In this article we will discuss about the definition of wages and factors affecting it.

Definition of Wages:

Wages can be defined as a sum of money paid to the staff by the employer for rendering services as per a contract.

According to minimum wages act 1948, wages means all remuneration, capable of being expressed in terms of money, which would, if the terms of the contract of employment, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment.

Factors Influencing Wages:

Determination of fair and adequate wage for a particular job is very difficult. Wages should be fixed in such a way which founds satisfactory both for workers and management.


Some of the factors which influence the wage rates are:

1. Demand and Supply of Labor.

2. Legal Provisions.

3. Ability to Pay.


4. Nature of Job.

5. Working Hours.

6. Comparative Wage Levels.

7. Cost of Living.


8. Type of Employment.

1. Demand and Supply of Labor:

Demand and supply is one of the important factors which influence the wage rates. If the number of workers required is more than availability of workers, then employees will be paid higher rate of work and vice versa.

2. Legal Provisions:


The government had made cretin laws/acts for fixation of minimum wages to the workers such as minimum wages act 1948. According to this act, the employer must pay minimum wages to the worker. If any employers do not follow the rule of this act, an action can be takes against him.

3. Ability to Pay:

Payment of wages also depends on the ability of a company to pay. A company running into losses will not be in a position to pay more than minimum wages, whereas a profit making company can give workers a share in the profit.

4. Nature of Job:


Wages also depends upon the worker’s skill and the conditions of work. Some jobs can be done by skilled employees while some jobs can be done by unskilled employees. The work conditions can be safe or hazardous. So wages can be high or low, depending upon the worker’s skill and conditions of work.

5. Working Hours:

Wages also depends upon the number of hours worked per day and the number of holidays.

6. Comparative Wage Levels:


Wage rates also depend upon the wages paid in competitive firms for the same type of work. Wages are therefore fixed after conducting wage surveys.

7. Cost of Living:

Cost of living also determines the wage rates. Wages should be such which satisfies the minimum needs of workers.

8. Type of Employment:


Wages depends upon the type of employment i.e. regular employment or contractual employment. A regular and permanent job provides security of service.