How Wage Theft Robs The Poor
“Wage Theft is so common” my lawyer friend once told me, “It is so common and yet its implications are not grasped by people at large.” He was advising a small-scale industry employer on labour matters when he discovered to his dismay that the employer was not paying minimum wages. (My lawyer friend refused to continue consulting unless the entrepreneur paid Minimum Wages. And lost his client!)
And that brings us to the unique similarity when rich and poor are victims of theft. The rich own so much that they often do not discover a theft. The poor do not know what was theirs, so they too do not discover a theft. Wage theft, for the poor, exemplifies it.
To understand what is wage theft I will quote Wikipedia verbatim : ‘Wage theft is the denial of wages or employee benefits rightfully owed to an employee. It can be conducted by employers in various ways, among them failing to pay overtime; violating minimum-wage laws; the misclassification of employees as independent contractors, illegal deductions in pay; forcing employees to work “off the clock”, not paying annual leave or holiday entitlements, or simply not paying an employee at all.’
The workers do not insist on being paid minimum wages. Rather, they cannot! In most cases they do not know the declared rate of Minimum Wage. In other cases, they do not have bargaining power to force an employer to pay it. For every employed workman, there are ten others unemployed persons willing to work on a rate less than the Minimum Wage! That’s the harsh reality. And Unions have lost their teeth, the genuine or committed union leaders watch workers’ exploitation from sidelines.
The situation became worse during the Covid pandemic. Mostly those are cases of migrant workers mainly from Arab Gulf countries. People were willing to take up any job as long as it fetched them some income. Scores of articles have been written on how employers committed wage theft on migrant workers.
Here is a live case of how committed wage theft. Take the case of SVS Aqua Technologies. It existed since 2012 and never paid Minimum Wages to workers. The recently submitted report by a Fact-Finding Team calculated the wage theft. It is an eye opener because it monetizes the wage theft, a unique exercise, as you will readily agree.
Here is how wage theft is calculated: Step one is to calculate the difference between Minimum Wage and Actual wages. Remember that the minimum wage includes ‘special allowance’ and by law you have to pay (in Maharashtra) 5% on the aggregate as HRA. Step two is to multiply it by the number of months a worker has worked. That gives us the amount of actual wages stolen. Step three is to add leave wages not paid. Every worker is entitled to certain days of leave in a year. But (s)he is often denied it. Step four is to add the social security benefits denied. This means PF, ESIS contributions not paid as well as Gratuity deprived. This typically works out to 32% of the denied wages. Step five is to add up the amounts to get the wage theft.
When you calculate it at the factory level is works out to be a big figure. It worked out to be Rs 7.59 Lakhs per worker in SVS Aqua Technologies case.
And mind you, we have not calculated the interest on the wages not paid. Since many employers do it over a long period, even the loss of interest becomes sizeable.
There are more implications which we must take a note of. If PF Contribution is not paid by the employer, his retirement benefit is directly affected. What this means is that once the person is out of job, he will soon hit the streets as a beggar unless he has some land to till. In the case of SVS Aqua Technologies 17 workers died in the fire at the factory. Their family would have been entitled to receive the money under the ‘Employees Deposit Linked Insurance Scheme’ which is a sizeable amount. And they also lost a sizeable amount in PF accumulation.
If the employers did not cover the workers, as in the case of the company above, what is the amount their family will get paid? You know the answer!
Now the employer company, SVS Aqua Technologies has graciously (?) declared an ex-gratia payment of Rs 10 Lakh. You will readily see that it is funded mostly by the stolen wages, as they amount to Rs. 7.59 L without interest.
One of the questions which our society has shied away from thinking is ‘what should be the minimum lifestyle our lowest category of workers enjoy.’ The minimum wage is actually a bare minimum subsistence wage. It does not allow a person to live with dignity. It is of course open for an organization to pay according to what it thinks is the just and fair pay, obviously higher than the statutory minimum wage.
The real question is ‘who will bell the cat’ in the absence of trade unions. Though everyone knows the answer, it will not be uttered. Sometimes the answer is available on their website in the form of vision, mission and values statements. Do you get me?
