Wage Boards in Compensation Management

Wage boards are set up by the Government, but in selection of members of wages boards, the government cannot appoint members arbitrarily. Members to wage boards can be appointed only with the consent of employers and employees. The representatives of employers on the wage boards are the nominees of employers’ organization and the workers’ representatives are the nominees of the national center of trade unions of the industry concerned.

The composition of wage boards is as a rule tripartite, representing the interests of labor, Management and Public. Labor and management representatives are nominated in equal numbers by the government, with consultation and consent of major Central Organizations. These boards are chaired by government nominated members representing the public. Wage board function industry-wise with broad terms of reference, which include recommending the minimum wage differential, cost of living, compensation, regional wage differentials, gratuity, hours of work etc.

The main objectives of wage boards are;

  1. To work out wage structure based on the principles of fair wages as formulated by the Committee on Fair Wages.
  2. To work out a system of payment by results.
  3. To evolve a wage structure based on the requirements of social justice.
  4. 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.

Composition and Functions of Wage Boards

The wage board is, as a rule, tripartite body representing the interest of labor, management and the public. Labor and management representatives are nominated in equal numbers by the government, after consultation with and with the consent of major central organizations. Generally, the labor and management representatives are selected from the particular industry which is investigated. These boards are chaired by government – nominated members representing the public.

They function industry – wise with broad terms of reference, which include recommending the minimum wage, differential cost of living compensation, regional wage differentials, gratuity hours of work, etc.

Wage boards are required to:

  1. Determine which categories of employees (manual, clerical supervisory, etc.) are to brought within the scope of wage fixation.
  2. Work out a wage structure based on the principles of fair wages formulated by the committee on fair wages.
  3. Suggest a system of payment by results.
  4. Work out the principles that should govern bonus to workers in industries.

In addition to these common items, some wage boards may be asked to deal with the question of Bonus (like that of the wage boards for cement, sugar and jute industries); gratuity (like that of the wage boards for iron ore mining, limestone and dolomite mining industries) and the second wage board on cotton textile industry; demands for payments other than wages (wage boards for jute and iron and steel industry); hours of work (rubber plantation industry); interim relief (wage boards for jute industry and post and dock workers). Some wage boards (Wage boards for sugar, jute, iron ore, rubber, tea and coffee plantations, limestone and dolomite mining industries) have been required to take into account the ‘special features of the industry’.

Thus, wage boards have had to deal with a large number of subjects. Of these, the fixation of wage – scales on an industry – wise basis constitutes the biggest of all the issues before them. In evolving a wage structure, the board takes into account:

  1. The needs of the industry in a developing economy including the need for maintaining and promoting exports:
  2. The requirements of social justice, which ensures that the workman who produces the goods has a fair deal, is paid sufficiently well to be able at least to sustain himself and his family in a reasonable degree of comfort, and that he is not exploited;
  3. The need for adjusting wage differentials (which is in relation to occupational differentials; inter-firm differentials; regional or inter-area differentials; inter-industry differentials and differentials based on sex) in such a manner as to provide incentives to workers for improving their skills.

For the determination of fair wages, the board has to take into consideration such factors as the degree of skill required for his work, the fatigue involved, the training and experience of the worker, the responsibility under-taken, the mental and physical requirements for work, the disagreeableness or otherwise of the work and the hazards involved in it. The board is required to make due allowances for a fair return on capital, remuneration to management and fair allocation to reserve and depreciation.

Working of Wage Boards

Although wage boards are set up by the government, the basic reason for their establishment is the pressure brought to bear on the government, by the trade unions, industrial federations and national organizations on the one hand after the employers’ formal or informal consent on the other. Pressure has been used for the appointment of wage boards for the jute industry by the jute workers association and for the coal mining industry by their trade union. The formation of wage boards in other industries has been the result of similar demands and pressures on the part of trade unions – such as plantations, iron and steel, engineering, sugar and electricity.

The government cannot appoint members of the wage boards in an arbitrary way. Independent members can be appointed only with the consent of employers and employees. The representatives of employers on wage boards are the nominees of the employer’s organisation and the workers representatives are the nominees of the national organisation of trade unions of the industry concerned. However, before their actual appointment, a great deal of negotiations take place not only between the two main recalcitrant interests but also among different groups representing particular interests.

Item to be included for the consideration of the wage boards are the outcome of the negotiations between the parties. The issues are unanimously determined by trade unions and employers; but these invariably relate to gratuity, bonus, hours of work and grant of interim relief. The quantum of interim relief is also decided by negations and bargaining which have sometimes resulted in temporary deadlocks.

