Minimum Wages comprise of a Basic rate of wage and Dearness Allowance (which will be variable according to changes in the cost of living index announced by the Department of Economics and Statistics)
Apart from the above there is no specific rule that Basic should be 70% or 35% of gross salary. It is to be structured according to the convenience of the employer and employee (as he has to bear Income Tax on his earnings). In any kind of salary structure the basic salary will take the base for the entire thing (hence it is "BASIC SALARY) and DA, HRA, CCA etc will be calculated as percentage of the given Basic Salary to reach the Gross Salary. Only thing to be aware of is to ensure that you are not paying a gross salary less than the minimum rate of wages fixed by the appropriate government.
Regards,
Madhu.T.K
From India, Kannur
4249Apart from the above there is no specific rule that Basic should be 70% or 35% of gross salary. It is to be structured according to the convenience of the employer and employee (as he has to bear Income Tax on his earnings). In any kind of salary structure the basic salary will take the base for the entire thing (hence it is "BASIC SALARY) and DA, HRA, CCA etc will be calculated as percentage of the given Basic Salary to reach the Gross Salary. Only thing to be aware of is to ensure that you are not paying a gross salary less than the minimum rate of wages fixed by the appropriate government.
Regards,
Madhu.T.K
From India, Kannur
Dear Sir,
Thanks for your explanation about basic. You have mentioned that there is no rule on how you split basic & only gross wages shall be atleast as per minimum wages specified by the state govt. But if look at the attachment, I had sent on 24th July , which states the verdict given by PF commisioner, Faridabad that PF calculation has to be based on the basic minimum wages & basic can not split for calculation of PF. Your explanation is contradicting to judgement gien by PF commisoner. Is there any other judgment past superceeding this judgement? If yes please send us the updates.
I feel if governments are specifically splitting minimum wages into basic & DA there is reason to it. Had the goverment given liberty to companies to decide about basic there would be no measureable yard stick & companies can go as low as they wish & that will affect the statutory benefits employees get like PF,ESI, Bonus,Overtime etc.
It will be great if can put some light on this as many are still confused about the Basic.
Best Regards,
Shrinkar
From India, Mumbai
Thanks for your explanation about basic. You have mentioned that there is no rule on how you split basic & only gross wages shall be atleast as per minimum wages specified by the state govt. But if look at the attachment, I had sent on 24th July , which states the verdict given by PF commisioner, Faridabad that PF calculation has to be based on the basic minimum wages & basic can not split for calculation of PF. Your explanation is contradicting to judgement gien by PF commisoner. Is there any other judgment past superceeding this judgement? If yes please send us the updates.
I feel if governments are specifically splitting minimum wages into basic & DA there is reason to it. Had the goverment given liberty to companies to decide about basic there would be no measureable yard stick & companies can go as low as they wish & that will affect the statutory benefits employees get like PF,ESI, Bonus,Overtime etc.
It will be great if can put some light on this as many are still confused about the Basic.
Best Regards,
Shrinkar
From India, Mumbai
Yes, it is quite possible that EPFO shall issue a notification (Please bear with me, I could not open the file sent by Shrunkar) calling on the employers to fix the basic wages to a limit. This is certainly to avaoid contribution towards ESI/EPF etc to be reduced to that small amount. For EPF, infact, Basic + DA wages form the qualifying salary and not the basic salary alone. Under minimum wages, only basic rate and Dearness allowance are stated and if the employer is willing to pay HRA, CCA or other allowance like special pay etc, he can do so but the total should not be less than the minimum wages. As such there may be a tendency to fix very low basic wages and pay higher HRA or other allowances sothat his contribution towards PF could also be reduced. Here the EPFO shall have interfered and asked to bring the basic wages UP so as to bring up the contribution also. Here again, this is an action of the EPFO after having found that there are so many cases of attempt to reduce the burden of EPF contribution. It is not as per EPF Act or Schemes framed thereon as there is no such provision in the Act which says that basic wages shall be so much. But it shall be looked as a ruling made by the EPFO by virtue of the powers conferred to it by the Act in the interest of the employees.
