How Do You Calculate Monthly Minimum Wages for Contractors with Weekends Off?

Dear Seniors,

We have employed a contractor for plant operation. We work five days a week, with Saturday and Sunday off.

Calculating Monthly Minimum Wages

To check if the contractor is paying the monthly minimum wages, I would like to know how to calculate it. Currently, the central minimum wage at our location for highly skilled workers is Rs. 897/-.

If the number of working days in a month is 20 days (after deducting Saturday, Sunday, and other holidays), the monthly minimum wage would be 20 x 897 = 17,940. Is it necessary to consider 26 days for the calculation?

Central Minimum Wages vs. State Notification

Why are you taking Central Minimum Wages? Don't you have a state notification for your scheduled industry?

Normally, the notification shall provide for a monthly rate as well as a daily rate. The daily rate, if not given separately, is arrived at by dividing the monthly rate by 26. If you take that daily rate, the issue will be solved.

Please note that the rate per day should be inclusive of dearness allowance.

Calculation of Monthly Wages

When the employee has worked on all the working days in a month, then the employee is entitled to a full month's salary. The notification of minimum wages indicates the monthly wages and the daily wages (by dividing the monthly wage by 26). A practical way to compute wages is to pay the monthly minimum wage amount for full attendance and for absent days, deduct the daily wage rate for each such day.

Thank you, Madhu.T.K, sir, for your reply. Since we are under the central government department, we follow the central minimum wage, and the central circular provides the daily rate.

So if I take the daily rate, the calculation will be the number of days worked multiplied by the central minimum wage daily rate. Is this correct?

Also, this central minimum wage changes every April and October of the year, so the contractor has to pay the hiked amount, irrespective of the contract start date. Is this also correct or not?

Thank you.

Sir, are there any specified educational qualifications fixed for the category of workers, namely highly skilled, skilled, semi-skilled, and non-skilled?

Variable Dearness Allowance and Wage Calculation

The notification shall provide for a basic wage and a dearness allowance that varies with changes in the CPI. Since the CPI is notified every April and October (in some states, it is notified every three months also), the Variable DA will change in April and October. When the VDA changes, you can demand the revised wages from the principal employer. The agreement shall never be for a fixed wage throughout the contract period but should be based on notified wages plus a service charge. Therefore, whenever the notified wages change, you should pay it to your workers and demand it from the principal employer.

Calculating Daily Wages

If the minimum wages per day are not available in the notification, you can take the wages per month and divide it by 26 to arrive at the daily rate of wages and then pay it depending upon the days worked by the employee.

Categorization of Workers

There is no educational qualification prescribed for different categories of employees, but the skill possessed by each worker together with educational qualifications will decide whether a worker is unskilled, semi-skilled, skilled, or highly skilled. Accordingly, a worker who can do the assigned work without any supervision may fall under highly skilled or skilled; a worker who occasionally requires guidance from others may be put under semi-skilled, and a worker who cannot work without supervision shall be under unskilled.

Under technical works, like turner, welder, machinist, etc., this categorization is easier and, depending on the worker's experience, accuracy in doing the work, ability to read the mechanical drawings, etc., you can categorize the workers as skilled, semi-skilled, and unskilled. Obviously, a worker possessing no trade knowledge or having no technical educational background (say, ITI) who is engaged to help a turner or a machinist is an unskilled worker. The decision can be taken by the employer. Naturally, a skilled worker will demand a higher salary, and the employer cannot deny it by putting him under 'unskilled' and saying that you are unskilled. If the employer does so, the worker will not be available for work tomorrow!

Minimum Wages Notification

The minimum wages notification issued by the Central Government lists the industry-wise details of jobs constituting Unskilled, Semi-Skilled, Skilled, and Highly Skilled Categories. The rules also define these terms, so they can be used to determine the category of any unlisted job.

Consumer Price Index (CPI) and Its Impact on Wages

CPI is published by the Shimla Labor Bureau every month for most major cities across India. The base year has changed over the years: 1960 = 100, 1982 = 100, 2000 = 100, etc.

Calculation of DA/VDA Based on CPI Changes

DA/VDA is calculated based on changes in the CPI, which may be revised monthly, quarterly, semi-annually, or annually. Many private organizations have different DA schemes along with minimum wage DA schemes. In this process, there are two key aspects: Index month(s) and Payable month(s). Neutralization of the Index is usually done per point neutralization, by a percentage method, or any other innovative formula.

Revisions of Minimum Wages

Minimum wages, whether State or Central, are usually revised semi-annually in April & October or January & July. Every State and Central minimum wage system has fixed index months and payable months. The increase or decrease is determined by the six-month average from the previous six-month average. The difference in the index is neutralized by per point of index neutralization or a percentage method.

Publication and Revision of Indexes

Indexes are usually published after one and a half to two months. Subsequently, minimum wages or private/government organizations where DA is applicable are revised accordingly. An example is given below:

INDEX QTR PAYABLE QTR

JAN, FEB, MAR JUNE, JULY, AUG

APR, MAY, JUNE SEPT, OCT, NOV

AND SO ON for any quarterly DA review system.

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