Industrial Relations And Labour Laws
Asst.commissioner Of Labour..a.p.
+4 Others

Thread Started by #kusumkanchi

Dear Seniors ,
* I would like to know that what is the relation between minimum wage and % of minimum basic wage . please let me know also that how minimum wage (which is upgraded from time to time) changes the minimum % of basic salary ?
*As per my knowledge basic salary may lie between 40 - 60 % , is there any law which defines the percentage of minimum or maximum basic salary in india.
Thanks in advance!!!!!!!!
8th June 2011 From India, Delhi
Dear Kusum,
There is no law which defines the percentage of minimum or maximum basic salary in india. Moreover, it depends on Management.
Govt revise Minimum Wages every after six month and Employer should keep in mind that their employee' basic should be more than what govt fix and revise time to time. This is just for Basic rest of the components are by managent decisions and company policies.
16th June 2011 From France, Voreppe
Let me make a correction that Minimum Wages is not revised every six months but it is normally revised after every five years. At the same time, dearness allowance, which is a component of minimum wages, only is revised and that revision need not necessarily be in six months but it may take place every month also depending upon the increase or decrease in cost of living indices.
Minimum Wages is the bare minimum wages payable to an employee to survive. We know that every day the prices of essential commodities are on increase. Therefore, the government can not fix a wage for five years because a wage fixed now may become negligible after a year or two. It is with a view to avoiding such situation and to make up the cost of living that Dearness Allowance which is variable according to changes in consumer price index is made a component of statutory minimum wages.
16th June 2011 From India, Kannur
Dear Mr. Madhu
Thanks for your reply. but i am on the same state of confusion . recently govt of Delhi revised minimum wage upto rs. 310 per day (rs. 8060 per month for 26 days).
* Correct me if i am wrong as you said the govt. revise the D.A component of minimum basic wage on behalf of consumer price indices. which automatically pushes the minimum wage !!
* according to the new revision an employer is ALSO supposed to revise the basic salary of his graduate employee upto Rs. 8060 and and also needs to consider Rs. 8060 as a base for Pf & PS calculations ?
* In my company(Pvt. Ltd.) employer is giving only basic salary not D.A , does our company also need to upgrade basic salary upto rs. 8060 for a graduate employee?

17th June 2011 From India, Delhi
If you do not give DA but the total salary paid is not less than the minimum wages fixed, it is okay. You need not pay anything extra like DA. With regard to PF contribution, if the minimum wages is Rs 8060, you need not pay contribution on that amount because as per PF schemes, you can restrict your contribution on a salary of Rs 6500. The direction to pay contribution at least on minimum wages does not mean that it should be paid on the actual salary if it is above Rs 6500.
18th June 2011 From India, Kannur
Dear experts, Can I consider my basic pay as 100% of salary (without any allowances) ? Is it legal or not ? Please advise.
10th April 2015 From India, Jamnagar
usually m.w is being confused....
First clear urself state govt .every 2 yrs fixes minimum wage to be paid to the daily labour.....which includes dearness allowance also... Usually it is heigher than basic m.w of any private company worker.
Itsa lengthy answer plstalk 09963218536
16th September 2016 From India, Nellore
Could some expert please clarify on the original question of the thread as it is also giving me headche at my organization level?
Taking example of U.P. where min. wage is 7300 as of today.
Case 1:
Is it legal to keep basic salary as 50% of above amount i.e. 7300/2 = 3650? And then do all the necessary PF deductions etc.
So the salary becomes:
Basic 3650
HRA: 3650
EPF deduction employee = 12% *3650 = 438/-
Employer share = 438
ESIC Employee Share = 1.75% * ( 100% of Grooss i.e., 7300) = 127.75
ESIC Employer = 4.75* ( 100% of Grooss i.e., 7300) = 346.75
Total in-Hand salary of worker= Basic + HRA - EPF Share of employee - ESIC Share of employee
Total in-Hand salary of worker= 3650 + 3650 - 438 - 127.75 = 6734.25 Rs/-
Is it fine?
Also, please answer the main question
Is it legal to keep basic salary as 50% of above amount i.e. 7300/2 = 3650? And then do all the necessary PF deductions etc.
14th December 2016 From India, Delhi
Dear Mr. Atul,
Please be noted that in reference to Section 4 under MW Act, it mentions that minimum wages may be inclusive of basic pay and with special allowance on which it is based.
Though in practice we concentrate on the basic as in Pvt. concerns, we do not have DA. In few Cos. Special Allowance is a component in wages, and in others they do not have any SA.
Therefore to your query, would like to clarify that...
1. If MW is 7500/- then the following will be its structure.
a. Basic- 7500/-
b. HRA- (7500*50/100) = 3750/-
c. PF- Employee= 900/-, Employer= 1002/- (Basic*13.36%)
d. ESIC- Employee= 197/-, Employer= 534/-
e. Total in hand= 10547/-
If you follow this then that can be called as complied.
14th December 2016 From India, Kolkata
Dear Pradipta Nath Sir,
I highly appreciate you for taking out time to reply on my query.
Can i not keep basic salary as 3750 in case of MW is 7500 and do all deductions on this basic?
or do i have to compulsorily keep 7500 itself as the basic and do necessary deductions?
Anticipating your kind reply.
14th December 2016 From India, Delhi
It is not mandatory that your salary should have a component like Dearness allowance. In Airfreight Ltd Vs State of Karnataka, the decision was that if the sum of the salary paid to employees is more than or equal to the basic + DA of the state government notified wages, the establishment is said to comply with minimum wages requirements and there is no need to pay DA. Therefore, if your state's minimum wages is Rs 7500 and you have a basic salary of Rs 3750 and the rest is paid as HRA or other component, you can do so provided this other component is available to the employee while on duty or leave and is not linked to any output or performance.

Keeping Basic wages on a low level would certainly reduce your (employer's) liability towards various contributions and payments like PF, Bonus, Leave encashment or Gratuity. But very strictly, in all these Acts the definition of wages is almost the same, and that is, the amount as per terms of service. What the employee has agreed as remuneration for the service he renders is the salary and for him it is 7500 and not 3750. It is not not at all justifiable that you pay 3750 per month for keeping the employee alive (FOOD) but at the same time pay the same, Rs 3750 for his SHELTER. Please pay some thing for his clothing also, so that it will be clear that we take care of his Roti, Kappada and Makkaan!

Now coming to the PF's view, it is true that HRA is excluded from PF. But what constitutes basic wages is clearly defined in the Act as "all emoluments which are earned by the employee while on duty or on leave....." but does not include dearness allowance, HRA, Overtime wages, ...... This does not mean that your Basic salary would only qualify for PF contribution although for the time being you can defend saying that HRA is excluded. In reality, basic wage is the base of the wage below which it should not fall under any circumstances. That was why the Apex Court of India had rightly said that a company which does not pay the bare minimum wage has no right to exist.

When we pay Gratuity, it is not merely the low Basic wages that will be considered but it will be the minimum wages that will form base for calculation of gratuity. Therefore, even if you fix a low basic wages, your calculation of gratuity should be on the minimum wages.

When it comes to ESI contribution, again, it is the gross salary which will qualify for contribution.

15th December 2016 From India, Kannur
Dear Mr. Atul, Please keep 7500/- as the Basic and do all the statutory or other deductions. It is the correct one and even everybody practice the same.
16th December 2016 From India, Kolkata
From the above discussion- Shall we clarified that basic wages should be same with Minimum wages?
I need to convince my management as I had same problem
Is there any notification that "Min. wages and basic salary must same"?
Please share
Thanks & Regards

21st November 2017 From India, Daman
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