Minimum wages

To calculate the labour cost in India two most important parameters are to be known to the estimator. What is the amount of wages we have to pay to workers? Whether the wages are same for all the labours or it differs. Second parameter is the man-hour to be spent for completion of a particular type of activity. How many persons of different category are to be deployed for that activity? Are there any common guide lines to calculate the parameters? Yes. Regarding the labours wages there is a common guide line in India.   Remuneration which the workers are entitled for the work performed by them can be find out by Minimum wages act in India..

          The Minimum Wages Act, 1948: It is landmark legislation in India for regulating of wages in the country. A basic rate of wages and a special allowance i.e. cost of living allowance; A basic rate of wages with or without cost of living allowance and case value of concessions for supplies of essential commodities; An all inclusive rate, i.e. basic rate, cost of living allowance and cash value concessions. The Government may fix the minimum rates of wages either by the hour, by the day, by the month or by such large wage-period as may be prescribed which may be revised at intervals and reviewed 

The Government may fix or revise minimum wages either by committee procedure of by notification procedure.. The rates recommended by the committee and accepted by Government or the rates determined by Government after consideration of all representatives should be published in the Official Gazette. Minimum Wages in India are revised during the month of April and October of every year. The living wage is an informal benchmark, not a legally enforceable minimum level of pay, like the national minimum wage. The Indian Constitution has defined a 'living wage' that is the level of income for a worker which will ensure a basic standard of living including good health, dignity, comfort, education and provide for any contingency. 

However, to keep in mind an industry's capacity to pay the constitution has defined a 'fair wage'.. Fair wage is that level of wage that not just maintains a level of employment, but seeks to increase it keeping in perspective the industry’s capacity to pay India introduced the Minimum Wages Act in 1948, giving both the Central government and State government jurisdiction in fixing wages. The act is legally non-binding, but statutory. Payment of wages below the minimum wage rate amounts to forced labour. 

Wage Boards are set up to review the industry’s capacity to pay and fix minimum wages such that they at least cover a family of four’s requirements of calories, shelter, clothing, education, medical assistance, and entertainment. Under the law, wage rates in scheduled employments differ across states, sectors, skills, regions and occupations owing to difference in costs of living, regional industries' capacity to pay, consumption patterns, etc. Hence, there is no single uniform minimum wage rate across the country and the structure has become overly complex. 

Since minimum wages are not standard and from one state to other state it varies because of living conditions and enforcement of minimum wages by both state and central governments it becomes utmost important for the estimator to understand which Minimum wages act ( whether state minimum wages act or central minimum wages act) is to be followed.There are standard guidelines and official notifications and amendments from time to time are to be collected and kept in position ready before starting the estimation which will sort out calculating the first parameter of the direct manpower calculations. The minimum wages rate for Indian workers are normally indicated not with their technical designation like welder, fitter, rigger, electricians, khalasi  and helpers. They are divided in to four different  disciplines classified.. Technicians with high degree of skills to perform the works are called highly skilled labours. Normally High pressure welders, electricians, fabricators, Foreman etc fall under this heading. Fitters , junior electricians, structural welders ,Riggers are categorised in skilled workers levels similarly khalasis are considered in semiskilled level and helpers are in unskilled level.

                      

The minimum rates at delhi as below:

The following rates of minimum wages shall be applicable in respect of unskilled, semiskilled and skilled categories in all schedules employments except employment in the establishments where the workers are given facilities of meals or lodging or both by the employer Category Rates as on 01.04.2016 (Rupees) Dearness Allowances (pm) w.e.f 01.10.2016 (Rupees) Rates from (Rupees) 01.10.2016 Per-Month Per-Day Un-skilled 9568.00 156.00 9724.00 374.00 Semi skilled 10582.00 182.00 10764.00 414.00 Skilled 11622.00 208.00 11830.00 455.00 The following rates of minimum wages shall be applicable in employment in establishments where the workers are given facilities of meals of lodging or both by by the employer Category Rates as on 01.04.2016 (Rupees)  Dearness Allowances (pm) w.e.f 01.10.2016 (Rupees) Rates from (Rupees) 01.10.2016 Per-Month Per-Day Un-skilled (i)9412.00 156.00 (i)9568.00 (i)368.00 (ii)8710.00 (ii)8866.00 (ii)341.00 (iii)8606.00 (iii)8762.00 (iii)337.00 Semi skilled (i)10426.00 182.00 (i)10608.00 (i)408.00 (ii)9620.00 (ii)9802.00 (ii)377.00 (iii)9516.00 (iii)9698.00 (iii)373.00 Skilled (i)11440.00 208.00 (i)11648.00 (i)448.00 (ii)10582.00 (ii)10790.00 (ii)415.00 (iii)10452.00 (iii)10660.00 (iii)410.00 (i)Where only lodging is provided (ii) where only meals twice a day is provided  (iii) Where both meals and lodging are provided.  The following rates of minimum wages shall be applicable in respect of Clerical and     Supervisory Staffs in all Scheduled Employments Category Rates as on 01.04.2016 (Rupees)  Dearness Allowances w.e.f .01.10.2016 (Rupees)    Rates from   (Rupees) 01.10.2016 Per Month Non Matriculates 10582.00 182.00      10764.00  414.00 Matriculates but not graduates 11622.00 208.00      11830.00  455.00 Graduate and above 12662.00 208.00      12870.00 495.00 *( All Rates are in rupees)  The estimator to identify the state and place of work to be carried out and collect proper minimum wages document to fix the wages of different disciplined people.

