Hi, please resolve my query. I am proposing to freeze the Basic Salary up to Rs 21,000 per month. Now considering this, please guide me on the following:
1) In case of an increment, can I make an addition only to the Special Allowance component without increasing the Basic Salary part? The reason for doing so is to keep the gratuity payout component permanent.
2) Is this legally possible?
3) Also, I would like to fix the PF contribution at Rs 15,000 per month.
4) Currently, the Basic Salary (without the new wage code) is 45% of the CTC. So, can I tweak the same and issue new appointment letters to everyone?
Please advise; it will be of great help.
From India, Mumbai
Acknowledge(0)
Amend(0)
161) In case of an increment, can I make an addition only to the Special Allowance component without increasing the Basic Salary part? The reason for doing so is to keep the gratuity payout component permanent.
2) Is this legally possible?
3) Also, I would like to fix the PF contribution at Rs 15,000 per month.
4) Currently, the Basic Salary (without the new wage code) is 45% of the CTC. So, can I tweak the same and issue new appointment letters to everyone?
Please advise; it will be of great help.
From India, Mumbai
Acknowledge(0)Amend(0)
Answer to your question no. 1 is yes. However, PF contribution will also be based on Special Allowance. It is very difficult to determine if Gratuity payout will be restricted to a fixed amount since PF gross (Basic + other allowances) will change, resulting in potential changes to Gratuity.
Answer to your question no. 2 is uncertain at this stage regarding future interpretations. Additionally, after the implementation of new labor codes, the existing ambiguities will be eliminated.
Answer to your question no. 3 - it is well accepted in law.
Answer to question no. 4 - Acceptable for now. However, potential issues may arise when the new labor codes are implemented.
From India, New Delhi
Acknowledge(0)Amend(0)
Answer to your question no. 2 is uncertain at this stage regarding future interpretations. Additionally, after the implementation of new labor codes, the existing ambiguities will be eliminated.
Answer to your question no. 3 - it is well accepted in law.
Answer to question no. 4 - Acceptable for now. However, potential issues may arise when the new labor codes are implemented.
From India, New Delhi
Acknowledge(0)Amend(0)
Dear Mr. Bandyopadhyay,
The new labor code is just a few days away. However, the new wage code is silent on the treatment of Gratuity specifically with regards to Basic. If I am wrong, please guide me to the appropriate section. If the entire 50% of CTC is to be taken for gratuity calculation, that is a significant hit to companies from an individual employee perspective.
Regards,
Anu
From India, Mumbai
Acknowledge(0)Amend(0)
The new labor code is just a few days away. However, the new wage code is silent on the treatment of Gratuity specifically with regards to Basic. If I am wrong, please guide me to the appropriate section. If the entire 50% of CTC is to be taken for gratuity calculation, that is a significant hit to companies from an individual employee perspective.
Regards,
Anu
From India, Mumbai
Acknowledge(0)Amend(0)
Dear Anu,
Gratuity matter is not under the Wage Code but under the Code on Social Security. There is no change in the calculation method of Gratuity. The Wage Code will determine the wage (Basic & DA) for the calculation of Gratuity.
The reality in the system is different. Till date, there are a good number of organizations, including organized sectors, maintaining Basic as 30 to 35% of the monthly gross. Moreover, there are organizations that are paying more in yearly items instead of monthly gross to keep the Basic low. The purpose of lawmakers is absolutely clear - not to deprive the employees irrespective of the level. That is the reason the definition of wage has been framed very scientifically.
Basic should be Annual CTC less ESIC & Insurance premium if any (not payable to the employee directly or indirectly) and 50% of the amount. If it is the law of the land, whether we like or dislike, we will be required to fix Basic accordingly, and there will be an impact on Gratuity payment.
It will be a big project for all organizations to identify skill differentiation of the employees, check the minimum wage level, and find out the total remuneration payable to the employee and accordingly determine Basic.
Thanks & regards
From India, New Delhi
Acknowledge(0)Amend(0)
Gratuity matter is not under the Wage Code but under the Code on Social Security. There is no change in the calculation method of Gratuity. The Wage Code will determine the wage (Basic & DA) for the calculation of Gratuity.
The reality in the system is different. Till date, there are a good number of organizations, including organized sectors, maintaining Basic as 30 to 35% of the monthly gross. Moreover, there are organizations that are paying more in yearly items instead of monthly gross to keep the Basic low. The purpose of lawmakers is absolutely clear - not to deprive the employees irrespective of the level. That is the reason the definition of wage has been framed very scientifically.
Basic should be Annual CTC less ESIC & Insurance premium if any (not payable to the employee directly or indirectly) and 50% of the amount. If it is the law of the land, whether we like or dislike, we will be required to fix Basic accordingly, and there will be an impact on Gratuity payment.
It will be a big project for all organizations to identify skill differentiation of the employees, check the minimum wage level, and find out the total remuneration payable to the employee and accordingly determine Basic.
Thanks & regards
From India, New Delhi
Acknowledge(0)Amend(0)
Annual increment is done to the Basic, not on account of the Special allowance. If done so, it shall be treated as a component of basic wages. The reason offered by you in the matter of gratuity shall not stand as valid because an increment is considered to match the inflation.
The PF contribution cannot be fixed at Rs 15,000 per month because the slab changes from time to time. If you do so, there would be difficulty in accounts to make provision.
The new Code on Wages is applicable for the employees taken on employment from the date it comes into effect.
From India, Mumbai
Acknowledge(0)Amend(0)
The PF contribution cannot be fixed at Rs 15,000 per month because the slab changes from time to time. If you do so, there would be difficulty in accounts to make provision.
The new Code on Wages is applicable for the employees taken on employment from the date it comes into effect.
From India, Mumbai
Acknowledge(0)Amend(0)Engage with peers to discuss and resolve work and business challenges collaboratively - share and document your knowledge. Our AI-powered platform, features real-time fact-checking, peer reviews, and an extensive historical knowledge base. - Join & Be Part Of Our Community.
Case studies on R & S.doc
Circular Dated 28-10-2016 for settlement of PF Death Case Claims within 7 days.pdf
PF Death case Composite Claim Form No 20,10D & 5IF.xls