Unit 5

Wage System: Basically, there are two methods of paying labour remuneration& other methods
are combination or modifications of these two. One is the time wage system & another is piece
wage system.
Time Wage System:
This is the oldest & the most common method of fixing wages. Under this system, wages are paid
on the basis of time spent on the job irrespective of the amount of work done. The unit of time
may be a day, a week, a fortnight or a month. In past, daily wages have been the most common
basis & therefore, it came to be known as the ‘Day Wage System’
Time Wage system has the following advantages:
1. It is the simplest & the oldest method. It is easy to understand & workers can easily compute
their own remunerations.
2. Earnings of workers are regular & fixed & they do not offer from temporary loss of efficiency.
This gives them a sense of economic security & self- confidence. The worker is assured of a fixed
income & can therefore, plan his expenses accordingly.
3. The plan is economical as no detailed records of output are required. Clerical work
in computation of wages is minimum. The employer knows the cost of labour.
4. As there is no pressure to speed up production, the quality of work can be kept high. A worker
can slow his skills.
5. This method also avoids wasteful handling of materials & tools. In the absence of rough
handling of machinery, repairs & maintenance expenditure is low. Workers can adjust the pace of
work so that there is no injury to their health.
6. Learners can concentrate on learning the best methods of work as their earnings are not
dependent on the amount of work.
7. Unions prefer time wage as it does not differentiate between efficient & inefficient workers. A
sense of equality & solidarity is created among them.
8. Where work done is of an intangible nature eg: mechanics, design engineers, services etc. It is
difficult to measure output accurately & standards of output cannot be laid down. In mental & non-
repetitive jobs, therefore, time wage is a more equitable & convenient method.
9. In continuous or assembly line production, the pace of work is beyond the control of an
individual worker. Time wage is, therefore, a better method.
10. It is an objective method.
11. The employer can calculate the wage bill in advance.
The time wage system suffers from the following disadvantage:
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1. The method provides no incentive for better performance as reward is not proportionate to
effort. It makes no distinction between efficient & inefficient workers. Efficient
& hardworking employees receive the same remuneration as inefficient employees & shirkers. It
thus has a demoralising influence & encourages soldiering on the jobs.
2. Guaranteed remuneration makes workers indifferent & complacent.
3. Calculation of labour cost per unit is difficult as the total wage bill does not change with the
volume of production.
4. In the absence of an incentives to hard work, productivity of labour becomes low unless close
supervision is used. Thus, costs of supervision are high.
5. Control over labour cost become difficult & more payment may be made for the lesser amount
of work.
6. There is no basis for finding the merit of difficult employees & promotions may have to be
made on the basis of seniority. This may lead to deterioration in the morale of efficient & young
employees.
Time Wage system is suitable under following conditions:
1. Where units of output are non-measurable as in case of office work & mental work is involved
as in policy working.
2. When employees have little control over the quantity of output or there is no clear cut relations
between efforts & output as in some machine-placed or assembly line jobs.
3. When delays in work are frequent & beyond the control of the employees i.e; where output is
uncertain & irregular.
4. When quality of work is especially important eg; artistic furniture, fine jewellery etc.
5. When supervision is good & supervisors know what constitutes a ‘fair day’s work’.
6. When competition conditions & cost control do not require in advance the precise knowledge
of labour costs per unit of output.
7. Where machinery & material used are very sophisticated & expensive.
8. Work is of highly varied nature & standards of performance cannot be established.
9. Employees & trade unions strongly oppose incentive payments
10. When workers are new & learning the job.
11. When collective efforts of a group of persons are essential for completing the jobs.
2. Piece Wage System:-
Under this system, remuneration is based on the amount of work done or output of a worker. One
unit of output is considered as one piece & a specific rate of wage is paid per piece. Greater is the
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number of pieces produced by a worker, higher is his remuneration. Thus, a workman is paid in
direct proportion to his output. It is called payment by results.