Direct Mnpower cost Construction Estimates

The first step when an estimator start his costing of erection work is to find out how much direct manpower is to be employed from starting of the project work up to completion of the works as specified on the contract document. In general the detail description of the works to be completed is clearly mentioned in the request for quotation document(RFQ).Many a cases a detailed bill of quantities(BOQ) are also attached with the (RFQ).Based on the bill of quantity the direct manpower cost is calculated. Direct manpower means leaving the supervisory staff for that work the required number of labourers required in various categories. These people are. Mostly in the capacity of technicians like welders, Fitters, khalasis,Riggers and helpers in case of mechanical erection works. For civil works the calculation will be for masons for masonry work, carpenters, bar benders, and. helpers. Similarly the direct manpower for electrical and instrumentation works will be qualified electricians for HT and electricians who can handle LT works and along with tem the number of helpers required for assisting the technicians. Fitters are further categorised in India as fabricator and fitter.

 Fabricator is a technician who do the  mechanical works and knows the works of development and can fabricate materials from structural steel. The fabricators in Indian conditions are considered to be well trained fitter who himself can do the work and help two or three fitters in their works also. The quality of the fabricators is such that they are capable of reading site drawings and can work independently. Fitters either work with fabricators or they work under the guidance of supervisors. In India there are many ITI institutes to teach fitting process. There fitters are taught fitting works get trained and come out with qualified certificates and start work in construction sites. But most of the cases the fitters who work in Indian construction sites don’t depend upon the certificates and get their practical experience when they work with some fitting technicians and with reference and try they become fitters. Initially the juniors who work with fabricators help in assisting them in measurements etc and understand the process of fitting. They are not fully skilled but have semi skilled.

The welders are costlier and difficult to get commodities in construction sites since there presence will be required in every step when work progresses. In welders too there are welders qualified for working in steel ,pipeline works. .Welders working in pipe line construction works have lot of further sub categories .The welders qualified for different position welding in pipe works and they get paid according to their capability. The materials of construction in pipe works are many. Carbon steel pipe line works, alloy steel pipe line works, stainless steel pipeline works etc.All the welders cannot work in all kinds of materials. They need to be qualified for different positions and for different materials. The welders .who can only work in structural steel works are called as structural steel welders. The helpers of the welders get their training under the supervision of the elder while on work and become a structural welder and further get him qualified in other fields.

Project construction is a voluminous field which involves shifting and lifting of materials. The lifting and shifting of the materials can either be done my machinery or by manpower. Even though mostly machineries are used for shifting and lifting the presence of manpower becomes inevitable in certain cases where in congested areas machineries cannot be operated. The persons helping in such activities are called as Riggers and experienced riggers are termed as sarongs. The juniors who work with the help of sarongs are called as khalasis

..In electrical works electricians are the persons who can check up wiring in panels. Technicians who works in electrical works are used for termination of wires, give connection to rotary equipments. In electrical works riggers are mainly used for the laying of cables underground and on trays, erection of electrical panels etc.The electrical works also the involvement of welders, fitters are there. Fitter works on installation of cable trays and cable tray supports. Welder helps them in fixing the cable trays where ever required. The panel supports are mostly site made and fabricated at site.

Instrumentation works also have similar sequence of operations like cable tray fixing, laying of cables, installation of junction boxes, cable termination where again the described technicians comes into picture. So it becomes necessary for the estimator to understand the work involvement and actual requirement of people of different disciplines. Without understanding and not knowing the quantum of work involvement the estimation will not be accurate. Based on the bill of quantity and with the experience of the estimator the total requirement of direct manpower is calculated. The basis of calculation of direct manpower is productivity.

                                  For productivity please see my next post

Basic Elements of construction cost Estimate

On receipt of the construction bids the company decides their participation based on the principles of the companies quoting for the bid. Once decided to participate in the race for the work with other competitors the strength and weakness is analysed and strategies are made to hit the work. The estimator starts work on the bid. While estimating at what cost the work to be quoted the minute details and requirements of the client is to be understood. Because each requirement mentioned in the bid by the owner  has cost implication for the company participating and the estimator to calculate the cost for each item mentioned. .Let us consider the company participates in a mechanical erection works the minimum basic items to be considered by the estimator are

