I have once again read the definition of the wages and find that the law makers are scientifically and professionally drafted the definition of wages. To remove any doubt they have focused on payment received by the employees by way of salary, allowances or otherwise along with a exclusion list and 50:50 condition on the all remuneration calculated under the clause. No where they have mentioned the ESIC contribution as employee is not receiving the same. Therefore, there are items like premium to Mediclaim Insurance, Group personal Insurance etc. will not be considered as part of wages as the employee will not receive the same.
In the exclusion list PF contribution, LTA /LTC , Stautory Bonus etc. have been included with a condition of 50:50 ratio between allowances and wages ( Basic & DA). Therefore, the intention of the law makers to decide wages based on all remuneration if received by the employee should be considered to determine wages on 50:50 basis.
Now the remuneration structure as mentioned by @HBJ - all the components should be considered as those are received by the employee and then divide it on the basis of 50:50 to arrive at wages value ( Basic and DA). After arriving at the wages value, the monthly gross wages will be after deducting PF, Bonus and others annualise items from the allowances and adding Basic with net allowances figure.
Obviously, the Basic will increase, monthly gross may change, CTC ( on the basis of the components received by the employee) will be same if the PF contribution restricted up to 15,000/- basic but Gratuity will increase.
There is no ceiling for gratuity calculation.
S K Bandyopadhyay ( Howrah, WB)
www.usdhrs.in
From India, New Delhi
334In the exclusion list PF contribution, LTA /LTC , Stautory Bonus etc. have been included with a condition of 50:50 ratio between allowances and wages ( Basic & DA). Therefore, the intention of the law makers to decide wages based on all remuneration if received by the employee should be considered to determine wages on 50:50 basis.
Now the remuneration structure as mentioned by @HBJ - all the components should be considered as those are received by the employee and then divide it on the basis of 50:50 to arrive at wages value ( Basic and DA). After arriving at the wages value, the monthly gross wages will be after deducting PF, Bonus and others annualise items from the allowances and adding Basic with net allowances figure.
Obviously, the Basic will increase, monthly gross may change, CTC ( on the basis of the components received by the employee) will be same if the PF contribution restricted up to 15,000/- basic but Gratuity will increase.
There is no ceiling for gratuity calculation.
S K Bandyopadhyay ( Howrah, WB)
www.usdhrs.in
From India, New Delhi
@HBJ
special allowance posted by you is more than 100% of basic, have you noticed it ? apart from it there are performance incentive also,
second by arriving to basics of bonus calculation 14000x12months x8.33% ( minimum bonus) comes to one month salary i.e 14000/- but posted below the basic
third, the leave encashment formula is not matching any limit, as the leave encashment means the EL encashment and it is half a month salary +/- 2 days
to save the contribution of gratuity fund, spits are not a wise wise idea, and that too for an employee, who is continued in service for 20+ years
special allowance posted by you is more than 100% of basic, have you noticed it ? apart from it there are performance incentive also,
second by arriving to basics of bonus calculation 14000x12months x8.33% ( minimum bonus) comes to one month salary i.e 14000/- but posted below the basic
third, the leave encashment formula is not matching any limit, as the leave encashment means the EL encashment and it is half a month salary +/- 2 days
to save the contribution of gratuity fund, spits are not a wise wise idea, and that too for an employee, who is continued in service for 20+ years
Mr.Bandyopadhyay, @Glidor, thanks for the replies. The discussion is very useful for my understanding also.
@Glidor, I was of the understanding that Bonus calculation is on maximum of Rs.7,000 and not as per higher basic salary. So 12,600 bonus is 15% on Rs.7,000.
Our employee does not take many leaves so we give encashment for EL and even CL. However I would like to understand if Leave Encashment is to be calculated as per basic+DA or full salary? Also can leave encashment be maximum 15 days only as per law?
The only reason I am calculating Gratuity increase is because if we have to get basic+DA to 50% of monthly salary then gratuity contribution is increasing a lot.
I also want to know what exactly is the rule for number of EL in a year and is CL and SL also part of EL? As per factory act 1 leave is to be given per 20 "worked days". Does this apply to daily wage workers or also to technical and administrative staff? Are the EL/CL/SL/Paid Holidays/Paid weekly off for staff also to be considered while calculating EL for next year?
Thanks again to everyone for your valuable comments.
From India, Aurangabad
@Glidor, I was of the understanding that Bonus calculation is on maximum of Rs.7,000 and not as per higher basic salary. So 12,600 bonus is 15% on Rs.7,000.
Our employee does not take many leaves so we give encashment for EL and even CL. However I would like to understand if Leave Encashment is to be calculated as per basic+DA or full salary? Also can leave encashment be maximum 15 days only as per law?
