A company pays minimum wages to its employees by dividing it into two components - Basic and Special allowance. Could you please clarify whether minimum wages should consist of only the basic component or if they can be divided into two or three components?
Thank you.
From India, Kolkata
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1Thank you.
From India, Kolkata
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Gross wages including all allowances are to be considered for calculation under minimum wages act compliance
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Please refer to the definition given in 2(h) of the Minimum Wages Act, 1948, which states that it includes all remuneration capable of being expressed in terms of money, plus house rent allowance. It can be split into more categories, but it must be ensured that the workers are not deprived of the recurring benefits prescribed by the Appropriate Government under other relevant Acts.
BS Kalsi, Member since August 2011
From India, Mumbai
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BS Kalsi, Member since August 2011
From India, Mumbai
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There are many things that you should consider while doing so. Mostly, companies adopt this practice to reduce the burden of remitting the lump sum PF contributions. However, it is not a fair practice. There is a circular from EPFO which states, "splitting of minimum wages for the purpose of PF contribution is not permissible."
If you split the minimum wages into different subheads, you are essentially deducting some amount from the Basic and DA parts. By doing so, you are depriving your workers of the benefits of EPF. Hence, my sincere advice is to not split minimum wages.
I request professionals to shed some light on this topic.
From India, Hyderabad
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If you split the minimum wages into different subheads, you are essentially deducting some amount from the Basic and DA parts. By doing so, you are depriving your workers of the benefits of EPF. Hence, my sincere advice is to not split minimum wages.
I request professionals to shed some light on this topic.
From India, Hyderabad
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Dear All, As per my understanding, Min Wages can not be split into components. Regards, Col.Rathi
From India, Delhi
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From India, Delhi
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Friends,
The Punjab & Haryana High Court, vide an order dated 20.7.2011 (copy attached), has permitted the splitting of minimum wages for PF. Similarly, the EPFA Tribunal, vide an order dated 30.11.2015 (copy attached), has also permitted splitting. However, it is understood that the matter is pending before the Supreme Court for a final decision.
Thanks
From India, Malappuram
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The Punjab & Haryana High Court, vide an order dated 20.7.2011 (copy attached), has permitted the splitting of minimum wages for PF. Similarly, the EPFA Tribunal, vide an order dated 30.11.2015 (copy attached), has also permitted splitting. However, it is understood that the matter is pending before the Supreme Court for a final decision.
Thanks
From India, Malappuram
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Dear sir, Warm Greetings, If we split the minimum wages as different components..then there is short fall on PF contribution.... So my opinion is don’t split the MW Regards Siva.
From India, Hyderabad
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From India, Hyderabad
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Dear sir,
Warm greetings,
Minimum wages are nothing but (Basic+DA), and PF contribution is generally considered on both (Basic+DA). So, in my opinion, minimum wages cannot be split into components.
Best regards,
Nihar Ranjan Swain.
From India, Kolkata
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Warm greetings,
Minimum wages are nothing but (Basic+DA), and PF contribution is generally considered on both (Basic+DA). So, in my opinion, minimum wages cannot be split into components.
Best regards,
Nihar Ranjan Swain.
From India, Kolkata
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Can anyone provide clarity on whether minimum wages can be split into different allowances so that the contractor pays a lower contribution to PF remittances?
For example, if Minimum Wage = Rs. 325/Day, the Total Wage for 26 days would be Rs. 8450/Month. Breaking it down further:
- Basic (@35% of Gross) = 2958
- HRA (@30% of basic) = 887
- Other Allowances = 4605
Therefore, the contractor would pay PF for Rs. 2958, amounting to Rs. 253.
From India, Bengaluru
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For example, if Minimum Wage = Rs. 325/Day, the Total Wage for 26 days would be Rs. 8450/Month. Breaking it down further:
- Basic (@35% of Gross) = 2958
- HRA (@30% of basic) = 887
- Other Allowances = 4605
Therefore, the contractor would pay PF for Rs. 2958, amounting to Rs. 253.
From India, Bengaluru
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The splitting of minimum wages should not be used to avoid or manipulate the EPFO. If the employee is of a permanent nature within the establishment, then HRA can be allowed as an allowance from MW. However, in the case of casual employments, gross consolidated wages are minimum wages and cannot be split. In gross Basic + HRA = Minimum Wages, anything paid over it may be taken in other allowances. But in no case can the EPF Wages be below 50% of gross wages (subject to a ceiling of 15000/- if maintained).
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Delhi - Minimum Wages w.e.f. 01.10.2012 (1).pdf
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