PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
Labour Law & Hr Consultant
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Shailesh Parikh_HR ProDear Thirumurugun
1.Shall we keep HRA more than basic wages.
There is No cap by law- however the allowances are to be arranged considering Income Tax exemption available as per IT rule. So if you are in Metro- HRA should be max. 50% of Basic in other cases max. 40% of Basic.
2.Basic wages is included HRA. This is called minimum wages. Is this correct.
No. Basic wage is an absolute component. In case of Min wages the special allowance also known as DA is clubbed with Basic.
3.(Basic+HRA) should not go below minimum wages. Is it correct.
No. Basic should not go below Min wages.
99 98 97 10 65
From India, Mumbai
T.ThirumuruganThe Minimum Wages Act, 1948
"wages" means all remuneration, capable of being expressed in terms of money which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment [and includes house rent allowance], but does not include:
(i) the value of
(a) any house accommodation, supply of light, water, medical attendance, or
(b) any other amenity or any service excluded by general or special order of the appropriate Government;
(ii) any contribution paid by the employer to any Pension Fund or Provident Fund or under any Scheme of social insurance;
(iii) any travelling allowance or the value of any travelling concession;
(iv) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(v) any gratuity payable on discharge;
In this above definition, it seems that wages includes house rent allowance
From India, Hyderabad
A definition is ordinarily the crystallisation of a legal concept promoting precision and rounding off of blurred edges. Sometimes a definition extends the ordinary meaning and sometimes it restricts the same. Therefore, a definition clause in any statute does not necessarily apply in all possible contexts in which the defined words may be found therein. Hence the definition clause must be read in the context of the subject-matter and the scheme of the Act and consistently with the objects and other provisions of the Act.
In this back drop, the definition of the term "wages" occurring in the Minimum Wages Act,1948 quoted by you is only for the purpose of fixing minimum rates of wages in certain employments. If you look at the term "wages" as defined u/s 2 (vi) of the Payment of Wages Act,1936, you can find some additional heads of remuneration included in the definition for the purpose of the latter enactment is to ensure that wages actually disbursable to workers covered by the Act are disbursed within the prescribed wage-period and employees get their full wages without any deductions which are not specifically authorised by the Law.
Here the gist of all your queries, if I were correct, is relating to breaking up of the single package of wages into different components and their scales. In other words, it is the bifurcation of the entire package of wages into two major heads viz., Basic wages and allowances. It, therefore, implies that originally wages for the services rendered by the employee meant only the basic wages and allowances came to be added later as a compensatory measure for the purpose of retaining the employee on the job due to reasons of migration of labor and collective bargaining. Hence, whatever be the allowances, they have to be computed relative to the basic or original wages.
As such, a relatively determined component like HRA can not be more than the basic wages just because it forms part of the term "wages" as defined under any law enacted for a different purpose. You also should bear in mind that HRA is not included in the calculation of statutory terminal and social security benefits. Moreover, such move would be viewed as cynical.
From India, Salem
HRA is actually decided based on the salary. There are some other factors that affect it which could include things like the city in which the employee resides. If the place of residence is a metro city then employees are entitled to an HRA equal to 50% of the salary. For all others cities the entitlement is 40% of the salary.
For the purpose of calculating the HRA, the salary is defined as the sum of the basic salary , dearness allowances and any other commissions. If the employee is not receiving a dearness allowance or commissions then the HRA will be 50%/40% of the basic salary.
The actual HRA offered will be the lowest of the following three provisions:
The amount received as the HRA from the employer.
Actual rent paid less 10% of the basic salary.
50% of the basic salary if staying in a metro city and 40% in a non-metro city.
The calculation of HRA is based on various factors, such as the entitlement to 50% of the basic salary, The calculation of HRA for tax benefit is considered from one of the following three listed provisions:
The actual amount allotted by the employer as the HRA.
Actual rent paid less 10% of the basic salary.
50% of the basic salary, if the employee is staying in a metro city (40% for a non-metro city).
The least of the above mentioned amount will be considered for tax deduction from HRA.
Thanks & Regards
From India, Ghaziabad