Are Engineers Being Paid Fairly? Understanding Minimum Wage Laws in the Oil Industry

Dear Seniors, I am working in the oil industry where many contractors are employed in my organization, and they have engaged a number of workers in different categories such as Labor, Supervisory Staff, Technical Staff, and some Engineers as Contract Workers. During an inspection of the registers and records, we discovered that some contractors who have Engineers on either a permanent or contract basis are paying basic wages that are less than the minimum wage (which is ₹5000/- per month including DA for unskilled workers, and ₹8034/- as decided by the government for skilled workers), even though their gross salary exceeds ₹20,000/- per month.

Queries on Minimum Wages for Engineers

My queries are:
- Is this against the Minimum Wages Act?
- Do Engineers fall under the category of Minimum Wages? If so, in which category do they belong (Skilled/Highly Skilled), and what should be their minimum Basic Wages?

Please provide your valuable advice and support.

Thank you.

To answer your query, you must first read the notification of MW for employment in engineering published in March 2014. As you have already pointed out, there are only three categories, namely - skilled, semi-skilled, and unskilled. The notification does not mention labels or designations such as manager, supervisor, mukadam, accountant, clerk, engineer, etc. However, it states that a minimum of this much in wages is payable. Obviously, nobody should be paid less than the MW notification.

Once a MW wage is declared as Rs. 8,034 (Basic + Sp. Allow.), what is paid over and above the minimum level is hardly a concern of the MW Act. Thus, keeping Basic and SA as low as possible and gross increased by showing a variety of allowances is the pattern adopted by almost all employers just to keep PF contribution as low as possible.

For Engineers, Why is MW Required?

For technocrats, there cannot be a legal MW, but rules of demand and supply, experience, aptitude and skills, ability, and quality, etc., do prevail, and the package is decided.

Understanding the Applicability of the Minimum Wages Act

The Minimum Wages Act applies to every scheduled employment in the country. It's applicable irrespective of the type of work, designation, or qualification, as long as it is listed in the scheduled employment (which is practically every job anyway).

Basic Pay and Dearness Allowance

The Minimum Wages Act specifies that basic pay plus dearness allowance (DA) must be above a certain threshold. There is no excuse not to pay it. The fact that other allowances may raise the total above this threshold is immaterial under the law.

Liability of the Principal Employer

As the principal employer, you will be liable for differential wages, provident fund (PF), Employees' State Insurance Corporation (ESIC) contributions, and penalties if minimum wages are not met. You need to ensure the salary is raised accordingly.

Restrictions on Salary Restructuring

Please note that you cannot restructure the salary now, as doing so would violate PF requirements, which prohibit reducing an employee's salary to pay part or all of their PF dues. Instead, you must increase the salary by the difference between the minimum wages and the current pay level.

Regards

My to-the-point answers to your questions are given below:

Yes, it is against the MW Act. In Maharashtra, the minimum wage consists of Basic & Sp. Allw/DA and not gross salary. You cannot split the gross in such a way that the Basic and Sp. Allw/DA components are lesser than the MW rate declared by the Government.

Engineers come under MW. They are in the Skilled category. Since you are in the oil industry falling under the scheduled industry of Oil Mill, the Minimum Wage Rate as of today for the skilled category in Zone I (Maharashtra) is Basic Rs. 5300.00 + Sp. Allw Rs. 2913.75 = Rs. 8213.75 per month.

Supreme Court Judgment on Wage Components

It would be worthwhile to study the judgment of the Hon'ble Supreme Court in Airfreight Ltd. Vs. State of Karnataka, where the issue, inter alia, was whether the employer has to maintain the components of wages as declared by the Minimum Wage (MW) notification. In the said case, the employer was paying wages higher than the MW but under various heads, and no separate Dearness Allowance (DA) was paid, for which the matter went up to the Apex Court. The Apex Court negated the contention that "Basic and DA are to be separately maintained" as per the notification and reversed the observations of the Karnataka High Court.

However, this judgment is taken to a disadvantage, and the wage components are so arranged that the basic and DA are just as low as possible so that the Provident Fund (PF) contribution is minimized. At many places, both contributions are deducted from wages; hence, the employees also do not seem to be bothered about the framework of wages.

The judgment of the Supreme Court is uploaded for the benefit of all.

Regards.

Understanding the Judgment on Minimum Wages

So, does the judgment mean that if the employer is paying gross wages (excluding certain specified allowances like HRA) more than the minimum wages, they are compliant? Then why are the state governments specifying basic plus DA? They could specify total wages instead. It seems like the intent is not being met. Or did I misinterpret the judgment?