Sunday, January 5, 2014

Calculation of Minimumwage & Minimum pay

Providing proper minimum wage of Rs 27000/- for CG Employees including that of GDS employees and pay fixation formula:

The staff side of the JCM had given representation demanding Rs 10,000/- as minimum wage for Central Government Employees. The 6th CPC in its report vide para no 2.2.15 had calculated a minimum wage of Rs 5478/- today if we are calculate the minimum wage it should be more than Rs 21,000/- apart from HRA and other allowances. Hence there is three times increase in actual prices calculated by the 6th CPC and the current prices. The current wages of the CG Employees should be doubled at least including that of GDS.
The most comprehensive criteria for covering all the basic needs were evolved by the 15th Indian Labour Conference (ILC) in 1957 for fixing minimum wages. The norms are that a need-based minimum wage for a single worker should cover all the needs of a worker’s family consisting of a spouse and two children. The food requirement was to be 2,700 calories, 65 grams of protein and around 45-60 grams of fat as recommended by Dr Wallace Aykroyd for an average Indian adult of moderate activity. Dr Aykroyd pointed out that animal proteins, such as milk, eggs, fish, liver and meat, are biologically more efficient than vegetable proteins and suggested that they should form at least one-fifth of the total protein.

Dr Aykroyd worked on nutrition for nearly 30 years and was director of the Nutrition Division, Food and Agriculture Organisation, United Nations. In 1935, he was appointed Director of the Government's Nutritional Research Centre in India, situated in Coonoor in the south. The 15th ILC further resolved that clothing requirements should be based on per capita consumption of 18 yards per annum, which gives 72 yards per annum for the average worker's family. For housing, the rent corresponding to the minimum area provided under the government's industrial housing schemes was to be taken. Fuel, lighting and other items of expenditure were to constitute an additional 20% of the total minimum wage.

The Supreme Court upheld these criteria in the case of Unichoy vs State of Kerala in 1961. In the later Raptakos Brett Vs Workmen case of 1991, the SC went one step further, and held that besides the five components enunciated by the 15th ILC, minimum wages should include a sixth component, amounting to 25% of the total minimum wage, to cover children's education, medical treatment, recreation, festivals and ceremonies. The SC also observed that a wage structure including the above six components would be “nothing more than minimum wage at subsistence level” which the workers must get “at all times and under all circumstances”.

Minimum Salary-Analysis &Recommendations para 2.2.15
The Commission, however, agrees that the norms set by the 15th International Labour Conference (ILC) are appropriate for computing minimum salary. It is also observed that the minimum salary is applicable at the time a person joins the Government which will usually be at a young age when a person may be just married and will not have responsibility of parents or many children. Accordingly, the family unit for minimum salary can only be taken as three.

The Minimum Salary should be based on 6 units not three units as per 6th CPC calculation. As both parents and two children are depending on the salary of Government servant apart from spouse. the additional burden the employees will carry after a few years of service as his parents would have retired from service and are wholly dependent on him also his children would have stepped into school / college level, even small baby requirements are much unlike in the past years, the hence the minimum wage he gets will not compensate with the family financial burden. Hence the whole calculations needs a undergo a drastic change in next CPC taking into account of 6 units rather than 3 units.  

The Sixth Central Pay Commission has recommended a minimum wage of Rs 6600/- per month against the demand of Rs 10,000/- per month as worked out by Staff side of JCM. Today the minimum need based wage works out to Rs 21,000/ per month+ HRA+ allowances. The general minimum expenses per month for a family of four members are as follows when a Government servant joins the duty with two small children: 
a) Vegetables Rs 3000/-
b) Food Grains /Groceries Rs 7000/-.
c) House rent single room Rs 6000/-
d) Clothing Rs 3000/-
e) Children education and their expenses Rs 2000/-
f) Electricity Chargers Rs 800/-
g) Water Charges Rs 250/-
h) Transportation charges Rs 1000/-
i) TV cable rent Rs 300/-
j) Medical Expenses Rs 500/-
k) Mobile expenses Rs 250/-
l) Cooking Gas Rs 450/-
m) Recreation charges Rs 500/-
n) Personal expenses Rs 1000/- 
Total Rs 26500/-Hence minimum wage works out to Rs 27,000/-

The expenses will increase as the age of Government servant goes up and family responsibility will increase as he has to educate the children in professional courses, marriage of his children has to be performed, his medical expenses will increase, his parents will stay with him and now there are quite dependent on the Government servant for their lively hood. As such the salary should be more to meet his expenses. The Government is a model employer hence the wages should be provided with the needs.

Fixation of Minimum wage as on 1.1.2006 as per 15 ILC norms as per Table 2.2.1 of the 6th compare minimum wage should be three times the 6th recommendations.

