Govt prepares to raise minimum wage of workers

With the government gearing up to increase the minimum wage of workers effective from the start of the new fiscal year 2023/24, negotiations are ongoing between government officials and representatives of the private sector, and labor unions. As per the country’s labor law, the minimum wage of workers should be reviewed every two years. Since the government increased the minimum wage in mid-July 2021, it is planning to fix the new wage by mid-July 2023. The monthly minimum wage of workers is currently Rs 15,000 which was increased from Rs 13,450 in mid-July 2021. The government set the daily wage at Rs 577 and the hourly wage at Rs 77. Of the Rs 15,000 monthly wage, Rs 9,385 is monthly salary and Rs 5,615 is dearness allowance. In addition, organizations have to provide additional facilities including gratuity and contributions to the Social Security Fund.

While tripartite talks are going on, it is yet to be known how much the minimum wage will be increased this time around. While the government is preparing to revise the salary on the basis of inflation and the consumer price index, the private sector is hesitant to increase the minimum wage at this time citing the economic slowdown for the inability of businesses to raise the salaries of their employees.

The Ministry of Labor, Employment, and Social Security (MoLESS) has formed a recommendation committee for wage determination under the leadership of Joint Secretary Danduraj Ghimire. The committee also has representatives of concerned stakeholders that include the Department of Labor, Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Confederation of Nepalese Industries (CNI), and labor unions. The committee has been mandated to recommend the new minimum wage to MoLESS. While the labor law does not specifically state how much the wage should be increased, the minimum wage is fixed taking account of inflation, price index, and the last salary increment. According to a member of the committee, they are now in the final stage of drafting the report to be presented to the Labor Ministry. Nepal Rastra Bank, FNCCI and CNI, and General Federation of Nepalese Trade Unions (GEFONT) have submitted separate reports for determining the new wage. The private sector bodies have submitted reports demanding that wages should not be increased as the business sector is facing problems due to the economic downturn. On the other hand, GEFONT has submitted a report with the demand to increase the salary. All these reports will be discussed in the committee’s meeting on June 21. According to private sector representatives, the capacity utilization of industrial enterprises has declined due to the slump in market demand, making it difficult for businesses to increase the minimum wage this time. “Because of the economic slowdown, there is a situation where we have to cut down the jobs. This is the time the government and the private sector need to work together to save employment,” said Rajesh Kumar Agrawal, Senior vice president of CNI. “If the wages are increased at this time, businesses will be affected and it will be difficult to save the employment. Businesses are not in the position to bear the additional financial burden.” According to Agrawal, the minimum wage can be increased once the economy comes out of the slump. “We are positive about increasing wages. And, it is also necessary. But we are not ready for it now because of the economic situation of the country,” he said. While employers have their reservations over the wage increment, trade unions are of the view that their minimum wage should be increased to Rs 26,000. According to them, wages should be determined scientifically. Trade unions have asked the government to set the minimum monthly wage of workers at Rs 26,000. The minimum wage should be on par with the salary of civil servants, they say. “Currently, the salary of the lowest-level government staff i.e., office assistant is Rs 26,348 rupees. We have demanded to raise the minimum wage of workers to this level,” said Janak Chaudhary, Vice President of GEFONT. “If not, the government should make a separate arrangement for the protection of workers. Additional facilities such as providing subsidies, arranging ration cards, and making mandatory contributions to the Social Security Fund should be guaranteed.”