Hello,
I require clarification concerning the new Wage Code. In the calculation of the 50% basic wage requirement, should the basic salary be considered as 50% of the total CTC directly, or should certain allowances be excluded from the CTC prior to calculating the 50%?
Your guidance will be much appreciated.
Thanks,
Parveen
Manager - HR
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I require clarification concerning the new Wage Code. In the calculation of the 50% basic wage requirement, should the basic salary be considered as 50% of the total CTC directly, or should certain allowances be excluded from the CTC prior to calculating the 50%?
Your guidance will be much appreciated.
Thanks,
Parveen
Manager - HR
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Hello Parveen,
The new Wage Code in India has indeed brought about significant changes in the way wages are calculated. Your question pertains to the calculation of the 50% basic wage requirement.
Firstly, it's important to understand that the new Wage Code mandates that the basic wage (which includes the basic pay and dearness allowance) should constitute at least 50% of the total remuneration or CTC. This is to ensure that employees receive a fair portion of their salary as a 'fixed' component, which has a bearing on other benefits like Provident Fund contributions.
Legally, under the new Wage Code, the allowances can be a maximum of 50% of the total remuneration. Therefore, if the allowances exceed 50%, the excess amount will be added to the basic wage. This means that the basic wage could be more than 50% of the CTC if the allowances are high.
In terms of action, you should first calculate the total of all allowances. If this total is more than 50% of the CTC, the excess should be reclassified as basic wage. If the total allowances are less than or equal to 50% of the CTC, then the basic wage would be the remainder of the CTC after deducting the allowances.
As an additional tip, it's important to regularly review the salary structure in light of these changes to ensure compliance with the new Wage Code. Also, be aware that an increase in the basic wage could lead to higher liabilities for the employer in terms of contributions to the Provident Fund and Gratuity.
In conclusion, the calculation of the 50% basic wage requirement is not as straightforward as considering the basic salary as 50% of the total CTC directly. Allowances play a crucial role in this calculation and should be carefully considered.
From India, Gurugram
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130The new Wage Code in India has indeed brought about significant changes in the way wages are calculated. Your question pertains to the calculation of the 50% basic wage requirement.
Firstly, it's important to understand that the new Wage Code mandates that the basic wage (which includes the basic pay and dearness allowance) should constitute at least 50% of the total remuneration or CTC. This is to ensure that employees receive a fair portion of their salary as a 'fixed' component, which has a bearing on other benefits like Provident Fund contributions.
Legally, under the new Wage Code, the allowances can be a maximum of 50% of the total remuneration. Therefore, if the allowances exceed 50%, the excess amount will be added to the basic wage. This means that the basic wage could be more than 50% of the CTC if the allowances are high.
In terms of action, you should first calculate the total of all allowances. If this total is more than 50% of the CTC, the excess should be reclassified as basic wage. If the total allowances are less than or equal to 50% of the CTC, then the basic wage would be the remainder of the CTC after deducting the allowances.
As an additional tip, it's important to regularly review the salary structure in light of these changes to ensure compliance with the new Wage Code. Also, be aware that an increase in the basic wage could lead to higher liabilities for the employer in terms of contributions to the Provident Fund and Gratuity.
In conclusion, the calculation of the 50% basic wage requirement is not as straightforward as considering the basic salary as 50% of the total CTC directly. Allowances play a crucial role in this calculation and should be carefully considered.
From India, Gurugram
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Revision in Basic wage wef Mar 2014 Gazette.pdf
Wage Code Bill - Summary.docx
Wage Code Bill.pptx
CiteHR.AI
(Fact Checked)-While it's true that the Wage Code document provides valuable information, it's also important to note that the basic salary should be at least 50% of the total CTC. This includes allowances. (1 Acknowledge point)