Dear sir it is mandatory to fix basic salary 70% of total salary and remaining part will be in allowances. Many of the employee who basic is 15000( i.e. 70% of his total salary 21428 .00 ) is demanded that kindly decrease the basic up to 50% . Can we go for 50 % basic an other will be in allowances .
From India, Raipur
From India, Raipur
The total income that an employee earns by working for an employer is the salary or wages. This is basic salary. Any other amounts that the employer pays over and above this is an allowance. For example, an employer wants the service of a person to be available very near to the place of work/factory. In order to make it happen, he gives a residential arrangement to the employee, the rent of which is paid by the employer or the employer gives the employee an additional amount equal to the amount required to be paid as rent for the house the latter takes. This is House Rent Allowances. This is not part of wages/ salary.
there is no such rule that basic salary should be 70% or 50% of the entire salary. We, the Managers have interpreted the law wrongly and started bifurcating the salary into different components, thinking that it is basic salary on which the employers' contributions towards PF, Bonus, Gratuity etc are to be calculated. Accordingly, we fix basic salary at 10% of total salary and the rest 90% will be allowances. If the total earning is for Food, Shelter and Clothing, the basic salary is for Food. in the new generation fixation it is food which takes the least amount and the rest, shelter and clothing take the major amount of earning.
The salary or wages for any purpose should include all allowances which are payable to an employee as per contract of employment. The recent interpretation of Supreme Court on the basic wages as defined in the EPF & MP Act, clearly says that it is the total salary which should be regarded as basic salary. In the similar way, gratuity is also payable on total salary and not on basic pay. Please follow the link
Madhu T K: Payment of Gratuity and Gratuity Qualifying Salary
In your present case, a basic pay of 70% of the gross salary was fair one and onebody would object it. But bringing it down to 50%, at least for the new recruits, will be unethical.
From India, Kannur
4249there is no such rule that basic salary should be 70% or 50% of the entire salary. We, the Managers have interpreted the law wrongly and started bifurcating the salary into different components, thinking that it is basic salary on which the employers' contributions towards PF, Bonus, Gratuity etc are to be calculated. Accordingly, we fix basic salary at 10% of total salary and the rest 90% will be allowances. If the total earning is for Food, Shelter and Clothing, the basic salary is for Food. in the new generation fixation it is food which takes the least amount and the rest, shelter and clothing take the major amount of earning.
The salary or wages for any purpose should include all allowances which are payable to an employee as per contract of employment. The recent interpretation of Supreme Court on the basic wages as defined in the EPF & MP Act, clearly says that it is the total salary which should be regarded as basic salary. In the similar way, gratuity is also payable on total salary and not on basic pay. Please follow the link
Madhu T K: Payment of Gratuity and Gratuity Qualifying Salary
In your present case, a basic pay of 70% of the gross salary was fair one and onebody would object it. But bringing it down to 50%, at least for the new recruits, will be unethical.
From India, Kannur
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