Determination of gross salary /wages, its componential structure and the percentage of each component to the gross amount are matters to be decided by collective bargaining between the individual employer and his employees or at the discretion of the individual employer as per the prevailing industry norms subject to statutory restrictions like the application of minimum wages, if any. Therefore, no straight - jacket formula, if any in the matter can be suggested. The percentage of the components of basic salary /wages and dearness allowance have to be fixed in such a manner that social security measures like gratuity, EPF are not reduced. Therefore, my suggestion would be that you can follow the structure adopted by the progressive employers in your industry.
15th July 2018 From India, Salem
Our most senior member Shri. Umakanthan has rightly said that there is no straight - jacket formula as to percentage of basic plus DA to Gross.
There is no such law which says that you need to pay basic & DA to certain percentage of gross pay. No law says that you need to pay salary / wages in various other components or allowances excepts in some States there is a law of HRA.
You need to pay the component of Basic & DA/ Sp. Allw. as per the minimum wage rates or more as prescribed to your schedule industry. This is the law.
In Maharashtra, if you have more than 50 employees, you are liable to pay min. 5% HRA of Basic & DA/ Sp. Allw.
15th July 2018 From India, Mumbai
The DA component is meant to neutralize basic wages against price erosion and it is 100% at the rock bottom wages as per the Supreme Court guidelines.
However unless you devise some formula to link basic wages to Cost of Living Index (CPI), to prescribe arbitrarily any % would be futile.
As rightly pointed out by the learned colleagues, you can adopt Minimum wages formula applicable to your industry or follow industry practice in the region.
16th July 2018 From India, Mumbai
It is wrong to say that minimum wage is equal to gross and not basic. Rather the opposite is true. In Punjab, as per Note 3 of the minimum wage notification dated 31-05-2012, it has been specifically provided that "The minimum wages fixed/revised shall be the basic rates of wages." This may also be the situation in many other States. Please check for your State.
20th July 2018 From India, Chandigarh
When the appropriate government fixes/revises minimum wage for different categories of employees i.e. unskilled, semiskilled, skilled etc., then one of the clause in that notification is about linking this wage with the Consumer Price Index (CPI) which is declared every six months based on the data provided by the Statistical Department of State/Center governments. Based on CPI, the appropriate government then enhances the wage of each category. This enhancement is merged with the earlier fixed/revised minimum wage. By such merger, a new minimum wage is formed and is treated as the minimum wage fixed by the government.
Hence, if you split the minimum wage into Basic + DA, it will not save you any money as all benefits under the Labour Laws are given to workmen on Basic+DA. My experience is that the employers want to split minimum wage so that they can save some money on contribution to ESI, PF, bonus, gratuity etc.
Under the Minimum Wages Act, there is no percentage fixed for splitting it in to Basic and DA. Please decide yourself keeping in view that it is a welfare legislation and even the ethics demand that the legal share of poor workmen or for that matter the share of any one, should not be taken away.
Best wishes and regards.
2nd August 2018 From India, Chandigarh