Piece wage system has the following advantages:

1. There is a direct relation between effort & reward; worker who work hard & produce more
get more wages. This produces an incentive to increase productivity.
2. Ambitious & efficient workers are provided ample opportunities to utilize their talent &
increase their earnings & thereby improve their standard of living & morale.
3. The method is just & fair to all. Efficient workers get ample reward, while shirkers
are penalised, it prevent soldiering on the job.
4. Management can distinguish between efficient & inefficient workers for the purpose of
promotion etc.
5. Increase in productivity results in higher output & lower costs of production per unit.
6. The cost of labour per unit of output can be easily calculated as the wage bill varies in direct
proportion to the output.
7. As workers themselves have a stake in maximisation of efficiency, cost of supervision is low.
8. Workers are more likely to cooperate with the schemes of rationalization designed to
improve efficiency of operation.
9. If the benefits of lower costs are passed to consumers in the form of lower prices or better
quality, the society as a whole stands to gain.
Piece Wage system is, however, subject to the following drawbacks:
1. It is very difficult to fix piece wage rates. Employees often cut the piece rates when they find
workers are producing large quantities.
2. The earnings of workers are not stable & they may suffer due to temporary delays or difficulties.
They feel insecure & dissatisfied.
3. In order to maintain their earnings, workers work with excessive speed. This may affect their
health. It also increases the wastage of materials & wear & tear of machinery. The method is not
suitable for work of artistic & delicate nature.
4. Employees may not stress quality so that rigid quality control becomes necessary.
5. This system may create jealously between efficient & inefficient workers. Trade unions do not
like it as it affects their solidarity.
6. Detailed records of production have to be kept so that the clerical work is increased. The method
is not practicable when contribution of individual workers cannot be calculated i.e; construction
work.
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7. The method may lead to industrial disputes. Fixation of piece rates may create controversy.
Workers resent loss of output & earnings due to breakdown of machinery or power, non-
availability of materials & such other factors beyond their controls. Trade Unions dislike piece
wage system.
Piece Wage system is suitable under the following conditions:
1. When work done by an individual worker can be measured accurately, e.g. production of
standardized goods in the factory.
2. When the quantity of output depends directly upon the skill & efforts of the worker.
3. Where the flow of work is regular & interruptions minimum, i.e; repetitive jobs.
4. Where quality & workmanship are not very important.
5. In large scale production involving heavy overheads & broad supervision.
6. When competitive conditions & cost control require that labour cost per unit fixed in order.
7. When methods of productions are standardized & the job is of a repetitive nature.

Profit Sharing options:

A profit-sharing plan, in general, is a company policy to reserve a portion of its profits for
distribution among its employees. A retirement plan based on profit-sharing invests the company
contributions in long-term accounts to be collected by the employee after retirement.
If the plan is retirement-based it comes with certain regulations imposed by the IRS.
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Employers control how much of the profit to share in each period, and may decide to share none
in a bad quarter or year.
In the years that it opts to make contributions, the company must come up with a set formula for
profit allocation. This is meant to ensure that profits are not unequally awarded to the company's
highly-compensated employees.
The most common way for a business to determine the allocation of a profit-sharing plan is through
the comp-to-comp method. The formula calculates each employee's share percentage based on the
individual's annual compensation.
A profit-sharing plan, in general, is a company policy to reserve a portion of its profits for
distribution among its employees. A retirement plan based on profit-sharing invests the company
contributions in long-term accounts to be collected by the employee after retirement.
If the plan is retirement-based it comes with certain regulations imposed by the IRS.
Employers control how much of the profit to share in each period, and may decide to share none
in a bad quarter or year.
Working of Employer Profit-Sharing Plans
The functioning of Employer Profit-Sharing Plans primarily involves three steps, namely a
Deferred Plan, a Cash Profit-Sharing Plan, and a combination of Deferred Money and Cash.
1. Deferred Plan: This plan entails employers distributing contributions at specific times, such as
retirement or job termination. Contributions are tax-exempt until received by employees. If
withdrawn before the age of 59 and a half, a 10% tax may be applicable.
2. Cash Profit-Sharing Plan: Some companies utilise their plans as an annual cash bonus. These
contributions are directly added to employees' paychecks and are tax-deductible for the employer
but taxable for the employee.
3. Combination of Deferred Money and Cash: This approach amalgamates the benefits of both
the deferred and cash options. It is a retirement plan that also grants regular cash bonuses. It might
contribute more towards retirement than a traditional 401(k) and can motivate employees.
Remember, in profit-sharing plans, only employers make contributions. They can decide how
much to pay each year or even skip a year if profits are not made.
Benefits of Employer Profit-Sharing Plans
1. Boosted Income Potential: Profit-sharing plans provide employees with the chance to earn
more than their regular salaries. This extra income can help speed up their retirement savings.
However, it is crucial to remember that these earnings depend on the company's profitability.
2. Ownership Feeling: Profit-sharing plans can foster a feeling of ownership among employees.
They feel appreciated and acknowledged for their efforts when they receive a share of the
company's profits. This sense of ownership can be strengthened if employers decide to give out
contributions in the form of stocks or bonds.
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3. Increased Productivity: Profit-sharing plans can motivate employees to put in more effort
since their earnings increase when the company performs well and is profitable. The direct link
between their hard work and the company's profits means they are rewarded not just for their time,
but also for the quality and volume of their work.
4. Lower Unemployment: During periods of lower profitability, companies can choose to reduce
the profit-sharing amount instead of implementing layoffs. This strategy can offer more stability
to employees in tough economic conditions, potentially lowering unemployment rates and staff
turnover within the company.
Pay Commission:
The Pay Commission is an essential institutional mechanism that plays a pivotal role in
determining the salaries, allowances, and benefits of millions of central government employees. As
a critical component of the country's administrative setup, the commission periodically evaluates
the prevailing economic conditions and recommends appropriate revisions in pay scales to ensure
fair remuneration for the public sector workforce.
What is Pay Commission
▪ The Pay Commission is a body set up by the Central Government that reviews and
recommends changes to the salary structure of employees.
▪ The composition of the Pay Commission comes under the Department of Expenditure
(Ministry of Finance).
▪ Pay commissions are usually constituted every 10 years and the first pay commission was
set up in 1946. Since Independence, a total of seven pay commissions have been formed.
▪ The latest pay commission was set up in 2014 and its recommendations came into effect in
2016. Currently, central government employees and pensioners get salaries based on the
recommendations of the 7th pay commission.
▪ It is not mandatory for the government to accept the recommendations of the pay
commission. The government may choose to accept or reject the recommendations.
Pay Commission Requirement
▪ Salary Revisions: The Pay Commission periodically assesses the existing pay scales,
allowances, and other benefits for government employees. It considers various factors
like inflation, economic conditions, the cost of living, and prevailing market rates
while recommending revisions.
o These revisions ensure that government employees receive fair and competitive
salaries, in line with the changing economic landscape.
▪ Impact on Public Finances: The recommendations of the Pay Commission have a
significant impact on the government's financial expenditure, as the salaries and
allowances of a large number of employees are affected.
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▪ Ripple Effect on Other Sectors: The recommendations of the Pay Commission

often influence salary structures in the private sector and various state government
organisations. Many state governments and private companies also use the Central Pay
Commission's recommendations as a reference point while revising their own salary
structures.
▪ Social Equality: The Pay Commission also addresses the issue of pay parity and social
justice. By ensuring that government employees receive fair and competitive wages, it
helps reduce income disparities between different sections of society.
▪ Reviewing Allowances and Perks: Apart from basic pay, the Pay Commission also
reviews and recommends changes to various allowances and perks provided to
government employees, such as housing allowances, medical benefits, and travel
allowances.
Challenges Faced by the Pay Commission
Economic Conditions: Economic fluctuations and uncertainties impact the government's ability
to allocate funds for salary hikes. If the economy is not growing at a healthy rate, it can limit the
resources available for implementing significant pay revisions.
Fiscal Constraints: The government has to balance its fiscal responsibilities, including managing
budget deficits and controlling public debt. Meeting the demands of higher pay for government
employees without compromising fiscal stability can be a troublesome task.
Inflation and Cost of Living: High inflation rates and rising costs of living affect the purchasing
power of individuals. The Pay Commission needs to consider these factors to ensure that
government employees' salaries are sufficient to maintain a reasonable standard of living.
Income Disparities: Addressing income disparities between different levels of government
employees can be challenging. Balancing the need for pay hikes while maintaining a fair and just
salary structure is a complex task.
Demands of Various Sectors: Different sectors of the economy have unique pay and benefits
requirements. The Pay Commission must cater to the diverse needs of employees in various fields,
such as defense, education, healthcare, and public administration.
Global Economic Factors: Global economic conditions can also influence India's economic
growth and fiscal position, affecting the government's capacity to implement significant pay
revisions.
Pension and Retirement Benefits: The Pay Commission must also address pension-related issues
and recommend measures to ensure financial security for retired government employees.
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Minimum Wages Act,1948

