Wage Boards

17/08/2020 1 By indiafreenotes

A Wage Board is a tripartite body with representa­tives of management, and workmen, presided over by an independent person nominated by the Government. The Board is required to fix wages in accordance with the principles of wage fixation.

The Wage Boards help to resolve the disputes in a democratic manner by bringing the parties together, without compulsion on either side. It may, however, be pointed out that a Wage Board can only make recommendations, as there is no legal sanction behind it. But for all practical purposes, a Board’s recommendations are regarded as awards, and if unanimous, are made binding on the parties.

The first wage board was set up in 1957 in the Cotton Textile Industry. Following this, Wage Boards were set up for working journalists, sugar, cement, jute, tea plantation, rubber and coffee, coal mining, iron and steel, road transportation and electricity undertakings.

The wage boards have, however, been criticised on the following counts:

  • The recommendations of the Boards have no legal sanction so that the parties are not bound to accept them.
  • Very often the recommendations of the Boards are results of compromise decisions and cannot therefore become consistent long range wage policy.
  • When the Government has to legislate for giving effect to the recommendations of a Board, as it happened in the case of the Textile Board award, the element of compulsion is brought back, and that militates against the very spirit of such boards.
  • Since the members of the Boards are not always the true representatives of the employers and workers, individual units are led to doubt the bona fides of the members.
  • The Boards often make recommendations on all-India basis, with the result that at times the special problems relating to any particular region may be ignored.
  • The time lag between the making of the recommendations and their implementation is generally very great.

Some people have suggested that Wage Boards should be made statutory bodies. They can probably be used as potent agency for collective bargaining in units which are in favour of this method of wage fixation.

Concept of Wage Boards

The concept of Wage Boards for determining and or fixing the wages of the workers in different industries was developed during the First Five Year plan. The objective of the wage boards is to resolve disputes on wages between the management and the workers. With this objective the Government decided to set up wage boards on an industry-wide basis.

The first Wage Board was set for the textile industry in the year 1957. Thereafter number of wage boards for different industries have been set-up. These boards are appointed by the Government purely on an adhoc basis on the demand of the Trade Unions and employers. The success of the first wage board led to it becoming a machinery for fixation of wages in India.

The National Commission on Labour in its report submitted in 1969, recommended that the wage boards should:-

  • Create a climate for harmonious industrial relations
  • Safeguard the interests of the community and to represent consumer’s interests; and
  • Derive standardised wage structure for the concerned industry.
  • However, these recommendations have yet to be followed.

The composition of the Wage Boards is Tripartite, i.e.; it comprises of the representatives from industry, trade unions and the Government. A wage board is a non-statutory body comprising of equal number of representatives of the employers and the employees or their trade unions who are appointed by the Government and it is chaired by a serving or retired judge who is a Government nominee.

The Wage Boards start their work by issuing a detailed questionnaire to collect information, makes its own assessment on the basis of the views of different parties, and thereafter makes its recommendations with regard to suitable wage structure.

The wage structure suggested by the wage board is in operation for five years, although the parties – the management and the trade unions – are not bound statutorily to follow the same with regard to their organization.

However, it has been observed that the management of the companies prefer to follow the same, otherwise the trade unions take to strikes and other means to get the recommendations implemented.

The wage boards make recommendations to the Government and then the Government asks the parties to implement them.

The wage boards while determining the wage structure for a particular industry, uses the following factors:

(i) Need-based minimum wage

(ii) Industry’s capacity to pay

(iii) Productivity of labour

(iv) Prevailing rates of wages

(v) Level of national income and its distribution

(vi) Place of industry in the economy of the country

(vii) Needs of industry in developing economy

(viii) Requirements of social justice; and

(ix) Adjustment of wage differentials in such a manner as to provide incentives for skill formation.

Objectives of Wage Boards

To achieve the following objectives the Wage Board was set-up:

  1. To align the wage settlements with the social and economic policies of the Government.
  2. To represent consumers/public the interests.
  3. To standardise wage structure throughout the industry concerned.
  4. To provide better climate for industrial relations.
  5. To work out wage structure based on the principles of fair wages as formulated by the Committee on Fair Wages,
  6. To work out a system of payment by results.
  7. To evolve a wage structure based on the requirements of social justice.
  8. To evolve a wage structure based on the need for adjusting wage differentials in a manner to provide incentives to workers for advancing their skill.

Wage Boards: Growth and Development in India

The history of wage boards in India dates back to the 1930’s. The Royal Commission on Labour recommended the setting up of tripartite boards in Indian industries. It said: we would call attention to certain cardinal points in the setting of (wage- fixing) machinery of this kind.

The main principle is the association of representatives of both employers and workers in the constitution of the machinery. Such representatives would be included in equal members, with an independent element, chosen as far as possible in agreement with or, after consultation with, the representatives of both the parties.

No action was taken during that plan period. However, the Second Plan emphasized the need for determining wages through industrial wage boards. It observed the existing machinery for the settlement of wage disputes has not given full satisfaction to the parties concerned.

More acceptable machinery for settling wage disputes will be the one which gives the parties themselves a more responsible role in reaching decisions. An authority like a tripartite wage board, consisting of an equal number of representatives of employers and workers and an independent chairman, will probably ensure more acceptable decisions.

Such wage boards should be instituted for individual industries in different areas. This recommendation was subsequently reiterated by the Indian Labour conference in 1957 and various industrial committees. The government decision to setup the first wage board in cotton textile and sugar industries in 1957 was also influenced by the Report of the ILO.

The appointment of a wage board often results from the demands for labour unions. It has been reported: The formation of wage boards in all industries has been the result of demands and pressures on the part of trade unions. In their efforts to secure the appointment of wage boards, trade unions have to re pressurize not only the government but also the employers whose formal or informal consent to their establishment must be obtained.

In India, the Bombay Industrial Relations (Amendment) Act of 1948 may be regarded as perhaps the earliest legislation included a provision for the establishment of wage boards in any industry covered by the act. Accordingly, the first wage board was set up in Bombay for the cotton textile industry. The principal purpose of starting wage boards was to relieve the Industrial Courts and Labour Courts of a part of their adjudication work.