In Airfrieght Ltd vs State of Karnataka, the Supreme Court has observed that the establishment paying gross salary without any component called DA, more than minimum wages as per notification need not pay DA separately.
It is on the basis of the above judgement that many started fixing their basic wages at a very low stage so that various statutory contributions like PF,Gratuity and Bonus can be reduced to the minimum. However, the meaning of wages should be interpreted as the total amount of remuneration that an employer had agreed to pay the employee in return for the labour or service that the latter will contribute when a contract of employment was made at the time of joining. As such there is no meaning in paying the PF on basic alone, or paying the gratuity or bonus on basic wages but it should very strictly be on the gross salary.
20th December 2018 From India, Kannur