The Minimum Wages Act 1948 is an essential piece of legislation in India. It sets the minimum
wages for all employees. The Act states that the government must fix the minimum wage for each
category.
The minimum wages act, 1948, is the minimum amount that an organisation has to pay a particular
employee (skilled or unskilled) for a specific job at a particular time that any contract agreement
or collective agreement cannot reduce. The Minimum Wage Act was first implemented in 1948
and took effect on 15 March. The Act also created the Tripartite Committee of Fair Wage. This
committee was formed to set the minimum wage guidelines in India. It defined the minimum wage
and the criteria for its calculation. It set the foundation for the wage fixation process in India. The
salary levels are determined based on the number of employees.
The Objective of the Minimum Wages Act
The Minimum wage Act 1948 accommodates fixing wage rates (time, piece, ensured time,
additional time) for any industry.
1) While fixing hours for an ordinary working day according to the demonstration, ought to ensure
the accompanying:
• The number of hours to be fixed for an ordinary working day should have at least one
stretch/break
• One three-day weekend from a whole week ought to be given to the representative for rest
• Installation for the day chosen to be given for rest ought to be paid at a rate at the very least
the additional time rate
2) If a representative is engaged with work that classifies his service in at least two booked
vocations, the worker’s pay will incorporate a particular compensation pace of all work for the
number of hours devoted at each undertaking.
3) The business must keep records of all workers’ work, wages, and receipts.
4) Appropriate legislatures will characterise and dole out the errand of review and choose
examiners for the equivalent
Types of wages
In 1948 a tripartite committee, known as the ‘Committee on Fair Wages’ was established. The
committee’s report was the benchmark for the formulation of wage policy in India. The committee
not only set guidelines for wage rates in the country but also laid down three kinds of wages
namely:
1. Minimum wage: This is the type of wage provided for bare subsistence so that the workers
can maintain a decent standard of living such as providing for education, medical
requirements and an adequate level of comfort.
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2. Fair wage: Any wage paid to the employees that are more than the minimum wage is
known as a fair wage. It is the wage that seeks to maintain a level of employment in the
industry and also looks after the industry’s capacity to pay sufficient remuneration to the
employees.
3. Living wage: A living wage not only meets the minimum requirement of the employees
provided by the employers but also allows individuals or families to afford adequate
shelter, food, and other necessities. It also includes health, sanity, education, dignity,
comfort, and provide for any contingency.
Essential provisions under Minimum Wages Act
The significant provisions of the Minimum Wages Act, 1948 are mentioned below.
• Minimum rates of wages
Under Section 3 of the Act, the minimum wages payable to the employees are to be fixed by the
appropriate government. However, this Section also mentions that the rate of wages shall be
revised every five years. The appropriate government may fix:
1. The minimum rate of wages for time work,
2. the minimum rate of wage for piece work,
3. a minimum rate of remuneration to apply in the case of employees employed on piece work
for the purpose of securing to such employees a minimum rate of wages on a time work
basis,
4. a minimum rate of wage to substitute the for the minimum rate which would otherwise be
applicable, in respect of overtime work done by employees.
In fixing or revising minimum wages under Section 3 of the Act:
1. Different minimum rates of wages may be fixed for; different classes of work, different
scheduled employment, different localities, different age groups, etc.
2. Minimum wages may be fixed by the wage period such as; by the hour, by the day, etc.
Section 4 of the Minimum Wages Act, 1948 states that the minimum wages fixed by the
appropriate government must consist of:
1. A basic rate of wages and a special allowance must be adjusted at necessary intervals by
the appropriate government to match the cost of living of the employees.
2. The cost of living allowance and the cash value of the concessions in respect of supplies
of essential commodities must be computed by a competent authority and at such intervals
specified by the appropriate government.
Section 5 states that in order to fix or revise the minimum wage of the employees the appropriate
government may establish as many committees and subcommittees necessary to hold enquiries in
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matters regarding fixing and revision of minimum wage. Further, the appropriate government by
notification to the Official Gazette publish its proposal for the information of the individuals who
are likely to be affected by such information and thereby specify the date which must not be less
than two months from the date of notification of the proposals that will be taken into consideration.
• Advisory board
Under Section 7 the appropriate government must appoint advisory boards for coordinating the
work of the committees and subcommittees mentioned in Section 5 and also for advising the
appropriate government generally in the matter of fixing and revising minimum rates of wages.
➢ Central Advisory Board
In the matters of fixation and revision of minimum rates of wages of the employees, the Central
Government shall appoint a Central Advisory Board. The Central Advisory Board shall consist of:
1. Members to be nominated by the Central Government representing employers and
employees in the scheduled employment, who shall be equal in number, and
2. Independent persons not exceeding one-third of its total number of members. One such
member shall be appointed as the Chairperson by the Central Advisory Board.
• Committees
Section 9 of the Act states that the members of committees, sub-committees, and Advisory Boards
shall be appointed by the appropriate government. Individuals who are appointed to these
committees shall be representatives of employers and employees in scheduled employments and
shall be equal in number. The appropriate government shall appoint such an independent person
to be the Chairman of the committee.
• Wages in kind under the Act
Section 11 of the Minimum wages Act, 1948 mentions how the wages will be payable to the
employees.
1. Minimum wages under this Act shall be paid in cash.
2. The appropriate government under necessary circumstances by notification to the Official
Gazette authorise the payment of the minimum wages either wholly or partly in kind.
3. The appropriate government by notification to the Official Gazette authorised a provision
for the supply of essential commodities at concession rates.
4. The cash value of wages and the concession rates shall be authorised in the prescribed
manner stated under the Act.
The payment of wages to the employees under this Act should be done in accordance with Section
12 of the Act, which states that the employer shall pay the minimum rate of wages fixed to every
employee working under him within such time and manner prescribed under the Act.
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• Fixing hours for a normal working day

