Fair Wages in India Legal Foundation Practical Gaps and the Road Ahead

Wages are the backbone of any employment relationship. They define the worth of a worker's time, skill, and labour. In India, where economic disparities are wide and labour rights are constantly evolving, the term "fair wages" carries immense weight. It's not just about getting paid; it's about getting paid fairly. The idea of fair wages revolves around compensation that allows workers to live a life of dignity—not merely to survive, but to lead a decent life that includes food, shelter, healthcare, education, and a bit of comfort.

The conversation around wages in India often focuses on the minimum wage—the bare minimum legally required to be paid. However, fair wages go beyond that. They are based on what is reasonable given the employee's skills and effort, the cost of living, and the employer's capacity to pay. Fair wages aim to strike a balance between employer sustainability and worker well-being.

The concept has legal, social, and economic relevance. Legally, it stems from India's Constitution and various labour laws. Socially, it addresses income inequality. Economically, it ensures worker productivity and industrial harmony. In this blog, we'll explore the definition of fair wages, how it's anchored in law, how courts interpret it, what factors influence wage levels, and what challenges still exist in ensuring every Indian worker earns a fair wage. As we move toward a more digital and informal economy, it's crucial to re-examine and reassert the value of fair compensation in our legal system.

What Do We Mean by 'Fair Wages'? 

The term "fair wages" is not defined under any single statute but has been given substantive meaning through policy reports and judicial pronouncements. The most authoritative explanation comes from the Fair Wages Committee Report of 1948, which was set up after India gained independence. The committee laid out a three-tier wage structure:

• Minimum wage: Ensures survival; it's the rock-bottom amount required to meet basic human needs like food and shelter.

• Fair wage: Goes beyond survival; considers the value of work, prevailing industry wages, and the employer's financial capacity. It aims to provide a lifestyle above mere subsistence.

• Living wage: The ideal; enables workers to afford decent housing, healthcare, education, and even some leisure and cultural activities.

Fair wages lie between the other two. They are context-dependent and dynamic, meaning what's fair in Mumbai may not be fair in Manipur due to varying living costs. Factors like inflation, housing costs, and even transport availability can affect what's considered fair in a particular region. Importantly, fair wages are not only about arithmetic; they are rooted in the ethics of employment. Paying fair wages ensures that workers feel respected, valued, and motivated. A well-paid workforce is also more productive and loyal, leading to fewer industrial disputes. Thus, fair wages aren't a burden—they're an investment in industrial peace and economic growth.

Constitutional and Legal Support for Fair Wages 

Though the Indian Constitution doesn't directly mention "fair wages," its broader goals clearly support the idea. It envisions a nation where economic inequality is minimized, and dignity in labour is recognized. This spirit is reflected in both Fundamental Rights and Directive Principles of State Policy:

• Article 14: Ensures equality before the law and equal protection of the laws.

• Article 21: Interpreted to include the right to livelihood and fair compensation.

• Articles 38, 39, and 43: Directive Principles aiming for economic justice and living wages.

Beyond the Constitution, several statutes support the fair wage framework:

• Minimum Wages Act, 1948: Sets the baseline; courts use its principles to push for fairer wages.

• Industrial Disputes Act, 1947: Tribunals adjudicate wage disputes based on fairness and industry standards.

• Payment of Wages Act, 1936: Ensures timely, full payment without unauthorized deductions.

• Code on Wages, 2019: Consolidates wage laws; enforces national floor-level wages.

Collectively, these provisions don't just protect wages—they promote justice in employment relationships.

The Role of Judiciary: Key Judgments That Shaped the Idea of Fair Wages 

The Indian judiciary has played a crucial role in defining and protecting the concept of fair wages. Courts have stepped in to ensure that workers are not treated unfairly under the guise of financial constraints or vague agreements.

• Crown Aluminium Works v. Workmen (1958): Defined wage categories and stressed fairness from both employer and employee perspectives.

• Kamani Metals & Alloys Ltd. v. Workmen (1976): Highlighted the need to consider inflation and cost of living in fair wage assessment.

• Unichoy v. State of Kerala (1961): Upheld government's right to fix minimum wages despite employer claims of economic hardship.

These cases show that wage justice is not just a legal concern but a part of social equity. The judiciary has also rejected using private agreements to override statutory protections, reaffirming that fair pay is not negotiable.

How Are Fair Wages Determined? 