The two concepts, minimum wages and the EPF, are different and have their own objectives and parameteres.
Regards,
Madhu.T.K
From India, Kannur
The two concepts, minimum wages and the EPF, are different and have their own objectives and parameteres.
Regards,
Madhu.T.K
From India, Kannur
Dear Sir,
I am still confused about basic wages. If I want to comply to Minimum wages act & to the minimum wages prescribed by govt. ( Basic + D.A.) I need to pay basic as well as DA as per the notification from the government. I need to show the same in wage register. If I want to reduce the burden of paying lesser PF amount by showing lower basic how can I do it if I have maintained wage register by showing basic & DA as per minimum wages prescribed. If I show lesser basic to reduce PF buden then I am not complying to basic wages prescribed by govt.
Kindly advise.
Best Regards,
Shrinkar
From India, Mumbai
I am still confused about basic wages. If I want to comply to Minimum wages act & to the minimum wages prescribed by govt. ( Basic + D.A.) I need to pay basic as well as DA as per the notification from the government. I need to show the same in wage register. If I want to reduce the burden of paying lesser PF amount by showing lower basic how can I do it if I have maintained wage register by showing basic & DA as per minimum wages prescribed. If I show lesser basic to reduce PF buden then I am not complying to basic wages prescribed by govt.
Kindly advise.
Best Regards,
Shrinkar
From India, Mumbai
Dear Sweety,
As per minimum wages act Basic+D.A+Cost of Living (HRA) is minimum wage. But PF official says that employer can't split minimum wage and for the same Karnal PF office had issued a circullar. But still PF department is also on silent on the same.
So the best practice is keep Basic 30-35% of CTC but not less then minimum wage.
There is no such ruling/judgment on the same yet. As per my knowledge a security company's case is also pending in the court on the same issue.
Feel free to revert.
regds,
Lalit
9310692536
Lalit
From India
As per minimum wages act Basic+D.A+Cost of Living (HRA) is minimum wage. But PF official says that employer can't split minimum wage and for the same Karnal PF office had issued a circullar. But still PF department is also on silent on the same.
So the best practice is keep Basic 30-35% of CTC but not less then minimum wage.
There is no such ruling/judgment on the same yet. As per my knowledge a security company's case is also pending in the court on the same issue.
Feel free to revert.
regds,
Lalit
9310692536
Lalit
From India
Dear
For scheduled industries notified by the Labour Deptt of the state, the basic wage should not be less than the minimum wages notified for the category. You can pay any amount as basic over and above the minimum wages, but must consider the cost of PF/Bonus/Gratuity/Leave Encashment/LTA/Medical reimbursement which are the indirect cost on the basic wage
ak malhotra
From India, Guwahati
For scheduled industries notified by the Labour Deptt of the state, the basic wage should not be less than the minimum wages notified for the category. You can pay any amount as basic over and above the minimum wages, but must consider the cost of PF/Bonus/Gratuity/Leave Encashment/LTA/Medical reimbursement which are the indirect cost on the basic wage
ak malhotra
From India, Guwahati
hi
according to epf act epf should be on basic+da and basic allow should be more then other allows. if a employee is getting 3500/- and minimum wages are 3700/- then in this case increase his salary upto 4000/- then split it into two parts, basic and hra. think in favour of employee if you deduct epf and esi on the minimum wage what he will get.
From India, New Delhi
according to epf act epf should be on basic+da and basic allow should be more then other allows. if a employee is getting 3500/- and minimum wages are 3700/- then in this case increase his salary upto 4000/- then split it into two parts, basic and hra. think in favour of employee if you deduct epf and esi on the minimum wage what he will get.
From India, New Delhi
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.
Increase in Minimum wages wef 01.01.09-Govt Letter.doc
National Minimum Guidelines for creches.pdf