Section 7: Components of minimum wages

Overview

This section of the Code on Wages, 2019, deals with what exactly constitutes the minimum wage that employers must pay their employees. It clarifies that the minimum wage isn’t just a single amount, but can be made up of different parts, like a basic wage and allowances.

Scope and Coverage

• Which employees and establishments are covered: This applies to all employees, regardless of skill level, working in all establishments (factories, shops, etc.) covered under the Code on Wages.
• Any thresholds or exclusions: There are currently no specific thresholds or exclusions regarding the application of minimum wage components as defined in this section. The applicable minimum wage rate (and its components) will be notified by the Central or State Government.

Key Obligations and Rights

• Main duties of employers: Employers are obligated to pay at least the minimum wage fixed by the appropriate Government. This minimum wage must be comprised of the components allowed under Section 7 – typically a basic wage and allowances. Employers cannot arbitrarily reduce the minimum wage by manipulating these components.
• Important rights or protections for employees: Employees have the right to receive a minimum wage that includes all legally mandated components. They are entitled to a clear breakdown of their wage slip showing the basic wage and any allowances contributing to the overall minimum wage.

Compliance and Penalties

If an employer fails to pay the correct minimum wage (including its components), they can face penalties. This can include fines, prosecution, and potentially imprisonment. Labour inspectors have the authority to inspect workplaces and wage records to ensure compliance. Repeated or serious violations can lead to more severe consequences.

Practical Examples

• Example 1 from a typical workplace: A factory worker in Delhi is entitled to a minimum wage of ₹16,000 per month. This might be broken down as ₹12,000 as basic wage and ₹4,000 as allowances (e.g., house rent allowance, conveyance allowance). The employer must pay at least this total amount.
• Example 2 for a borderline scenario: An employer tries to pay a worker the minimum wage solely as a basic wage, without any allowances, even though the government notification specifies that a certain amount must be paid as a dearness allowance. This is a violation of Section 7, as the minimum wage must include all specified components.