Minimum Wages Confusion: Should We Follow Central or State Government Rules?

Clarification on Minimum Wages Applicability

Our company is providing contract services for a Central Government Organization located in Chennai. Could you please confirm whether the applicability of minimum wages is as per the Central Government Act or the State Government Act?

I would appreciate your guidance on this matter.

Regards,
Ramkumar

Sub-Minimum Wages

There is no State Act on minimum wages. There is only a Central Act called the Minimum Wages Act 1948. However, the Minimum Wages Act permits the state government to notify minimum wages for various establishments falling under its jurisdiction.

Now, your doubt is since you employed contract labor for a central government undertaking, whether minimum wages shall be paid as per the central government notification or state government notification. So far as minimum wages are concerned, they are payable as per the Government of Tamil Nadu notification since your establishment is located in (presumably) Chennai.

Regards,
B. Saikumar
HR & Labour Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
Tel: [Phone Number Removed For Privacy Reasons]

Thank you for your clarification. I have one more doubt in this regard. Could you please clarify why Central Government minimum wages are not applicable even though contract labor is employed at Central Government establishments?

Regards,
Ramkumar

If you go through the Minimum Wages Act, you would see that the Act gives power to the "appropriate Government" to fix minimum rates of wages for certain employments. The term "appropriate Government" is defined in section 2(b) of the Minimum Wages Act. Specifically, section 2(b)(i) states the scheduled employments for which the Central Government is the appropriate Government, and section 2(b)(ii) states the scheduled employments for which the State Government is the appropriate Government. The term "carried on by or under the authority of the Central Government" has been interpreted by the Honourable Supreme Court and High Courts.

The information furnished by you is not sufficient to apply the rulings of the Supreme Court and the High Courts and to find out whether in the case specified by you the appropriate Government is the Central Government or the State Government. Moreover, in your post, you have not specified the employment with reference to which your query is made.

With regards,

Sub-minimum Wages

You need to approach the issue in the way Mr. Hari Krishnan explained. However, based on the brief details and your statement that you supplied contract labor to a central government organization, the applicability of minimum wages to the contract labor will, in my view, be decided with reference to the contractor's establishment, not with reference to the principal employer's establishment. Otherwise, you may be supplying some contract labor to a central undertaking, some to a state undertaking, and some to a private industry. Thus, you will be paying minimum wages to some contract workers as per state rates and to some of your contract labor at central rates. You may also shift some contract workmen from a state establishment to a central establishment or vice versa to meet any peculiar or urgent need in the respective establishments. In such a case, one day you will be paying minimum wages to the same contract labor at state rates and on another day at central rates.

If it is to be decided with reference to the contractor's establishment, this anomaly will not be there. If so, your establishment being in the private sector and located in Chennai, the appropriate government will be the State Government, and hence the minimum wages at state rates will be applicable, in my view. However, you can confirm it by contacting the Assistant Labour Commissioner (State) under whose jurisdiction your establishment falls.

Regards,
B. Saikumar
HR & Labour Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
[Phone Number Removed For Privacy Reasons]

The minimum wage slab differs between the Central Government and State Government. Please verify the current slab for Chennai.

Based on your information, your company is set to provide contract services for a Central Government organization in Chennai. This implies that for obtaining a labor license, you will need to visit the Local Regional Labor Commissioner's office, not the District Labor Commissioner's office. Since your principal employer falls under the Central Government, all Central Government labor laws will apply to your organization. Correspondingly, the minimum wage slab set by the Central Government will also be applicable to your organization.

Experts, your comments are requested.

Regards,
Ratikanta Rath

I request you to see section 3 of the Minimum Wages Act. This section gives power to the appropriate government to fix minimum rates of wages for EMPLOYMENTS and not minimum rates of wages for ESTABLISHMENTS.

Minimum Wages for Employment Through a Contractor

What rate of minimum wages has to be followed in the case of employment through a contractor in a Central Government organization, for which the Central Government has not fixed minimum rates of wages, but the State Government has? I want to repeat that the employees are the employees of the contractor and not employees of the Central Government organization, and the appropriate government for the employment is the State Government.

I request you to offer your views.

With regards,

We are a manpower supplying company in Maharashtra, and we have branch offices across India. I would like to clarify if we are supposed to pay minimum wages as per the Maharashtra State government's jurisdiction or follow the jurisdiction of the governments where our branch offices are located.

Whatever the answer to my question, I would appreciate it if I could have a government document or a webpage/link stating the true facts.

Regards

In my view, the branch falls under the jurisdiction of the Government of the State in which it is located for the purpose of the minimum wages.

Regards

I appreciate your view, but if I am not mistaken, shouldn't the wages be paid as per the jurisdiction of the state where the head office is located? Please correct me if I am wrong.

Dear Ram,

You have to pay minimum wages based on your client's registration, but it is also specified in the proviso under the Minimum Wages Act that the higher of the minimum wage, either central or state, should be paid to the workmen concerned.

Regards,
Sanjeev Kumar

Dear Mr. Saikumar, Your view on employees working in different locations, and whether there is any rule or decision by the court. Thank you, Maharana [Phone Number Removed For Privacy Reasons]

I had a re-look at this issue. It is a vexatious question. If you peruse the Minimum Wages Act, Sec. 3 of the Act is the relevant provision governing the issue. Sec. 3 says that the appropriate government can fix minimum wages in respect of employments specified in the Schedule to the Act. It spells out two key factors to determine the issue as to payment of minimum wages, namely:
1) the appropriate government and
2) employment in which the contract laborers are employed.

Now the issue gains complexity when a contractor is registered under the State's Shops and Establishments Act and supplies contract labor to a central undertaking because the appropriate governments for the contractor and for the principal employer are different. Thus, two views are heard on this issue. One view maintains that since the contractor is registered under the Shops and Establishments Act and the contract laborers are the employees of the contractor, the minimum wages notified by the State Government shall be paid. Another view is that even though the contract laborers are the employees of the contractor, since the contractor has a labor license for employment in the central undertaking and the contract laborers are working for the principal employer (central undertaking), the minimum wages shall be paid as per the Central Government notification.

Another twist to the issue may crop up when the contractor undertakes the job of the principal employer at his (contractor's) premises. Then in whose employment, the contract laborers are deemed to be employed - contractor's or principal employer's. Each view seems to have its own valid grounds. I have not come across any case law specifically covering a situation like this. The prudent view seems to be that when both the state government and central government notify minimum wages in respect of the same employment, it is better to pay the higher of the two. This is only a view on the issue. Others may have their own views.

Regards,
B. Saikumar
Mumbai

Please go through the attachment as per the Minimum Wages Act; it will help you. In case of any doubts, feel free to ask.

Thanks/Regards,
Ratikanta Rath

Dear Sandeep,

Thank you very much. However, is the stone crushing rate considered for the mining workmen? Since you have exposure in mines, can you guide me on the CMPF issue?

Thanks & Regards,

Dear Seniors, kindly clear my doubts on the Minimum Wages Act of 1948.

Applicability for employers

Does it depend on the number of employees, similar to PF & ESI regulations? I work for a Forex company, and I am wondering if this Act applies to us. Our company is located in Delhi, and we currently have 28 employees in Delhi.

PLEASE HELP ME.