Dear all,
I work as an HR professional for an IT & BPO company with 45 employees in Mysore, Karnataka. Currently, we are allocating 40% of the gross salary as Basic pay. Is this a legally correct split for the state? Please inform me about the category my firm falls into and what the minimum wage is for the same.
Thank you,
Megha A
From India, Maisuru
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2I work as an HR professional for an IT & BPO company with 45 employees in Mysore, Karnataka. Currently, we are allocating 40% of the gross salary as Basic pay. Is this a legally correct split for the state? Please inform me about the category my firm falls into and what the minimum wage is for the same.
Thank you,
Megha A
From India, Maisuru
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Dear Megha,
As per the classifications in Karnataka, IT & BPO fall under the Shops & Commercial Establishment Act. You should maintain basic pay & DA as per the Minimum Wages Act pertaining to the Karnataka Shops & Commercial Establishment Act.
From India, Bangalore
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As per the classifications in Karnataka, IT & BPO fall under the Shops & Commercial Establishment Act. You should maintain basic pay & DA as per the Minimum Wages Act pertaining to the Karnataka Shops & Commercial Establishment Act.
From India, Bangalore
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Dear Prashant B Ingawale,
As far as I know, there are a few court decisions stating that the basic salary should be in a reasonable proportion of the gross salary, and that reasonable proportion is usually considered as 40%. Can you please share under which section of the Minimum Wages Act it is specified that the basic should not be less than 40% of Basic + DA? Just to update myself.
Regards,
Kamal
From India, Pune
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As far as I know, there are a few court decisions stating that the basic salary should be in a reasonable proportion of the gross salary, and that reasonable proportion is usually considered as 40%. Can you please share under which section of the Minimum Wages Act it is specified that the basic should not be less than 40% of Basic + DA? Just to update myself.
Regards,
Kamal
From India, Pune
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Dear Kamal,
Prashant and Jeeva are guiding Megha as the Basic + DA must not be below the Minimum Wages fixed by the appropriate Government. There is no rule or act that fixes the 40% as Basic or Basic + DA. If I am mistaken, please clarify.
From India, Kumbakonam
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Prashant and Jeeva are guiding Megha as the Basic + DA must not be below the Minimum Wages fixed by the appropriate Government. There is no rule or act that fixes the 40% as Basic or Basic + DA. If I am mistaken, please clarify.
From India, Kumbakonam
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Dear Bhaskar,
I am totally confused now. I am currently following basic as 40% of gross. If I go by the MW act, then basic is less than 5800 in a few cases, which is the statutory basic for my industry. My management does not want any changes that will decrease net pay and increase CTC. I am trying a few different calculations, but it does not fit the above parameter. Will the company be in any sort of legal bind if I stick to 40% basic? Please clarify this issue for me.
Thanks,
Megha A
From India, Maisuru
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I am totally confused now. I am currently following basic as 40% of gross. If I go by the MW act, then basic is less than 5800 in a few cases, which is the statutory basic for my industry. My management does not want any changes that will decrease net pay and increase CTC. I am trying a few different calculations, but it does not fit the above parameter. Will the company be in any sort of legal bind if I stick to 40% basic? Please clarify this issue for me.
Thanks,
Megha A
From India, Maisuru
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Dear Megha,
Please ensure that the Basic + DA of any employee in your organization does not fall below the minimum wages set by the appropriate government. You do not need to worry about any percentage.
Additionally, could you clarify a doubt I have? If you increase an individual's basic salary by Rs. 1000, would you also raise other allowances by Rs. 1500 to maintain the percentage ratio? By doing so, you can keep the percentage consistent.
Thank you.
From India, Kumbakonam
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Please ensure that the Basic + DA of any employee in your organization does not fall below the minimum wages set by the appropriate government. You do not need to worry about any percentage.
Additionally, could you clarify a doubt I have? If you increase an individual's basic salary by Rs. 1000, would you also raise other allowances by Rs. 1500 to maintain the percentage ratio? By doing so, you can keep the percentage consistent.
Thank you.
From India, Kumbakonam
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Dear Bhaskar,
If I increase the basic by, say, Rs 1000, I will not increase other allowances at all. I will be decreasing it so that the gross remains the same. The problem with us is that the gross and take-home amounts are fixed and cannot be changed. I can only play with the way it is split to ensure legal compliance.