Section 13 specifies that the appropriate government may:
1. Fix the working hours of a normal day including one or more specified intervals.
2. Provide a day of rest in every period of seven days to all the employees or a class of
employees, and adequate remuneration must be provided to the employees during the day
of rest.
3. Provide payment to the employees on the day rest which shall not be less than the overtime
rate.
When an employee works more than the specified number of hours constituting a normal working
day, the employer shall be liable to pay him for every hour or part of the hour at the overtime rate
fixed under this Act or under any law of the appropriate government for the time being in force.
Furthermore, under Section 15 if an employee has worked less than the required number of hours
constituting a normal working day they shall be entitled to receive wages in accordance with work
done by him on that day as if he has worked a full day. However, he might not receive the wages
of a full day under certain circumstances.
• Maintenance of registers and records
Under Section 18 of the Minimum Wages Act, 1948 every employer will be liable to maintain
registers and records relating to the number of employees employed under him, the work done by
them, the wages paid to them, the work performed by them, maintain the receipts given by the
employers and any other relevant information.
• Inspectors
In this Act, the appropriate government by notification to the official gazette shall appoint
inspectors in a manner prescribed under the Act. The inspectors shall be liable to exercise their
functions within the local limits of their jurisdiction.
1. The inspectors shall enter the premises or places within the local limits of their jurisdiction
where the employees are employed to work in respect of which minimum rates of wages
have been fixed under this Act, for the purpose of examining the register, record of wages,
etc.
2. To examine any person on the premises or places who is an employee.
3. Seize or take copies of registers, records of wages, or other required documents under this
act which he may consider relevant in case of commission of any offence.
4. The inspector will be required to exercise any other power as may be prescribed under the
Act.
Every inspector under this Act will be deemed to be a public servant within the meaning of the
Indian Penal Code,1860.
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• Claims
The appropriate government may by notification to the Official Gazette appoint any Commissioner
for Workmen’s Compensation or any officer of the Central Government exercising functions as a
Labour Commissioner for any region, with an experience as a judge to hear and decide cases in a
particular region about matters relating to non-payment or payment of less than the minimum
wages to the employees.
When an application under Section 20 of the Minimum Wages Act, 1948 is made to the authority,
the authority shall give adequate opportunities of being heard to both the applicant and the
employer. Under this Section, every direction of the authority shall be binding and final. The
authority appointed under the Act shall have the powers of a civil court under the Code of Civil
Procedure, 1908 for the purposes of taking evidence, enforcing the attendance of witnesses,
production of documents, etc.
• Procedure before the authority
The procedure before the authority in the matters relating to non-payment or payment of less than
the minimum wages to the employees shall take place in the following manner as prescribed under
the Act.
➢ The prescribed authority shall give adequate opportunities of being heard to the employer,
applicant or any other person relevant to the case.
➢ In case of non-payment of wages, or delay in the payment of wages the authority shall
direct the refund of such amount to the applicant of the amount unpaid, or delayed along
with the compensation for the damages suffered by the employee.
➢ No compensation will be awarded to the employee if the authority is satisfied that the delay
in payment of wages of the employee was a bona fide error. The authorised person was
unable to make the payment even though they exercised due diligence.
• Penalties for offences
Section 22 of the Minimum Wages Act, 1948 an employer who fails to provide minimum rates of
wages to the employees or contravenes any rule or order made under Section 13 of the Act shall
be punished with imprisonment for a term which may extend to six months or fine not less than
five hundred rupees or both.
• Exemptions of the employers in certain cases
When an employer is accused under this Act and brought before the court he will be exempted
from such offence under the following circumstances:
1. The employer has used due diligence in the execution of all the provisions of the Act.
2. The other person has committed the offence without his knowledge, connivance or consent.
Then in that case the other will be held liable as if he were the employer and the employer
will be discharged.
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• The power of the Central Government to make rules

