METHODS OF WAGE PAYMENT- ALL YOU NEED TO KNOW
A Wage is a monetary compensation given by the employer to the employee (labor) for the amount of work done on an hourly, weekly or monthly basis.
The components of a wage
In many cases, total wages or earnings include different components, such as:
- basic pay
- annual bonuses
- tips
- in-kind benefits
- productivity and performance pay
- allowances and premiums for non-standard work hours or dangerous work.
The minimum wage in India is fixed following certain criteria:
- Timely Rate
Here, the minimum wage is set according to the duration of the work done - Piece Rate
This wage is set by calculating the total number of pieces manufactured in a factory - Overtime Rate
This is set by the overtime work done by the labour excluding the time or piece rate
Minimum Wage Method:The Minimum Wages Act of 1948 was established after the end of the British’s exploitative rule and sought to bring due equality and fairness of pay to the working class. Labour in India is broadly categorised as highly skilled, skilled, semi-skilled and unskilled. The central minimum wages are calculated differently based on the skill and nature of the labour.
Minimum wages have been defined as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”.
This definition refers to the binding nature of minimum wages, regardless of the method of fixing them. Minimum wages can be set by statute, decision of a competent authority, a wage board, a wage council, or by industrial or labour courts or tribunals. Minimum wages can also be set by giving the force of law to provisions of collective agreements.
The purpose of minimum wages is to protect workers against unduly low pay. They help ensure a just and equitable share of the fruits of progress to all, and a minimum living wage to all who are employed and in need of such protection. Minimum wages can also be one element of a policy to overcome poverty and reduce inequality, including those between men and women, by promoting the right to equal remuneration for work of equal value.
Fair Wage Method:The wage is said to be a fair wage when its amount is similar to the rate that prevails in the same industry in the neighborhood or the rate that prevails throughout the country for the same kind of work. Fair wage, according to the committee on Fair Wage, is the wage which is above the minimum wage but below the living wage. The lower limit of the fair wage is obviously the minimum wage; the upper limit is set by the capacity of the industry to pay. The concept of fair wage is essentially linked with the capacity of the industry to pay.
A fair wage is a wage that is considered “fair” by the employee. This salary, received in return for individual work performed, will encourage the employee to invest more or less in their daily tasks, but also to keep their current job for longer or less time. The employee makes a real trade-off between the level of salary they receive and the quantity and difficulty of their day-to-day responsibilities.
Living Wage Method:The living wage is slightly higher than the fair wage, in which the worker not only fulfill his basic needs of life viz. food, clothing and shelter, but also avail the frugal comforts such as education of children, insurance, protection against ill health, essential social needs, etc. Because minimum wage rates fail workers at the lowest end of the pay scale and even where established are often not met.
Without a living wage workers may be compelled to
- work excessive overtime hours or multiple jobs
- become bonded labourers
- put their children into work instead of school
- be denied their basic human rights to food, shelter, nutrition, health, housing and education and suffer social deprivations such as being unable to take part in cultural events
- be unable to withstand crises such as ill health.
Thus, the employers follow different methods of wage payment depending on their paying capacity and the economic conditions prevailing in the country.