The only reason I am calculating Gratuity increase is because if we have to get basic+DA to 50% of monthly salary then gratuity contribution is increasing a lot.
I also want to know what exactly is the rule for number of EL in a year and is CL and SL also part of EL? As per factory act 1 leave is to be given per 20 "worked days". Does this apply to daily wage workers or also to technical and administrative staff? Are the EL/CL/SL/Paid Holidays/Paid weekly off for staff also to be considered while calculating EL for next year?
Thanks again to everyone for your valuable comments.
From India, Aurangabad
@HBJ
1 day EL for every 20 days attendance, (attendance, and it is not paid days), so in a year 365 days in total
365 - {(52 weekly off+3 national holidays+10 to 12 CL + festive holidays) total 65 minimum} = 280 so the maximum earned leave i.e EL would be 14, (280/20=14)
regarding bonus calculation, the limit is 21000/- and not 7000/- please be updated https://economictimes.indiatimes.com...5.cms?from=mdr
1 day EL for every 20 days attendance, (attendance, and it is not paid days), so in a year 365 days in total
365 - {(52 weekly off+3 national holidays+10 to 12 CL + festive holidays) total 65 minimum} = 280 so the maximum earned leave i.e EL would be 14, (280/20=14)
regarding bonus calculation, the limit is 21000/- and not 7000/- please be updated https://economictimes.indiatimes.com...5.cms?from=mdr
@HBJ Weekly+ National + Festive leaves are officially closure for workmen, and the employees working on those days are paid in overtime basis, Hope now the doubts would get cleared,
@Glidor, as per the article cited by you and as per my understanding, 21,000 is for eligibility and 7,000 is for calculation. "The Lok Sabha has approved amendments to the Payment of Bonus Act that seeks to make more workers eligible for bonus by raising the monthly pay eligibility limit of employees to Rs 21,000 from Rs 10,000. The bill, tabled in the house earlier this month, also seeks to enhance the monthly bonus calculation ceiling to Rs 7,000 per month from Rs 3,500, thus substantially increasing the amount of bonus."
Thanks for EL calculation, is the applicable to all employees or only daily wage workers?
From India, Aurangabad
Thanks for EL calculation, is the applicable to all employees or only daily wage workers?
From India, Aurangabad
@HBJ EL does not make any difference between daily or monthly workers, but it get accumulated on every 20 days attendance only,
@HBJ
Payment of bonus is 8.33% or 7000/- whichever is higher,
above 8.33% it can be up to 20% with ex gratia
7000 is minimum bonus ceiling limit, and it is for those employees who are below 7000 monthly wages
Payment of bonus is 8.33% or 7000/- whichever is higher,
above 8.33% it can be up to 20% with ex gratia
7000 is minimum bonus ceiling limit, and it is for those employees who are below 7000 monthly wages
Hello All,
Acc to the new labor code, it is stating that basic+DA and other allowance should be in 50:50 ratio. Few have commented that "this allowances" means components which compute and are part of GROSS and few have said that any payment received by the employee so it means that we should consider LTA+yearly performance bonus+leave encashment+overtime allowance+Employer's PF.
So if CTC is 450000 then
BASIC-24000
HRA-12000
MPP-4000
GROSS-40000
Employer's PF-2800
Gratuity-1154
Total Remuneration-44034
LTA-5000(paid annually)
performance bonus-38000(paid annualy)
1. is the above example meeting all the rules of the new labour code?
2. can I consider this 50:50 ratio with monthly gross or annual component should also be considered while computation?
3. overtime allowance is not fixed ofcourse, it depend on the requirement so how can it be considered at the time CTC computation. It also varies every month so the month an employee gets this OT allowance, then the 50:50 percentage will get impacted.
I would be highly obliged if you can answer my above question
Acc to the new labor code, it is stating that basic+DA and other allowance should be in 50:50 ratio. Few have commented that "this allowances" means components which compute and are part of GROSS and few have said that any payment received by the employee so it means that we should consider LTA+yearly performance bonus+leave encashment+overtime allowance+Employer's PF.
So if CTC is 450000 then
BASIC-24000
HRA-12000
MPP-4000
GROSS-40000
Employer's PF-2800
Gratuity-1154
Total Remuneration-44034
LTA-5000(paid annually)
performance bonus-38000(paid annualy)
1. is the above example meeting all the rules of the new labour code?
2. can I consider this 50:50 ratio with monthly gross or annual component should also be considered while computation?
3. overtime allowance is not fixed ofcourse, it depend on the requirement so how can it be considered at the time CTC computation. It also varies every month so the month an employee gets this OT allowance, then the 50:50 percentage will get impacted.
I would be highly obliged if you can answer my above question
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
CTC-Salary Break Up.pdf
CTC Break up.xls