Section 29 of the Minimum Wages Act, 1948 authorises the Central Government to make rules by
notification to the Official Gazette in matters relating to the term of office of the members, the
manner of voting, and the mode of conducting business by the Central Advisory Board, and other
relevant matters.
The rules made by the Central Government must be laid before the Parliament while it is in session
for a total period of thirty days which may consist of one session or two successive sessions.
Furthermore, Section 30 of the Act also authorises the state government to make rules by
notification to the Official Gazette for carrying out the purposes of this Act.
Equal Remuneration Act 1976
Introduction
The chief motive of the Equal Remuneration Act 1976 is to provide for payment of remuneration
to men and women on a uniform basis. In order to avoid discrimination against women and to treat
the women in a fair and just manner, this act is brought into force.
In 1976, the Indian Government passed the Equal Remuneration Act 1976 to bridge the wage gap
between men and women workers. The objectives of this Act was to provide equal wages for men
and women based on the nature of employment; to provide equality of opportunity in employment;
to protect persons against discrimination concerning employment or occupation, and to ensure that
no person shall be unfairly dismissed from work on grounds only of gender. No woman shall be
dismissed on grounds only of her gender. This Act facilitates and ensures equality among all the
gender, whether it is male or female.
Objectives of Equal Remuneration act, 1976
he equal remuneration act was enacted to fulfil the following objectives:
• To ensure equal wages to men and women performing the same work
• To promote the participation of women in the workforce.
• To remove all discrimination against women in the workforce
• To eliminate inequality of treatment in the workplace
• To protect anyone from being unfairly dismissed due to their gender
• To create an equitable, diverse and fair work environment
The “Equal Remuneration Act, 1976” extends to India except for the State Of Jammu And
Kashmir. It was enacted to make it illegal for employers to discriminate between men and women
employees on their pay scale.
The Salient Features of Equal Remuneration Act, 1976
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1. Remuneration to be paid in cash or in-kind at the same rate: Under section 2(e) of the
remuneration act, a woman shall not be paid a rate less than what is being paid to male
workers of a corresponding grade employed in the same establishment if the nature of
employment is not essentially different. If employment is essentially different, then pay
should be made differently but based on skills, capacity, and performance.
2. No discrimination in favour of men: Under section 3(1) of the remuneration act, no
employer shall discriminate between men and women in favour of men by paying them
fewer wages for the same work or employment. The definition provided under section 2(h)
says that any differential pay shall be justified and has to be on any one or more of the
following grounds:-
3. Any other factor which is not prohibited under the provisions of this Act: Under
section 3(2) of the remuneration act, The employer shall not discriminate between men and
women in favour of men by paying women fewer wages for the same work or employment.
The definition provided under section 2(h) says that any differential pay shall be justified
and has to be on any one or more of the following grounds. This is an addition to the Act
made in 1998 by introducing section 3(2).
4. No discrimination on the ground of gender: Section 4 of the remuneration act, 1976
prohibits discrimination and offers a guarantee against the exploitation of women workers.
It states that no woman shall be dismissed on grounds only of her sex.
5. No discrimination in employment: Section 5 of the remuneration act, 1976 prohibits
discrimination and offers a guarantee against the exploitation of women workers. It states
that no employer shall discriminate between men and women regarding employment or
any term or condition of employment based on their sex by paying them fewer wages for
the same work or employment.
Key Provisions of the Equal Remuneration Act, 1976
Section 3: Act to have overriding effect
The Equal Remuneration Act, 1976, establishes the supremacy and overriding effect of the
provisions of the Act over any other law, agreement, or contract that may be in conflict with its
principles. This is defined efficiently in Section 3 of the Act, “The provisions of this Act shall
have effect not withstanding anything inconsistent therewith contained in any other law or
in the terms of any award, agreement or contract of service, whether made before or after
the commencement of this Act, or in any instrument having effect under any law for the time
being in force.” Through this, it demonstrates that the goal of eliminating gender-based wage
discrimination takes precedence over any conflicting provisions in other laws or contractual
agreements. By having an overriding effect, Section 3 provides a robust legal mechanism to
safeguard the principle of equal remuneration.
Section 4: Duty of employer to pay equal remuneration to men and women workers for same