Warm Regards,
Megha A
From India, Maisuru
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If I increase the basic by, say, Rs 1000, I will not increase other allowances at all. I will be decreasing it so that the gross remains the same. The problem with us is that the gross and take-home amounts are fixed and cannot be changed. I can only play with the way it is split to ensure legal compliance.
Warm Regards,
Megha A
From India, Maisuru
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Dear Megha You have to increase the Basic & DA to comply the minimum wages act. Other allowances shall decrease. So your gross will remain same & it will reflect only CTC & the Net take home
From India, Bangalore
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From India, Bangalore
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Megha,
You started the thread in a wrong manner...
First, understand, legally there is no rule that says how salary will be structured. It is the notice of the company to decide what it will do and how it will break up the salary. There are certain norms you will find on this site and on other forums, sites, and books. However, you are free to decide your own structure.
However, there are some rules that you should follow to avoid problems, some of which members tried to explain to you above.
1. Ensure that Basic + DA is more than minimum wages. That is a requirement of the law. Check with the latest state notification for minimum wages.
2. Check if HRA is compulsory (as far as I know, Maharashtra and Gujarat are the only states that provide for compulsory HRA amounting to 5% of Basic + DA). Income tax allows tax-free HRA up to 40% of salary if the employee actually pays house rent. So it would make sense to provide an amount of HRA that gives maximum tax benefit. Speak to your accounts head; he will help you work that out.
3. An amount of Rs. 800 per month is allowed to each employee as tax-free travel allowance. So you can provide for that in the structure.
4. Companies generally try to reduce basic and DA since a lot of statutory benefits are often computed on that basic. However, I believe that is a fallacy that has resulted in companies creating a number of allowances unnecessarily. I believe that you should create allowances that actually make sense (e.g., additional allowance for night shift).
As desired by your management, you can adjust your structure without disturbing the total take-home or CTC.
From India, Mumbai
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You started the thread in a wrong manner...
First, understand, legally there is no rule that says how salary will be structured. It is the notice of the company to decide what it will do and how it will break up the salary. There are certain norms you will find on this site and on other forums, sites, and books. However, you are free to decide your own structure.
However, there are some rules that you should follow to avoid problems, some of which members tried to explain to you above.
1. Ensure that Basic + DA is more than minimum wages. That is a requirement of the law. Check with the latest state notification for minimum wages.
2. Check if HRA is compulsory (as far as I know, Maharashtra and Gujarat are the only states that provide for compulsory HRA amounting to 5% of Basic + DA). Income tax allows tax-free HRA up to 40% of salary if the employee actually pays house rent. So it would make sense to provide an amount of HRA that gives maximum tax benefit. Speak to your accounts head; he will help you work that out.
3. An amount of Rs. 800 per month is allowed to each employee as tax-free travel allowance. So you can provide for that in the structure.
4. Companies generally try to reduce basic and DA since a lot of statutory benefits are often computed on that basic. However, I believe that is a fallacy that has resulted in companies creating a number of allowances unnecessarily. I believe that you should create allowances that actually make sense (e.g., additional allowance for night shift).
As desired by your management, you can adjust your structure without disturbing the total take-home or CTC.
From India, Mumbai
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Dear Megha,
Now Saswata has given you a good idea regarding the salary structure designing. The government has fixed minimum wages to be Basic + DA. For seniors and higher-level people, it can be on the upper side. 40% can be fixed as House Rent Allowance (for tax exemption). Additionally, there is a conveyance allowance of Rs. 800/-.
Education allowance may also have some exemption (please check). The balance amount can be fixed as an additional allowance or special allowance.
Hope you now have some idea regarding the framing of the salary structure.
From India, Kumbakonam
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Now Saswata has given you a good idea regarding the salary structure designing. The government has fixed minimum wages to be Basic + DA. For seniors and higher-level people, it can be on the upper side. 40% can be fixed as House Rent Allowance (for tax exemption). Additionally, there is a conveyance allowance of Rs. 800/-.
Education allowance may also have some exemption (please check). The balance amount can be fixed as an additional allowance or special allowance.
Hope you now have some idea regarding the framing of the salary structure.
From India, Kumbakonam
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Gross Salary(1).xls