Minimum Wages Update: How Should Employers Handle Retroactive Compliance?

Retrospective Corrigendum on Minimum Wages
The Central Government has issued a retrospective corrigendum on Minimum Wages. Principal Employers are responsible for ensuring compliance with past period wages, even in cases where contractors have completed the work and settled their accounts with the company (PE).

Legally and morally, when the minimum wages have been enhanced with retrospective effect, they must be implemented from that date. However, in most cases, payments made are not reviewed, and revised wages are applied only prospectively. This cannot be taken casually, and in the event of an inspection of the records where this discrepancy is noticed, there could be penalties and prosecution for non-observance of the mandatory provisions in the Minimum Wages Act of 1948.

Your views are appropriate. However, in one case, the Punjab Government revised wages retrospectively, and the Honorable Punjab and Haryana court has temporarily stopped the order. Since then, the state has not revised minimum wages.

I request everyone to contribute to the discussion to gain a better understanding.

Minimum wages are published every six months for most Indian states. They vary by time periods: Jan-June & July-Dec or Apr-Sept & Oct-Mar. Most of the time, they are published with retrospective effect as the CPI index is not available on time. Therefore, as mentioned by KK!HR, I fully agree.

Observations regarding minimum wages

1. In most organizations, minimum wages are paid to contractual workers and, in some cases, to permanent workers in small organizations.

2. Some organizations pay more than minimum wages, especially to workers who have been employed for years. They review annually, so a six-month retrospective review is not required.

3. Some organizations pay minimum wages with a six-month review and retrospective effect.

4. Some organizations do not follow point number 3 but pay minimum wages from the month they receive the information, with no retrospective effect. Additionally, some organizations do not pay minimum wages at all.

My personal opinion is that contractual workers and permanent workers who have been employed for years should receive more than minimum wages (though not equivalent to permanent workers) by receiving an annual increment.

We all know the famous Maruti case when, for almost similar jobs, contractual employees were receiving 18k per month, whereas permanent employees were receiving 42k per month (as far as I can remember the figures). In my opinion, the contractual employees might have been paid close to 30k per month at that time when the organization was a very large industrial house.

S K Bandyopadhyay (WB, Howrah)
CEO-USD HR Solutions

You should conduct compliance (wages, contribution of EPF as arrear, and ESIC) for the past period wages. You should create a wages register for the same period for all related employees who worked during that period. Regarding their payment, you should notify your contractor and also send a copy to the labor department concerning the payment due. Additionally, the contractor should inform their eligible employees about the payment.

Notification to Contractor

In the letter, you must state:

Dear (Contractor Name),

Please refer to the revised minimum wages set by the government. The wages for the earning period from --- to (whatever the period is) are due for the following employees: (list all eligible employees for the benefit). You are advised to make payments to your respective employees based on the details mentioned above and then claim your bill accordingly. You can also request the mobile numbers of all concerned employees for verification. Keep records of the retrospective wages payment, which can be submitted to the labor department or kept for future reference and inspection.

Alternative Approach (Not Recommended)

In another scenario that is neither legal nor appropriate, creating a wages sheet for the effective period and generating fake acknowledgments (forging employee signatures using different pens) is suggested. Other obligations like EPF and ESIC will be actually submitted. This method can save money, but it is recommended to opt for the first approach over the second.

Yes, the principal employer as well as the employer/contractor are both responsible.

I wish to share our experience in AP & Telangana States. In both states, the minimum wage was revised in April and October. The base is the average index points from July to December of a year, considered for the revision to be applicable from the following April. Likewise, January to June will be considered for the revision of wages from October. Since there is a time gap, the issue of retrospective implementation does not arise.