work or work of a similar nature
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The Act mandates that men and women should receive equal remuneration for work that requires
similar skill, effort, and responsibility performed under similar working conditions. It ensures that
gender-based wage discrimination is eliminated. Section 4 of the Act also ensures that no
employer can reduce the rate of remuneration of any worker to comply with the rule to provide
equal wages to both men and women for the same or similar work. Moreover,
Section 5: No discrimination to be made while recruiting men and women workers
The Act prohibits employers from discriminating against women in matters of recruitment,
employment, and promotion from the date of commencement of the Act. It ensures that women
have equal opportunities for growth and advancement in their careers. Along with this, the Act
also provides an exception where it prohibits the employment of women workers in hazardous
places. Moreover, the provisions of this Act do not affect any priority or reservation for ex-
servicemen, Scheduled Castes or Scheduled Tribes, retrenched employees, or any other category
of persons for recruiting employees.
Section 6: Advisory Committee
It pertains to the establishment of an Advisory Committee that plays a significant role in advising
the government on matters related to the implementation and enforcement of the Act. The
Advisory Committee ensures to provide employment opportunities for women and advises the
government regarding “which women may be employed in such establishments or employments
as the central government may, by notification, specify in this behalf.” It should not include less
than ten persons of which one-half should be women. The persons will be nominated by the
appropriate government.
Section 7: Power of appropriate Government to appoint authorities for hearing and deciding
claims and complaints
Section 7 empowers employees who believe they have been discriminated against to file
complaints with the appropriate government regarding “...claims arising out of non-payment of
equal wages at equal rates to men and women workers for the same work or work of a similar
nature”. The section outlines the procedure for filing complaints and the powers of the authorities
to hear and decide on such complaints. It provides a mechanism for employees to seek redressal
in cases of violations of the Act. Section 7(6) of the Act states that any employee aggrieved of any
order made by the authority can prefer an appeal to such authority within thirty days from the date
of the order. After hearing the appeal, “the authority may confirm, modify or reverse the order
appealed against and no further appeal shall lie against the order made by such authority.”
Section 8: Duty of employers to maintain registers
It imposes a duty on employers to maintain registers containing prescribed information, including
the names and addresses of employees, the work performed by them, and the remuneration paid to
them. This provision promotes transparency and accountability in remuneration practices, enabling
the effective implementation and enforcement of the Act.
Section 9: Inspectors
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This Section empowers the government to appoint inspectors who have the authority to enter and
inspect establishments covered under the Act. As per Section 9(2), every inspector appointed for
the purpose of investigation should be a public servant “within the meaning of Section 21 of
the Indian Penal Code,” where public servant is divided into 12 different categories. Some of the
powers given to the Inspector include:
• Enter at any reasonable time in any building, factory, premises, or vessel,
• May call for any employer or official to produce any register or other documents,
• May take the evidence of any person on the spot or at any other time.
• Examine the employer or any other person in charge of the establishment under
investigation.
• Can make copies of documents maintained on the basis of the establishment under this Act.
Section 10: Penalties
Section 10 stipulates penalties for non-compliance with the provisions of the Act. This section
serves as a deterrent against discriminatory practices and reinforces the importance of adhering to
equal remuneration principles. As per Section 10(1) of the Act, after the commencement of this
Act, if an employer; fails to maintain any register, fails to produce any register or other document,
refuses to give any evidence or prevents any other person from doing so, or refuses to give any
information is punishable with an imprisonment extending to one month or with a fine extending
to 10,000 rupees or with both. According to Section 10(2), after the commencement of this Act,
if an employer; recruits anyone in contravention of the provisions of the Act, makes payment at
unequal rates for the same work to men and women workers, makes any gender-based
discrimination, or fails to follow any direction made by the appropriate government is
punishable with imprisonment for a term not less than 3 months but which may extend to
one year or with fine not less than 10,000 rupees but which may extend to 20,000 rupees or
with both. In case, the offence is performed more than once then the imprisonment term will
accordingly increase.