ItemsPer day PCU (In grams)Per month 3CU (In kg)Price per kg. taken by 6th CPC (In Rs)Total cost as per rates of 6th CPC (in Rs) As on 1/1/2006Price per kg. as per prevailing market rates (in Rs) 1/6/13 At BangaloreTotal cost as per prevailing rates (in Rs) 1/6/2013
Dal (Toor/ Urad / moong807.24028880576
Raw Veg.1009.00109060600
Greenleaf Veg12511.2510112.540400
Other Veg.756.751067.545450
Milk200 Ml18 Lt.24.0043235630
Sugar and Jaggery565.0024.0012045225
Edible Oil403.650180100360
Detergents etc200200400400
Clothing5.5 Mt.80/Mt4402001100
Misc. @ 20%*8272660
Addl. Exp @ 25%**4003325
Housing @ 10%***148600^
Grand Total5478.517226

Source: Average market rates in Kolkata, Chennai, Delhi and Mumbai as indicated in the Economic Times & Other major dailies (element of 20% has been added to cover the increase in cost in retail sale).

Notes PCU = Per day Consumption Unit 3CU = Three Consumption Units that is wife, husband and a child no parents or second child is taken into account.

* 20% Miscellaneous charges towards fuel, electricity, water etc.

** Additional Expense at the rate of 25% includes expenditure towards education, Medical treatment, housing, recreation, festivals etc.

# Has been taken as Rs.400 because separate allowances for education, medical

Treatment and housing exist in the Government. Consequently, only the expenditure

Towards recreation & festivals need to be taken in account.

^ Being the license fee chargeable for government accommodation at an average rate of 3% of the basic pay.

Total minimum wage is Rs 17225+ HRA Rs 7000/- + Transportation Allowance Rs 2500/-= Rs 26725 that is Rs 27,000/-.

The fixation of minimum basic pay of Rs 21000/- is taking into the account of minimum skill and education requirement as 10th Standard as prescribed by the 6th CPC. As the education requirement is more such as Diploma in Engineering or Degree in Science or Commerce, then the minimum basic pay should be Rs 40,000/- (8700+4200) X 3 = Rs 39,000/-. For Engineering Graduates and Master Degree it should be Rs 65,000/- .

The pay scales should start with a minimum basic pay including Grade Pay of Rs 21,000/- to end with 2, 10,000 with a ratio of 1:10 of minimum scale and maximum scale. Since government is a model employer they should provide minimum wages as per the 15 ILO conference and other wages as per the educational qualification & skill requirement of the job.

The multiplying factor is calculated as below:

The existing basic pay + Grade pay + DA 100% + weightage of 100% ( that is the difference between the actual price rise and the DA paid) that is the multiplying factor works out to three.
Note: The actual price rise is over 200% the DA is only 90%.


The existing basic pay + grade pay+ DA 100%+DA merger = Net wage + weightage of 70% (that is the difference between the actual price rise and the DA paid).

The pay scales should have a multiplying factor of three, that means the existing pay scales and pay (basic pay + GP) should be multiplied by three. The pay scales arrived should not have any bunching of basic pay as done in the 5th there is no stagnation.

The concept of fair wages has been deprived to CG Employees. Usually pay commissions had adopted a multiplying factor of 3.2 to 3.8 to arrive at the new scales compared to earlier scales. But the VI CPC adopted conversion factor of about 2.6 at the lowest where as it was about 3.6 at the highest scale. By this method well established ration 1:12 between the lowest scale and highest scale was disturbed by the VI CPC.

The minimum pay & band pay fixed by the 6th compared all other pay commissions for example a new recruit for the post of LDC his pay is Rs 5200+ 1900 = Rs 7100/- + allowances, that should have been actually Rs 3050 multiplied by 3.6 times which works out to Rs 11000/- .

In case of a Graduate or Diploma holder as per 6th + 4200= Rs 13500/- + allowances, that should have been actually Rs 5000 multiplied by 3.6 times which works out to Rs 18000/- .

In case of a Master degree holder as per 6th 4800= Rs 14100/- + allowances, that should have been actually Rs 6500 multiplied by 3.6 times which works out to Rs 23000/- .

Hence the justification of multiplying factor of three is justified.  

The ratio between the lowest and highest scales should not more than 1:10

The existing basic pay should be multiplied by factor three, so that there is no bunching of basic pay. The existing GP of Rs 2000/- and Rs 2800/- should be removed. Likewise there are GP of Rs 5400/- in both PB-2 and PB-3 one of them is to be removed.

There are 34 scales recommended by the 6th Pay has been not in existence, as such 30 GP are right now available.

With the merger of pay scale from S9 to S12 into Grade Pay of Rs 4200/-.

There are many pay scales which was merged into single GP of Rs 4200/- which has created anomalies, the promotions have been made in same grade pay without financial benefits.

There should be time scale rather than grade pay system, these time scales should long enough.

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