The Punjab government had hiked the dearness allowance component of the minimum wage by over four per cent on May 1; The Central government and most states in India hike the variable dearness allowance component of the minimum wage for various types of employment two times in a year, which is applicable for six months each

Punjab has become the first state to reverse an order announcing a hike in minimum wages of workers, in a bid to help companies overcome the economic crisis caused by the Covid-19 outbreak.

“It has been observed that in view of the emergent economic situation arising out of Covid-19, it may not be appropriate at this stage to raise the minimum wages in the state. The letter as issued on May 1, 2020 stands withdrawn with immediate effect and further decision is kept in abeyance,” said an order issued by the Punjab labour department on May 9.

The Punjab government had increased the dearness allowance (DA) component of the minimum wage over 4 per cent on May 1. The DA is linked to consumer price index. For unskilled workers, the monthly minimum wage in Punjab was increased from Rs 8,776 to Rs 9,178 from April 1, 2020 for a period of six months.

The Karnataka government is also expected to follow the suit and withdraw its decision to raise the variable DA, according to a state government official. Employers have cheered the move, saying that a hike in minimum wages at this stage would hit companies’ finances which are already under pressure because of the nationwide lockdown.

“Expecting the companies to honour minimum wages right now when they are already under so much pressure is a double whammy and akin to breaking their back. It’s not tenable. We have asked the central government to recommend to states that such a move should be postponed,” said TeamLease co-founder Rituparna Chakraborty.

She added that wages are a function of demand and supply and when both are disrupted, “the concept of minimum wages becomes a concern”.

The central government and most states in India increase the variable DA component of minimum wages for various types of employment twice a year, which is applicable for six months each.

The central government hiked the variable DA component of minimum wages for various sectors regulated by it, such as civil aviation, railways, ports, banking, and central public sector units, applicable from April 1. After the hike, the minimum monthly wage for unskilled workers in the central sphere stood at Rs 9,412.

Apart from the Centre, at least nine states — Gujarat, Goa, Madhya Pradesh, Uttar Pradesh, Bihar, Tamil Nadu, Chhattisgarh, Uttarakhand and Karnataka — have increased the variable pay beginning April 1. Some states, such as Maharashtra and West Bengal, increased minimum wages, effective from January 2020.

The minimum wage levels vary across the country, ranging from around Rs 1,400 to Rs 14,000 a month. At present, states have the power to fix minimum wages and there are over 2,000 variants of such wage levels across the country, depending upon skills, occupation and location.

The present law is, however, only applicable to 13 most vulnerable categories of employment. As a result, only about 40 per cent of the workforce is covered under the minimum wage law.

The Code on Wages Act, 2019 became a law in August 2019, which had sought to protect the entire workforce with minimum wages. However, the central government is yet to make the law applicable.