Offence Penalty

Employer omits/fails to -maintain the

register -produce the register and other Maximum: Rs 10,000 OR Maximum
relevant documents -give evidence -give any Imprisonment: 1 month OR Both
information
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Employer makes -any recruitment in

contravention of the provisions of this act - Minimum: Rs 10,000 Maximum: Rs
any payment of remuneration at an unequal 20,000 OR Minimum Imprisonment:3
rate for the same work or work of similar months Maximum Imprisonment:1
nature -any discrimination between a man and year OR Both Note: The maximum
a woman -an omission to carry out the period of 1 year shall be replaced by 2
directions made by the appropriate years for the 2nd,3rd and 4th offence.
government.

Failure to produce the register or any other

document or to give any information to the Maximum: Rs 500
Inspector

Section 11: Offences by companies

This Section addresses the offences committed by companies under the Act. It states that if a
company is found guilty of any offense under the Equal Remuneration Act, 1976, it will be held
liable and may be prosecuted accordingly. This provision emphasizes that not only individuals but
also the companies themselves can be held accountable for violations of the Act.
Moreover, Section 11 illustrates that holds directors, managers, secretaries, or other officers of the
company responsible for offenses committed by the company. This means that individuals who
hold positions of authority and decision-making within the company can be held personally liable
for the company's contravention of the Act. If a company is found guilty, it may be subject to
penalties, which can include fines. The specific penalties will be determined by the court based on
the nature and severity of the offense. Despite this, a due diligence defence is provided for
directors, managers, secretaries, or other officers of the company. It demonstrates that if they can
prove that the offense was committed without their knowledge, consent, or connivance and that
they had exercised due diligence to prevent the contravention, they may be exempted from
liability.
Section 13: Power to make rules
It gives power to the Central Government to make rules for carrying out the provisions of the Equal
Remuneration Act, 1976. These rules can be regarding the documents or registers to be maintained,
how complaints shall be made, or any other matter. Further, the changes, when accepted by each
House of Parliament, are implemented.
Section 14: Power of Central Government to give directions
Section 14 empowers the Central Government to give directions to a State Government regarding
the execution of the Act and the same has to be followed by the State Government appropriately.
Section 15: Act not to apply in certain special cases
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This Section outlines specific circumstances in which the provisions of the Act may not be
applicable. The Section reads as follows:
“Nothing in this Act shall apply:
(a) to cases affecting the terms and conditions of a woman’s employment in complying with the
requirements of any law giving special treatment to women, or
(b) to any special treatment accorded to women in connection with
(i) the birth or expected birth of a child, or
(ii) the terms and conditions relating to retirement, marriage or death or to any provision made in
connection with the retirement, marriage or death.”
Section 16: Power to make declaration
It states that “Where the appropriate Government is, on a consideration of all the circumstances of
the case, satisfied that the differences in regard to the remuneration, or a particular species of
remuneration, of men and women workers in any establishment or employment is based on a factor
other than sex, it may, by notification, make a declaration to that effect, and any act of the employer
attributable to such a difference shall not be deemed to be a contravention of any provision of this
Act.” It means that there is an exemption that allows employers to discriminate on any grounds
other than sex. However, the employer will only be exempt from prosecution if the government
thoroughly examines the case and deems it appropriate to grant such an exemption.
Section 17: Power to Remove Difficulties
It empowers the Central Government to make any order, consistent with the provisions of this Act,
which are necessary for removing the difficulty.
Section 18: Repeal and Saving
Section 18 states that the act, The Equal Remuneration Ordinance, 1975, governing before the
implementation of the present Act, The Equal Remuneration Act, 1976, stands repealed. Any
action taken under the repealed Ordinance (The Equal Remuneration Ordinance, 1975) will be
deemed to have been taken under the corresponding provisions of the Equal Remuneration Act,
1976.