Can we keep Basic wages equal to Gross Salary for only selected employees who gross salary is more than Rs.15,000/Rs.21,000. - CiteHR
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Dear sir,
Can we keep Basic wages equal to Gross Salary for only selected employees who gross salary is more than Rs.15,000/Rs.21,000.
If we keep Basic wages equal to Gross Salary for only selected employees, we can exempt those employees from PF/ESI.
Is it mandatory to keep allowances (i.e.HRA).

Hello Mr. T.Thirumurugan
Whenever you create salary structure it is mandatory to include Basic as well as HRA. It is ok if any other components are not included.
Also PF is compulsary for employees with sakary below Rs.15,000. For salaries above 15K, you can ask them to sign Form 11 and opt-out of PF Facility.

Hi Thirumurugan,
Your proposal more or less akin to a 'consolidated' pay packet scenario. You can do that but before doing to so you should be aware of/find solutions to the pertinent issues. For e.g. if there is no separate component such as HRA which is not accountable for calculation of EPF then employees will be benefited more by higher component of Basic pay. (I don't advocate either this one or the other one though).
Pl.read the definitions as per two major Acts impacting benefits to employees -
- Definition under EPF Act. --
.....2 (b) “Basic wages” means all emoluments which are earned by an employee while on
duty or [on leave or on holidays with wages in either case] in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include-
(i) The cash value of any food concession;
(ii) Any dearness allowance (that is to say, all cash payments by whatever name
called paid to an employees on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) any presents made by the employer;...."
- Payment of Gratuity Act -
.....2 (s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance....."
Similarly a decision whether to keep it as one whole component or break it into various components would impact other employee related costs such as ESI, insurance, leave pay, compensations etc. Therefore you have to study relevant impacts for pragmatic decision.
It also should be noted if you chose to have two different policies among two different groups, one policy for those < 15000/21000 and a different policy for higher income group might invite troubles on a/c of 'unfair labour practices' .

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