1.    Direct manpower cost

2.    Indirect manpower cost

3.    Cost of consumables to be used for that work

4.    Heavy equipment hire charges

5.    Non destructive testing and other testing requirement cost

6.    Cost of maintenance of tools going to be used

7.    Amount to be spent on documentation for obtaining statutory requirements

8.    Arrangements to be made onsite cost

9.    Arrangement for stay of persons at site

10.      Expenses incurred at corporate office on account of this work

11.      Salary of the officers/staff working at site

The details mentioned are the basic cost to be considered .over and above any special requirement of owners cost also to be included in the cost. The sum of total of the said cost becomes the basic cost for completion of the works. However all the companies work towards earning their profit which is not included in the above calculated cost. Erection works are very dangerous in nature. Hence workers and staff persons who will involve in the works are also to be covered under some safety scheme which is not covered in the above cost. With all possibilities for various reasons like lack of time, not getting the required correct input in time delay from subordinates in compilation of the work and many other reasons may leave the estimator in omission of certain items in the bid which is to be covered in the form of contingencies.. On various stages of quoting the work many types of guarantees are required by the owner/client of the project which in turn cannot be given by any company as cash. So some of the bankers of the company stand guarantee for the amount and it is normally accepted by the owner in their own accepted format which in turn  was already approved by their bankers. Such type of guarantees is given for non withdrawal of the bid after the specified date mentioned in owners document. Likewise for the performance of the work carried out by the contractor and for any major defects caused in  their work. In many cases the bank Guarantee formats are discussed between the contractor and owner  on award of contract for all guarantees except for bid gurantee.Normally it is common practice in India for execution of the work the estimated amount is not totally spend by the company of their own. There are lenders and financers who is ready to help the companies on good will and with some interest for the amount given by them. Such interest amounts are not normally added in the cost of the work before taking it further with owner for finalisation. Even when we go for any purchase we are not satisfied by the sale price mentioned in the tag. Everyone is happy with the discounts and reduction in price. Same principle apply here too. On finalisation of the contract the owner too wants reduction in the sale price of that work and the contractor always keep provisions on the calculation to pass it on to the owner and to clinch the contract. To execute the work from corporate/regional/head offices the indirect expenses spent while executing the project needs to be considered..Every company based on its size and volume have their own norms for this purpose and it is being communicated to the estimator to add it up along with other expenses. Addition of the total basic cost along with the above said hidden cost forms the basis for the cost of the work. On further discussions and requirement for that particular work for the company the cost is revisited and finalised and submitted to the owner,

Types of contracts

In my Blog i would like to describe the general procedure for preparation of quotation when the company receive the enquiry from the client. Initially the received bid is thou roughly scrutinised for the worth of quoting the bid. The nature and financial involvement is assessed by viewing the bid. The bid may be a normal Labour contract, only a small infra structure civil contract, only a part package of the project , may be either Engineering,Procurement and construction project or a normal erection contract . 

                     Labour contracts :Every company in India have their own policies in selection of the work for execution. Some contracting  companies wish to participate in all works of construction. It may be a civil contract, mechanical contract, electrical contract others which is purely construction in nature. This means whatever materials related to the construction activities either consumables or construction materials every item will be supplied by the client. Only labour portion of the contract will be carried out by the contracting company. The contract value of which will be very less. The contractors who have labours under their control wishes to execute such bids. Bigger companies with their own resources don’t wish to participate in such bids

LABOUR CONTRACTOR WITH WORKERS

Civil contracts : When the owner wishes to control the cost of the project normally the infr tructure facilities like local roads( Temperorary in nature) to be provided for their Engineering, rocurement and contraction contractor ,they develop the facilities with their own officers and only hiring a medium sized contractor who can carry out such projects ( Mostly from local area) are selected. In such cases the civil materials like bricks, sand,rebar,metal etc.According to clarifications ,contractors are classified as Class A,B,C based on their resources and financial capabilities. When the work starts the design and darwings required for execution of the works are normally prepared by the design and engineering contractor selected by the owner of the project and the execution at site is being carried out by the officers of the owner.

Buil                                                    Building Contractor

Packaging Route : Certain clients having sufficient workforce implements the project on package   route. It means the major equipments and material procurement actions are taken care by the owner himself and units forming part of the project which are readily available in market with sufficient experience in that particular field are purchased by owner. In the presence of the representative of the package supplier the client himself hire a small contractor and under the guidance of package vendor the contractor completes the works of the package. Normally the value of contracts are normally less except for major erections like boilers of higher capacity. Based on the size and capacity of the package the client choose a contractor who has sufficient experience in that particular field along with financial capabilities. In case  the client wants to capture good reputed contractors for installation they combine major packages together to increase the contract value of the installation.

                                Erection Contracts : When big factories are set up for the production of power, fertilizer ,petrochemicals and ore beneficiation plants the volume of items to be installed are huge and many and in most of the cases such items can not be handled by client himself. Hence it becomes absolutely necessary for him to engage a standard contractor to carry out major installation works. The erection works are complex in nature and involves installation of many items like structural steel, Heavy equipments, rotary equipments, pipe line works with various materials of construction . To handle such a big volume of work it may not possible either by a small or a medium sized contractor. Hence the client/ owner has no option except to select a contractor with good financial capability along with their own major resources to execute the work in time with quality.  Contracts of that nature are being handled by big contracting companies in the country.

Read my next post regarding cost estimation of Erection contracts