Labour Law & Hr Consultant
Head - Outsourcing
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Dear All

PFA copy of Judgement by the Hon'ble SC in Airfreight v Stae of Karnataka, wherein SC has clearly held that “ in cases where employer is paying total sum which is higher than minimum wages fixed under the Act including the cost of living index (VDA), he is not required to pay VDA seperately. However, that higher wages should be calculated as defined in Section 2 (h) of the Act” (copy attached). Section 2 (h) of the Minimum Wages Act 1948 defines “ wages means all remuneration capable of being expressed in terms of money … and includes house rent allowance … “(copy attached).

However, ignoring the specific provision in the Minimum Wages Act 1948 and the very clear and categorical Judgement of the Hon'ble Supreme Court, almost all State Governments have issued Gazette Notification fixing only Basic / Wages and Dearness allowance as Minimum Wages and ignoring HRA.

Moreover, the recent order of the EPF Tribunal (copy attached) also very specific that fixation of wages / allowances is between the employer and employee and the EPF authorities could only demand PF contribution on the Basic and DA so fixed as per the EPF & MP Act 1952.

Therefore in view of the recent amendment to the Payment of Bonus Act 1965, Employers should take it up through their representative Forums / Federation and challenge the Notifications of the respective State Governments issued under the Minimum Wages Act 1948 so that minimum Bonus of Rs 7000 /- only could be paid without reference to the Minimum wages. The revised fixation of wages and allowances could also help the employers in restricting the cost towards many other payments like Gratuity etc.,

I shall be thankful if you could inform me of your detailed and considered views on the above.


N Nataraajhan HP : + 91 94835 17402

Sakthi Management Services

Attached Images
File Type: jpg MW - Sec 2 (h) of the MW Act.jpg (910.5 KB, 203 views)
Attached Files
File Type: pdf AirFraight Ltd Vs. State of Karnataka (SC) .pdf (105.7 KB, 431 views)
File Type: pdf Delight Seveices - EPF Trbnl 2015.pdf (1.42 MB, 243 views)

Dear Mr.Natraj,

Sorry, I am not able to understand what exactly is the clarification sought for in your post. The definition of the term wages u/s 2(h) of the MW Act,1948 is with reference to the inclusive components which constitute the minimum wages fixed and periodically revised under the Act. It is not necessary all such components should be prescribed in the minimum wages fixed for the scheduled employments. What is important is that the sum total of the industry wages irrespective of the scale or nomenclature of the components other than the excluded ones should not be less than the minimum wages fixed by the App. Govt for that scheduled employment.So, non-inclusion of HRA as a distinct component in the rates of MW can not be viewed as an act of non-compliance of the definition of wage under the MW Act,1948 and of the ratio decidendi of the Apex Court's decision in the Air Frieght Corporation Case as well.

If HRA is also included in the rate of MW as you suggested, you will probably have to pay more than the minimum bonus of Rs.7000/= as the added HRA component may raise the minimum wages invariably in all scheduled employments.

Dear Mr Umakanthan
Thanks for your quick and detailed reply. The definition of "wages" in the Minimum Wages Act 1948 clearly and specifically says that HRA is part of MW. But when we bifurcate MW as Basic, DA and HRA, PF officials are objecting the bifurcation and there has been lot of HC judgements after the controversial circular in 2011 by the EPFO.. Now only there has been some clarity after the recent order of the EPF Appellate Tribunal. While notifying the MW, if the State Govt could mention that whatever the specific inclusion in the definition of "wages" is mentioned as part of MW - like Basic, DA, HRA etc., there will be more clarity and correct compliance of the Act.
As HRA is part of MW, inclusion of HRA will not become more than the MW and HRA is not additional payment over and above MW.
N Nataraajhan, Sakthi Management Services (HP : + 91 94835 17402 ; e-mail : )

Dear Mr.Nataraj,

The controversial circular of the EPFO is an example for the fact that at times enforcement authorities are bound to cross "the lakshman rekha" in their excess of enthusiasm. My suggestion to fight it out went unheeded then by the employers for other obvious reasons. Determination of wage, its scales, structure, etc., is a subject-matter of collective bargaining between the industrial employer and his employees based on several factors such as demand and supply, profitability,regional imbalances, bargaining power of employees, productivity etc. Therefore the introduction of certain components aiming to raise only the money-wages rather than real wages causing indirect burden on the employer is a universally accepted convention in the realm of wage and salary administration.When the definition of wage is unambiguous in a particular legislation to serve its object, it is not imperative on the part of the enforcement authority under that legislation to borrow the extended and liberal definition of the same term coined in a different legislation for a different purpose.

Dear All
PFA copy of article in LLR regarding applicability of HC judgement on the stay of retrospective effect of Bonus for the year 2014-15 all over India.
N Nataraajhan HP : + 91 94835 17402
Sakthi Management Services

Attached Files

Applicability of High Court Orders across India on retrospective effect of Payment of Bonus (Amendment) Act, 2015
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