Can We Offer Higher Wages to Retain Our Best Contract Workers? Seeking Advice

Dear All, The case is - my company is an auto component manufacturer in Pune. We have some contractual workers in the company, out of which a few are sincere and hardworking. However, our management is not willing to hire them as permanent employees. In this scenario, to retain such workers, can we offer wages higher than the minimum wages? For example, if as per the Minimum Wage Act it is set at Rs. 5000 per month, can we offer Rs. 7000 or more to the contractual workers?

If yes, what would be the maximum limit of wages?

Please provide a solution or your views.

Thanks,
Ganesh Kadam
[Phone Number Removed For Privacy Reasons]

Of course, you can pay more than minimum wages, but do take this path very cautiously as you may get caught in the provisions of the Equal Remuneration Act, which clearly states equal pay for equal work. It is very difficult to prove hard work and sincerity. Secondly, by giving different salaries, you would be creating grounds for unionization by spreading discontent among the workers. Also, look at the long term; with the increase in minimum wages, the overall liability of the company will also increase.

It's better to ask the contractor to provide them with an award or something, such as a cash award of Rs. 10,000, by which you can appreciate their contribution without creating any precedence and keeping the company costs in check.

Regards,
Preetam Deshpande

You can pay more than the minimum. No one will ask you why you paid more. But you cannot pay less than the minimum. If you pay less than the minimum, you will definitely be asked. There is no upper limit. But whatever you pay should be justifiable.

Law always speaks about the minimum things that you and the organization have to do. The maximum is your limit... there is no maximum limit.

Thank you.

In order to keep the fixed headcount low, it is appropriate for the organization not to absorb them. However, this does not prevent you from paying them above the Minimum Wages Act. You may want to review the past trends to understand how their increments have typically been—5-8% every year or something else. This analysis may provide you with insights on how to position them currently.

Furthermore, it implies that there may be existing staff members who have seniority in terms of tenure and are on your payroll, yet due to average performance, their salaries have not increased significantly. You may need to consider that the annual raises you provide to both such staff members could eventually lead to the contract staff receiving equal or higher compensation than the in-house staff after a couple of years.

Kind regards,
Regards

You can pay anything above the minimum wage, but you cannot pay lower than the prescribed amount. Therefore, it is called the Minimum Wages Act.

"You may get caught in the provisions of the Equal Remuneration Act."

I fully agree with you. The Equal Remuneration Act belongs to a bygone era. This Act is outdated today. We should make a representation to the Government to discard it. The Form D register under it, if not maintained, leads to a fine of ₹25,000. Enforcing Officers also do not know how to maintain it. They want you to make it black and white.

"Better ask the contractor to provide them with an award or something, such as a cash award of ₹10,000, by which you can appreciate their contribution without creating any precedence and keeping the company costs also in check."

It is a good suggestion.

Dear Ganesh ji, it is not within your authority to increase the wages of contract labor. I hope you understand what I am trying to convey.

In my company, to avoid unhappy or imbalanced situations regarding wages, I have categorized the performance of the workers, which is communicated with all CONTRACTUAL ASSOCIATES. The point you raised about an increase in minimum wages leading to an overall increase in liability is also valid, and I will definitely consider it. The idea of a cash award is a good one, but I will need to check with Senior Management.

Thank you for your suggestions.

Regards,
Ganesh

Dear Pankaj ji,

Thanks for sharing your views, but I was referring only to the SHOP FLOOR-CONTRACTUAL LABOR, which comes under the Minimum Wage Act and not about any staff or white-collar employees.

Regards,
Ganesh

Incentives and Bonuses for Workmen

You can give sincere and hardworking workmen incentives or productivity bonuses every month, provided that you maintain the productivity of each workman. Additionally, you can pay based on the quality of products delivered by the workmen without facing any questions. However, ensure to obtain prior approval from your management before making any payments.

This payment should not be given through the contractor or their bill; instead, you can directly provide the payment (Cash Reward) to the workmen during the monthly progress, quality, or safety meeting in front of all employees.

I have a setup where the contract workers, because of overtime and long working hours, have gotten very close to, or sometimes even more than, what a white-collar junior-level staff member receives. Hence, this was highlighted. I trust you would consider that.

Consider Early Salary Payment for Top Performers

As S. Bhaskar suggests, another option to consider is paying the salary early to good performers. For instance, the top 10% of performers will receive their salary 2-3 days in advance. That is, if the salary check is paid to the contractor on the 7th, issue the check to the top 10% staff on the 1st, and for the remaining 90%, on the usual date. There is no extra payment required from your end, just an early payment, which does not result in any revenue loss for you. However, for the staff, receiving one week's salary early means a lot. Moreover, you are not penalizing the 90% for not being the top performers.

Reward for 100% Attendance

Another suggestion is to reward someone with 100% attendance by giving that person one day's extra salary. Generally, contract staff have a habit of being absent.

Best Wishes

Dear Ganesh, may you find it useful to go through the following points:

- It is not you (management); it is the contractor who pays the wages to contract laborers.
- As mentioned above, you can definitely pay higher. In fact, it is common practice since there are several critical and high skills that demand higher than the minimum wage. It is market-driven. The contractor can pay/reward the performing laborers.
- There is no upper limit; it requires a review of the salary of the employees at the bottom of your organization and any possible implications on regular workers and their unions.

Regards,
Shailesh Parikh
Vadodara, Gujarat
[Phone Number Removed For Privacy Reasons]

Yes, you can pay as you desire. However, if you wish to avoid unrest among the workers who are currently employed, you may consider giving promotions or increasing the minimum wage for certain individuals, such as Grade I, Grade II, or Technicians.