Vivek S Patwardhan
“What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others.” **** “Aroehan: Creating Dream Villages in Mokhada by 2025: “No Malnutrition Deaths, No Child ‘Out of School’, Reduction in migration by 50%.”
There is another common theft of wages probably not highlighted here as:
Innumerable micro and small scale industry does that. The labour works for 12 hours a day and paid minimum wages for 8 hours.
Calculate the amount.
However as Unions have killed their own movements by corruption, government has, in the name of ease of business, lost control on this.
It is a real market driven economy – making slaves of the poor.
Dr RC Datta, Labour Economist and former Dean HR at TISS writes:
Thanks Mr Patwardhan. Have read it on email! Very well written. I believe Labour has weakened very significantly over the last 2 decades worldover with the simultaneous rise of Power Inequalities! My knowledge/reading tells me that these inequalities have even further increased during Covid 19 ! Employers have introduced automation even when Labour is available. Quality of ‘job’/ work has declined without being treated as a human being-giged.
I remember 20 years back when workers were ‘advised’ by managers to take VRS! And in order to apply for that the workers had to ‘get’ VRS from from Union’s office! And you know they had to pay to get the Form! Wage theft? Inhuman? All this is primarily because we equate Worker/Labour with Capital and not as a minimally a Living Factor of Production.
Their bargaining strength has hugely declined with the rise of new technology.
Probably that of ILO too!
Very well written Mr Patwardhan. Felt sad too.
Keep it up.
Take care and warm regards
RCD
Wage theft in the form of overtime payment adjustment or payment under a different head at lower rate is a regularised mechanism, justified even .
Patwardhan,
I read your report too. Its a brilliant one, comprehensively covering all the issues of the case. The wage theft is extremely novel way to invite attention to the plight of labour today. Someone from the affected employees or their relatives should file a suit on the employers even if it will take 25 years to get a verdict. The owners will go scot free due to their anticipated declaration of the bankruptcy and their proximity to current regime. but the recovery should be possible through the sale of their property. Govt departments involved should be made party to the case. The individual officers will also go scot free or die during the pendency of the case. So, one should explore whether the Govt itself be made responsible for the misrule and legally asked to compensate the workmen and their families. This will also form a precedent in the law for the similar cases. Though it will happen after 25 years, it will still be effective because I anticipate the situation would be worst then.
Thanks for sharing this. More such work is needed to reiterate that such cases are not anecdotal. Reinventing union strategies is the need of the tim es.
thanks vivek ji for reminding us in black and white which most of the people know but keep their eyes closed from this naked truth.
Paying actually less than minimum wages and getting signed on minimum wages wages sheet is very common practices in industries specially in respect of contract labour. Where k.the labour has become more informed and Big organisations are serious about it, it has been discouraged to to some extent.
I am told that even if the wages are paid through bank , difference of paid and agreed wages are taken back.
in case of security agencies, t is known to all that security guards are deployed on 12 hours duty but hardly paid OT for extra four hours.
regds
Indeed a horrific situation. Had the worker not been robbed of his wages, he would have probably afforded better education, nutrition and healthcare for himself and family…so, they all have been deprived of these basic opportunities all those years!..how can this lost time and opportunities be calculated?
I agree with Mr Dhavle when he says that all govt. officials complicit by omission, commission and connivance, should be held responsible along with the factory owner and asked to pay their share of the compensation too.
The Fact Finding Report needs wider publicity.
In the context of sustaining Un Employment and under
Employment , Employees who are fortunate to have
Some Employment and scope for Wages are more
Concerned in securing their jobs rather than assertion
of their Legal Rights or Entitlements. This is
Unfortunately the prevailing Socio Economic System.
Barring exceptions, Indian businessmen are free of all ethics and morals, so robbing the poor is normal. Just like fudging taxes, violating copyright, stealing electricity, over invoicing and plain bribery. Please complete this list.