The wage boards functions in three steps:

  1. The first step is to prepare a comprehensive questionnaires designed to collect information on the prevailing wage rates and skill differentials, means of assessing an industry’s paying capacity and workloads, prospects for industry in the immediate future, and regional variations in the prices of widely consumed consumer goods. The questionnaire is sent out to labor unions, employers associations, interested individuals, academic organisations and government agencies.
  2. The second step is to give a public hearing at which leaders of labor unions and employers associations, not represented on the board, as well as others interested in the industry in question, are given a verbal or oral bearing on issues dealing with wages, working conditions and other items.
  3. The third step is to convene secret sessions at which members of the board make proposals and counter – proposals regarding the items covered under the terms of reference.

In the case of failure to reach a unanimous decision on the issues, each party has the right to veto the others decision.

The role of independent members on the board is limited to conciliation and mediation; they try to prevent deadlocks by promoting communication between labour and management representatives. They also offer advice and suggestions to the parties, but the final decision must result from the parties give – and – take attitudes and compromises.

The decision – unanimous recommendations – is written down in the form of a report and submitted to the government, which usually accepts unanimous agreements, although it may modify any provisions thereof. Then the report is to be compiled with by the parties. The government has no legal powers to enforce the board’s recommendations. It tries to persuade the parties to narrow their differences and aim to unanimity.

Wage boards like their own time in the submission of reports, e.g., the second wage board for cement and the first wage board for cotton textiles and sugar took a little less than 3 years; while the wage board for coal mining, non journalists, jute, iron and steel took a little over 3 years; that for tea plantations took 5 ½ years and for coffee plantation 4 years and iron ore mining 5 years. Some of the wage boards constituted in 1964 did not submit reports even by 1969, e.g., heavy chemicals, fertilizers, engineering industries and ports and docks. The average time taken by wage boards in the finalization of their deliberations varies from 3 years to 5 ½ years.

The main reasons for the delay in the completion of wage boards work have been :

  1. Routine delays in the recruitment of staff; preparation and printing of questionnaires;
  2. Getting replies to questionnaires
  3. Time involved in public hearings and
  4. Lack of accord among members in arriving at a decision.

Evaluation of the Wage Boards

The boards have been successful in fulfilling their primary object of promoting industry – wise negotiations and active participation by the parties in the determination of wages and other conditions of employment. The board’s deliberations and awards have contributed significantly towards the development of a national and ‘development oriented’ outlook on questions pertaining to particular areas and sectors. They have given serious attention to the impact (of wage increase) on factors like prices, employment and the profitability of the industry.

The committee setup by the National Commission on Labour identified three major problems from which the wage boards suffer:

  1. A majority of the recommendations of the wage boards are not unanimous.
  2. The time taken by the wage boards to complete their task has been rather unduly long and
  3. The implementation of the recommendations of the wage boards has been difficult.

But it concluded that the system of wage boards has, on the whole served a useful purpose. As bipartite collective bargaining on wages and allied issues on an industry wise basis at the national level has not been found practicable at present for various reasons, this system has provided the machinery for the same. It is true that the system has not fully met all the expectations; and, particularly in recent years, there has been an erosion of faith in this system on the part of both employers and employees. The Committee is convinced that these defects are not such as cannot be remedied.

The committee made some important recommendations. These have been given below:

  1. The chairman of the wage should selected by common consent of the organizations of employers and employees in the industry concerned.
  2. In future, the wage board should function essentially as machinery for collective bargaining and should strive for unity.
  3. Wage boards should be assisted by technical assessors and experts.
  4. The terms of reference of wage boards should be decided by the government in consultation with the organisations of employers and the workers concerned.
  5. A central wage board should be set up in the Union Ministry of Labour on a permanent basis to serve all wage boards through the supply of statistical and together material and lending of the necessary staff.
  6. Unanimous recommendations of wage boards should be accepted and in case of non – unanimous recommendations, the government should hold consultations with the organizations of employers and employees before taking a final decision.
  7. Wage boards should not be set up under any statues, but their recommendations, as finally accepted by the government, should be made statutorily binding on the parties.
  8. For the industries covered by wage boards, a permanent machinery should be created for follow-up action.
  9. Wage boards should complete their work in one years time and the operation of its recommendation should be between two or three years, after which the need for a subsequent wage boards should be considered on merit.

If these recommendations are accepted, the working of wage boards may be made more affective.