 201–219 (2018).
5. National Minimum Wage Act 1998, c. 39 (U.K.).
6. Int’l Lab. Org. (ILO), Convention No. 26: Minimum Wage-Fixing Machinery Convention, 1928.
7. Int’l Lab. Org. (ILO), Convention No. 131: Minimum Wage Fixing Convention, 1970.
8. G. Goswami, Labour and Industrial Laws (13^th ed. 2023).
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11. R.K. Sinha, Labour Law (Central Law Agency, 2020).
12. ILO, Minimum Wages: Wage-Floor Policies and Their Impact (International Labour Office, 2014).
13. D. Srivastava, Commentary on the Minimum Wages Act, 1948 (12^th ed. 2010).