Saswatabanerjee
Partner - Risk Management
Jeevarathnam
Sr. Manager Hr/admin
Snehal4u
Assistant Manager - Hr
Ashutosh Thakre
Hr Professional
+2 Others

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Anonymous
Dear Friends,
I am working with a Pharma Pvt. Ltd.company. I need your expert advice regarding Basic & PF. My company has hired an old age consultant who doesn't know anything about latest rules and regulations of the legal compliances. We have total 400 employees in our company & we asked him to suggest some ideas of cost cuttings then he suggested us to increase the basic salary of all employees as much as possible and to exempt the employees from PF which may help us to reduce the cost of company. I found the idea is not worth as 40% basic is common rule everywhere. We can not make fool to employees by adopting such useless tricks.
Kindly help me in this which very much important for me. Waiting for the reply.
Thanks & Regards,
Ms. Sneha

From India, Kolhapur
If you increase basic salary then other Liability like Gratuity ,Leave encashment and other liabilities will increase.
If you want to reduce your Liability then you have to prepare Proper Policies,Pay structure.
you have to work on Performance management system,Manpower Planing and analysis on company direct and indirect expenses.
If you wish to learn Practical HR Things then you can join us on Band app.

From India, Faridabad
Hi Sneha
As Amit suggested if you increase the Basic wages sure other expenditure also will increase.
One more point you have to keep in mind is if any employee is covered under PF then even if the wages is above 15000/- then it is mandatory to contribute EPF for department. You can't skip the EPF contributions by increasing the wages

From India, Bangalore
Thank you so much all for your reply.
But i have some queries like Amit sir said it will increase the cost of leave encashment which is not there in our company. We are not in manufacturing we are a Marketing company so it is risky to adopt that leave encashment policy.
Jeevarathnam sir thank you for reply... It means PF is compulsory upto 15000 basic to each & every employee. If any of employee's basic is 30000 it doesn't mean we would exclude him from PF.. Is it..???
My mail id is [email protected]

From India, Kolhapur
Dear Sneha, As you have already been deducting the PF, you cannot stop the deductions on the ground that the Basic has increased. You will still need to pay the same. Regards, Ashutosh Thakre
From India, Mumbai
Your consultant will get you into trouble.
Exemption from PF is available only to an employee who has joined the company above the cutoff limit (currently ₹15000) and who does not have a PF account at time of claiming exemption.
So no, you can not stop PF payments.

From India, Mumbai
Dear Sneha,
Basic 40 % and HRA 30 % is a mandatory concept of statutory. Accordingly you can structure your pay components. However other than HRA all other components is a must to pay as PF. You can clarify this with Para 2 Section-29 of EPF 1952 . As Amit rightly said any change in Basic will affect the CTC and either the employer or the employee will be benefitted.
Exemption from PF is a lame excuse and not advisable either. As a perfect HR you revise your pay components in accordance with the existing minimum wages act and follow the payment wages act.
Any query in regards to industrial dispute or legal implications you may mail in to my official mail id [email protected]
Thanks & Regards, Wish You many success to progress
Sathish

From India, Chennai
Can you enlighten me, under which law is basic and HRA mandatory to be at 40% and 30% ? To the best of my knowledge, there is no such regulation. Basic can be even 100% of salary. Only in a few states HRA is mandatory. Like in Maharashtra HRA needs to be 5%. It is the wishes of the employer how he wants to structure his wages and salaries. Please be careful of what you write as people will be mislead and will take a wrong decision.

From India, Mumbai
I do accept Saswat Banerjee.
There is no any regulation for breakups. The only reason for breakups is just to reduce the Tax as well as some of the overheads.
I hope in Maharastra HRA is 50% & not 5%. I hope its just the typing mistake.

From India, Bangalore
In Maharashtra the HRA is mandatory for 5%. 40% or 50% is for tax benefits.
Also the Mandatory Basic can only be what ever is specified in the the Minimum Wages (applicable to those categories).
The Basic being 35% to 50% of the CTC, is more of a practice and not a mandatory requirement.
Regards,
Ashutosh Thakre

From India, Mumbai

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