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A company pays minimum wages to its employee after dividing into two heads (i.e. Basic and Special allowance). Kindly clarify whether minimum wages should be only basic or it can be divided into two/three heads.
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Gross wages including all allowances are to be considered for calculation under minimum wages act compliance
Please refer to the definition given given 2(h) of the Minimum Wages Act, 1948 which says that it includes all remuneration,which are capable of being expressed in terms of money Plus house rent allowance. It can be split into more heads but it must be ensured that the workers are not deprived off the recurring benefits prescribed by the Appropriate Govt under the other relevant Acts.
BS Kalsi,
Member since August, 2011
There are many things that you should consider while doing so.
Mostly companies adopt this practice to reduce the burden of remitting the lump sum PF contributions. But it is not a fair practice. There is a circular form EPFO which states "splitting of minimum wages for the purpose of PF contribution is not permissible".
If you split the minimum wages into different sub heads, obviously you are subtracting some amount from Basic and DA part, thus by doing so you are depriving your workers from getting benefits of EPF.
Hence my sincere advise is to don't split minimum wages.
Request professionals to throw some light on this topic
Dear All, As per my understanding, Min Wages can not be split into components. Regards, Col.Rathi
Friends,
Punjab & Haryana High Court vide order dated 20.7.2011 (coppy attached) has permitted splitting of minimum wages for PF. Similarly, EPFA Tribunal vide order dated 30.11.2015 (copy attached) has permitted splitting. However, it is understood that the matter is pending before Supreme Court for final decision.
Thanks

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File Type: pdf Splitting of minimum wages for PF permitted - P&H HC 20.7.11.pdf (61.5 KB, 251 views)
File Type: pdf Splitting of minimum wages for PF permitted - EPFAT 30.11.2015.pdf (670.3 KB, 308 views)

Dear sir, Warm Greetings, If we split the minimum wages as different components..then there is short fall on PF contribution.... So my opinion is don’t split the MW Regards Siva.
Dear sir,
Warm Greetings, Minimum Wages is nothing but (Basic+DA), PF contribution is generally considered on both (Basic+DA). So my opinion is Minimum Wages can not be split into components. Best Regards, Nihar Ranjan Swain.
Can any one give a clarity whether minimum wages can be slipted into different allowances so that the contractor pay very less contribution to PF remittances.
Ex. Suppose Minimum Wage = Rs.325/Day
Total Wage for 26 days = Rs.8450/Month
Basic(@35% of Gross) =2958, HRA(@30% of basic)= 887, Other Allowanses=4605
So, he pays PF for Rs.2958 which is Rs.253.
splitting of minimum wages should not be used to avoid or manipulate the EPFO,
if the employee is of permanent nature with the establishment then HRA can be allowed as allowance from MW
but in case of casual employments, gross consolidated wages is minimum wages, and can not be split
in gross Basic + HRA = Mimimum Wages, anything paid over it may be taken in other allowances,
but in no case the EPF Wages can be below 50% of gross wages (subject to ceiling of 15000/- if maintained)

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