Dear Vivek,
The term is new to me but not the practice. Today, it is happening more brazenly and impacting more levels of wage earners, even “qualified” workmen and staff. There is a concept of a minimum wage, a fair wage and a living wage. The fair and living wages are higher than the minimum wage, but what do we in a society that does not even wish to pay minimum wages but expects maximum productivity !! It is sheer exploitation and speaks of the lowering of our own ethical standards and lack of concern with exploitation. When a manager at a very senior level heads a third party factory that manufactures products of Apple but does not even bother to check whether those that work in the factory are not only paid at least minimum wages and that they are paid on time, does it not reflect the morals and ethics of that manager? When all other executives of that factory go to work every day and observe this happening and not protest, does it not reflect on the callousness and insensitivity of the executives? Are we as a race becoming so inhuman that we do not look beyond ourselves? Are we looking for crutches that are offered by legal frameworks to deprive people of what they are entitled to instead of treating them as the least that needs to be done? Maybe, we are becoming cold to the sufferings and hardships of others and hiding in our own cocoons. Sad.
Very well said.
Excruciatingly painful that such cases rampantly happen in the 94% unorganised sector in the country. I have seen it happening in professional companies too who indulge in ruthless exploitation.
A poor man sees God in a loaf of bread is conveniently forgotten, and in connivance with contractors and other unethical professionals, these exploitative practices are continued heartlessly.
I remember an employer who was not paying minimum wages asking “Can an action plan be worked out for paying minimum wages over a two year period? Pat came the reply from the consultant ” The product you sell bears the sweat and blood of your workmen, kindly remember”. Things changed since then.
Rightly said many including the enforcement authorities turn a blind eye and a deaf ear to the wailing of these unfortunate ones.
More of Maruti and Winstron in the horizon to restore balance.
Detailed account of Violation of multiple laws (perpetuated by the rotten system ) as reported in case of SVS Acqua Technologies is disturbing. The killing of 17 workers caused by negligence of the employers/their representatives overlooked by supervising authorities is a criminal offence and those responsible need to be punished .
Hope the Justice prevails in the matter.
Sir,
You have rightly pointed out the menace of ‘Wage Theft’ existing in our country. It happens mostly in the case of unorganized sector and sometimes in the organized sector as well taking the union leaders into confidence. But the same Wage Theft also happens at the level of executives in a different form. In most organisations executives do not have any standard working hours and are sometimes threatened for sticking to their usual office hours especially in the case of private sector organisations. Executives are threatened with low PMS scores and delayed or denied promotions if they do not work beyond their office hours. They also do not get paid anything extra and also do not have any unions are associations to support them. In the pretext of saving manpower cost people are made to work longer duration. This leads to mental stress and also disturbs the family life of these employees.Except for a very few ethical employers this trend is reflected everywhere in the country.Even the employers’organisations like CII, FICCI etc. do not take up this issue of Wage Theft at all levels and try to come up with a viable solution….
Dear Vivek,
Thanks again for the ‘continuing education’ that you run for the readers . It is unfortunate that such illegal practices are existing .Whilst we can easily blame Govt for all ills –lets also do our bit. A few thoughts/suggestions are given below —
. As a minimum acceptable program ,,,,a) Can all the Industry associations call out Members who are following such bad practices b)Various professional bodies eg NIPM< NHRD , ICAI etc can also list out Employers who are not following proper Labour practices c) We often mention that MSME companies do not follow proper systems and practices …most of them are vendors to large Companies . Am positive that whilst negotiating and placing orders, a check on the supplier practices is possible d) Even in Large and 'professionally ' managed companies , would be useful to audit/check if such practices are there across the Value Chain. e) Unions, can also unite for a cause and name these Defaulters
In short, lets make a difference where we can contribute ….surely, a beginning however small can be made.
Sir, Your article made me recall an illustration of the fable by Walter Crane in Baby’s Own Aesop which mentions that “God helps those who help themselves”. Wage theft is a serious challenge, especially among the companies working in developing & underdeveloped countries. Rather than relying completely upon government, union, and trade bodies, It is high time for the deprived employees to get united in the individual capacity without the banner of anything and stand tall against their due rights…
Dear Sir, such an eye opener when you calculate the total impact to be as much as 7.59 lakhs! Didn’t know the term wage-theft. There are other means of theft too which are violations of statute; eg, denial of double the wage for working on national holidays. More unfortunately, there are practices of wage theft happening in front of us everyday in our housing societies as well – security guards are often doing 12 hours duty and most of the cases for 8 hours’ wage! Tea garden workers are not even covered by the Min Wage Act!