Dear Seniors, Want to know that, is it permissible to reduce the HRA amount when restructuring the salary?? We are not going to reduce employees' total gross salary but salary restructure is done as per the code of wages Act.
Please guide...
From Japan, Osaka
1Please guide...
From Japan, Osaka
Dear Padmakar,
The definition of "Wages"under the new wage code and also in other codes ( same definition every where ) should be on the following basis:-
1. Identify all cash components payable to any employee - monthly,bi-monthly, qtrly, half yrly and yearly except gratuity , retrenchment benefit and including non payable amount - value of house accommodation, light, water, medical etc. if any provided by the employer at free of cost as an exceptional.
2. 50% of above value will be Basic and DA.
3. Rest 50% will be divided amongst monthly allowances, yearly items, co's contribution to PF etc.
Thanks and regards,
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
From India, New Delhi
The definition of "Wages"under the new wage code and also in other codes ( same definition every where ) should be on the following basis:-
1. Identify all cash components payable to any employee - monthly,bi-monthly, qtrly, half yrly and yearly except gratuity , retrenchment benefit and including non payable amount - value of house accommodation, light, water, medical etc. if any provided by the employer at free of cost as an exceptional.
2. 50% of above value will be Basic and DA.
3. Rest 50% will be divided amongst monthly allowances, yearly items, co's contribution to PF etc.
Thanks and regards,
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
From India, New Delhi
Dear Padmakar,
Regarding the interpretation of the term "wages" as defined u/s 2(y) of the Code on Wages,2019 for its application purpose of maintaining the proportionality between the included components and the excluded components, my learned friend Mr.S.K.Bandyopadhyay and myself have consistently different perceptions right from the very beginning whenever we answer questions similar to the one raised in this thread.
Simply put, my point is that only the components of the wages for such comparative discussion should be taken are only those payable within the " wage period " prescribed u/s 16 of the Code which stands limited to one month and all other excluded components mentioned in the definition payable in different periodicity like bimonthly (i.e., once in two months ), quarterly, half yearly or annually depending either on the terms of the contract of employment or under the provision of any special law applicable to the payment of such a component should be left out. They are simply perks or fringe benefits outside the regular wages and their inclusion for the purpose of proportionality would arise only when they are shown and actually paid in any periodicity fixed u/s 16. It is to be noted that the components mentioned from clause (a) to clause (k) are not illustrative BUT EXHAUSTIVE. If we analyse the CTC structures currently adopted by many employers, we can find many other items like LTC, annual medical allowance or payment of premium to medical insurance to the employee and his family etc.
Whereas my learned friend's contention is that all the pay outs should be indiscriminately calculated on yearly basis and then the proportionality should be determined for the purposes of the Code.
Of course neither of us have the authority to say as of now which view is correct unless and until a Judicial Pronouncement comes in this regard in future.
Besides, coming to the question of restructuring in the wake of implementation of the Code on Wages,2019, I feel that it is not so necessary. The reason is that when your existing wage structure gives room for any mis-match in terms of proportionality between the inclusive and excluded components, the calculation for all statutory purposes would be automatically restored to the parity of proportions. But, if you want to be judicious, you can adopt either of the above methods as per your own conviction. But reduction in the existing allowances for the purpose of restructuring would eventually become a contentious issue as it forms part of the subject matters of Schedule IV read with sec.9-A of the IDA,1947 in the case of workmen and in other cases would necessitate the formation of a new contract of employment.
From India, Salem
Regarding the interpretation of the term "wages" as defined u/s 2(y) of the Code on Wages,2019 for its application purpose of maintaining the proportionality between the included components and the excluded components, my learned friend Mr.S.K.Bandyopadhyay and myself have consistently different perceptions right from the very beginning whenever we answer questions similar to the one raised in this thread.
Simply put, my point is that only the components of the wages for such comparative discussion should be taken are only those payable within the " wage period " prescribed u/s 16 of the Code which stands limited to one month and all other excluded components mentioned in the definition payable in different periodicity like bimonthly (i.e., once in two months ), quarterly, half yearly or annually depending either on the terms of the contract of employment or under the provision of any special law applicable to the payment of such a component should be left out. They are simply perks or fringe benefits outside the regular wages and their inclusion for the purpose of proportionality would arise only when they are shown and actually paid in any periodicity fixed u/s 16. It is to be noted that the components mentioned from clause (a) to clause (k) are not illustrative BUT EXHAUSTIVE. If we analyse the CTC structures currently adopted by many employers, we can find many other items like LTC, annual medical allowance or payment of premium to medical insurance to the employee and his family etc.
Whereas my learned friend's contention is that all the pay outs should be indiscriminately calculated on yearly basis and then the proportionality should be determined for the purposes of the Code.
Of course neither of us have the authority to say as of now which view is correct unless and until a Judicial Pronouncement comes in this regard in future.
Besides, coming to the question of restructuring in the wake of implementation of the Code on Wages,2019, I feel that it is not so necessary. The reason is that when your existing wage structure gives room for any mis-match in terms of proportionality between the inclusive and excluded components, the calculation for all statutory purposes would be automatically restored to the parity of proportions. But, if you want to be judicious, you can adopt either of the above methods as per your own conviction. But reduction in the existing allowances for the purpose of restructuring would eventually become a contentious issue as it forms part of the subject matters of Schedule IV read with sec.9-A of the IDA,1947 in the case of workmen and in other cases would necessitate the formation of a new contract of employment.
From India, Salem
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
Taxes Restructure CTC NPS.pdf