Wage Policy

Wage Policy are principles acting as guidelines for determining

a wage structure.

Initially as an economic issue it was mainly the concern of the

employer while state was adopting laissez faire policy. But,
with the industrial progress and subsequent industrial balance
between employers, employees, wage bargain has become a
matter for three fold concern of the employer, employee, and
the state

In India it is built around certain cardinal principles:

• Equal pay for equal work
• Living wages for all workers so that they lead a decent life
• Payment of wages on appointed dates without
unauthorized deductions
• Resolving wage related issues through collective
bargaining
• Payment of statutory bonus at 8.33 percent as per legal
provisions
• Ensuring a fair, equitable wage plan for various
employees without significant wage differences.
• The capacity to pay(according to supreme court ruling-
‘an employer who cannot pay minimum wages has no
right to exist’
• Determining fair wages over and above minimum wages
with due regards to (i) the productivity of labour (ii) the
prevailing level of wages (iii) the level of national income
and distribution (iv) the place of industry in the economy
of the company.
• To compensate for the rise in cost of living
Economic Objectives of Wage Policy:
• Full employment and optimum allocation of all resources
• The highest degree of economic stability consistent with
an optimum rate of economic progress
• Maximum income security for all sections of the
community

Social Objectives of Wage Policy:

• The elimination of exceptionally low wages
• The establishment of ‘fair’ labour standards
• The protection of wage earners from the effects of rising
prices
• The incentive for workers to improve their productive
performance

Wage Policy is a democratic set up so it cannot be enforced by

the Govt alone. Its implementation has to be secured through
employers and employees organizations at bargaining table i.e.
by consensus

Limitations of Wage Policy:

• Socio-economic setup of our society
• Enforcement in unorganized sector
• Lack of unity among unions
• Prices rise almost beyond Govt’s regulatory capabilities
• Wages lag far behind labour productivity
• Lesser number of workers in organized sector take away
bulk of wages than unorganized
• Wage incomes are consumption oriented rather than
savings oriented so increased wages would mean
increased consumption. Therefore economic growth may
not be affected positively as it depends upon rate of
investment possible through savings.
• Ever increasing addition to workforce yet dearth of
skilled labour
 • High wages may force employer to shift towards capital
intensive methods
• High wages reduce capital for growth

Wage Policy in India

First Five Year Plan (1951-56) suggested:
• Pre-war levels of real wages be restored as a first
step towards ‘living wages’ through increased
productivity
• Reduction of disparities in income
• Reduction of gap between existing and living wages
• Standardization and maintenance of wage
differentials to provide incentives

Second Five Year Plan (1956-61) stressed:

• Improvement in wages through increased
productivity
• Improved layout of plants, working conditions
• Application of system of payment by result
• Improvement in management practices
• Recommended settlement of industry wise wage
disputes through tripartite wage boards

Third Five Year Plan (1961-66) reinforced:

• Wage policy of preceding two plans
• Rationalization of work load/ work methods and
functions of management

Three Annual plans (1966-69) aims at framing Wage

Policy after taking considering:
• Price level
• Employment level
• Social Justice
• Capital required by firm for future growth
Fourth Five Year Plan (1969-74) emphasized:
• Price stability
• Extension of system of payment by results

Fifth Five Year Plan (1974-79) recommended:

• That the reward system in terms of wages and
non-wage benefits must be related to performance
records
• A wage structure to narrow down disparities within
the organized sector itself.
• Govt. to intervene in setting up of wages & prices

Sixth Five Year Plan (1980-85) stressed on:

• The need for bringing about a greater
rationalization of wage structure and linking of
wages at least in some measure to labour
productivity.
• Modernization in industry
• Evolve wage structure without restrictions on
negotiations

Seventh Five Year Plan (1985-90) asserted that:

• There is a need for improvement in capacity
utilization, efficiency and productivity
• Rise in levels of real income
• Reduction in disparities
• Sectoral shifts in desired directions

Eighth Five Year Plan (1992-97) focused on:

• Formulation of wage policy relating to child labour,
bonded labour, rural labour, women labour and
inter-state migrant labour.