Fair wage determination is not a one-size-fits-all task. It involves a complex mix of social, economic, and legal considerations. Unlike minimum wages, which are often fixed by the government, fair wages are more nuanced. Key factors considered:

• Capacity to Pay: Assesses employer's financial ability beyond the minimum threshold.

• Prevailing Wage Rates: Ensures consistency across similar industries and regions.

• Cost of Living Index: Adjusts wages to real-time inflation and expenses.

• Skill Requirement: Higher wages for skilled or technical jobs.

• Productivity of Labour: Wages linked to output in some sectors.

• Bargaining Strength: Collective bargaining influences wage decisions.

Fair wage determination may involve Industrial Tribunals, Wage Boards, or Collective Agreements. While employers' financial conditions are considered, they cannot be an excuse to deny fair wages. A balanced approach ensures industrial peace and justice.

Wage Boards and Their Role in Promoting Fair Wages 

Wage Boards in India play a critical but often underappreciated role in determining fair wages across various industries. These are tripartite bodies composed of representatives from the government, employers, and workers, and are typically set up for industries where wage issues are complex or widespread.

The primary aim of a Wage Board is to conduct in-depth research into the financial capacity of the industry, prevailing wage structures, working conditions, productivity, and cost of living. After thorough consultation and data collection, they submit recommendations on appropriate wage levels—these can include minimum wages, fair wages, dearness allowance, and even bonus structures.

Wage Boards help standardize wages in sectors that lack strong unionization or where informal labour practices are rampant. For instance, the Wage Board for Working Journalists was instrumental in improving the wage structure of print media employees, especially in smaller publications.

However, there are criticisms too. One issue is that recommendations are not always binding—they only become enforceable when the government notifies them. Another problem is delays: some Wage Boards have taken several years to finalize reports, by which time inflation renders their recommendations outdated.

Despite the limitations, Wage Boards offer a democratic, research-based, and consultative approach to fair wage determination. In a time when informal and gig economy jobs are increasing, reviving and strengthening the role of such boards—possibly even at regional levels—could be key to maintaining equity and justice in wage distribution across India.

Modern-Day Challenges in Ensuring Fair Wages 

While India has made significant legal strides in protecting labour rights, the practical implementation of fair wages still faces multiple hurdles:

• Informal employment: Over 80% of India's workforce is in the unorganised sector, where wage laws are poorly enforced.

• Gig economy: Workers like food delivery agents or freelance tech workers often fall outside legal frameworks.

• Contractualisation: Core jobs outsourced to avoid long-term commitments; contract workers are often underpaid.

• Delayed wage revisions: Especially in the public sector; wages often based on outdated standards.

• Lack of enforcement: Labour inspections are rare and ineffective in many regions.

• Low worker awareness: Many workers don’t know their rights; fear job loss if they speak up.

To overcome these challenges, India needs stronger enforcement, better data, digital wage tracking, and a new legal framework that includes gig and platform workers. Only then can the promise of fair wages be turned into reality for all.

What the Code on Wages, 2019 Brings to the Table 

The Code on Wages, 2019 consolidates four major laws—Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act, and Equal Remuneration Act—into a single code. While it doesn’t define "fair wages" explicitly, it strengthens the wage law ecosystem.

Key innovations:

• National floor wage: No state can fix minimum wages below this benchmark.

• Universal coverage: Applies to all workers, irrespective of sector.

• Periodic revisions: Mandatory revisions of minimum wages every five years.

• Digital payments: Transparent and timely wage disbursal mechanisms.

While some argue the Code could have gone further, it improves foundational infrastructure and enforcement ease. It is a welcome step toward a fairer wage system in India.

Conclusion In a developing nation like India, ensuring fair wages isn't just about fulfilling legal obligations—it's about upholding the dignity of labour. Wages reflect our collective value for human effort, time, and skill. A fair wage structure ensures that workers are not only able to meet their basic needs but also enjoy a decent quality of life that includes education, healthcare, savings, and social security.

While Indian laws have evolved to promote fairness, implementation gaps remain. From legal definitions to ground-level enforcement, much needs to be done to make fair wages a reality. This is especially crucial in an era of digital and gig-based work.

Governments must update policies, courts must remain vigilant, employers must act ethically, and workers must be empowered. Fair wages are not a burden—they are a driver of productivity, stability, and dignity. If we truly aim to build an Atmanirbhar Bharat, it must rest on the shoulders of workers who are fairly compensated, respected, and secure in their livelihoods.