Dear All, As per the new wage code 2019, which have became a low and applicable from 1st April 2021, Need clarification on some of the points.
1- Basic should be 50% as per law, is this a capping? Can an employer give more than 50% like 60-70%?
2- Gratuity is applicable to consultants on a pro-rata basis, is there any minimum time period for the gratuity calculation, and is this amendment is for employees also?
3- DA is a mandatory part of basic salary? private organizations do not give DA at present.
4- then in the case of exempt employees i.e whose Basic is above Rs 15000 (threshold limit of EPF) the EPF deduction will be on what amount?
Scenario (1) at Minimum Wage
Scenario (2) at Rs 15000 threshold limit
Scenario (3) at 12% of the entire Basic
5- Need Clarification on Bonus payable (as per Sec 26) and Gratuity impact (Section 4(2) of the Payment of Gratuity Act).
From India, Indore
1- Basic should be 50% as per law, is this a capping? Can an employer give more than 50% like 60-70%?
2- Gratuity is applicable to consultants on a pro-rata basis, is there any minimum time period for the gratuity calculation, and is this amendment is for employees also?
3- DA is a mandatory part of basic salary? private organizations do not give DA at present.
4- then in the case of exempt employees i.e whose Basic is above Rs 15000 (threshold limit of EPF) the EPF deduction will be on what amount?
Scenario (1) at Minimum Wage
Scenario (2) at Rs 15000 threshold limit
Scenario (3) at 12% of the entire Basic
5- Need Clarification on Bonus payable (as per Sec 26) and Gratuity impact (Section 4(2) of the Payment of Gratuity Act).
From India, Indore
Dear friend,
Let me first ask you to carefully go through the definition of the term " wages" as defined u/s 2(y) of the Code on Wages,2019 and then read my following answers to your queries.
1) The definition of wages certainly connotes that the term is defined in such a manner that wages is a single package of remuneration comprising of different components which are actually or can be expressed in terms of money. However, as the COW,2019 consolidates the existing laws on payment of wages, payment of bonus, minimum wages and equal remuneration transcending gender distinction, the definition needs to be uniformly applicable to all these inevitable aspects of employment. Therefore, the legal necessity arises to distinguish the various components in the remuneration structure as inclusive ones and excluded ones for the sake of uniform application and avoidance of misinterpretation resulting in exploitation. So far so good so as to cover the aspect of uniform application. of the term. But, still the possibility of exploitation looms large and therefore a rider becomes imperative to fix a mark of demarcation between the included components and the excluded components in terms of percentage of the sum of their broader classification viz., Inclusive Components comprising of basic, dearness allowance and retaining allowance, if any and the Excluded Components viz., all other allowances which stands at a general ratio of 50:50. So there is no cap or limitation on any of the inclusive components as you hold but in fact only a minimum is prescribed in relation to the total package of remuneration. By and large, therefore, the percentage of the sum of inclusive components can be anything over and above 50 depending on the discretion of the employer or the bargaining power of the employee.
2) I may not be wrong if I presume that by "consultant", you actually mean a fixed term contract employee and as per sec.53 of the Code on Social Security,2020, such an employee is entitled to gratuity on pro-rata basis. Gratuity comes under Chapter V of the Code which does not otherwise qualify the term employee as defined u/s 2(26) and therefore the conditions for payment of gratuity remain as they are depending on the type of his contract of employment like regular, FTE etc.
3) D.A is not mandatory so long as the industry wages does not fall short of the statutory minimum wages. Even then it is not mandatory to introduce the component of D.A and parity can be maintained by raising the basic or the consolidated wages, if it is the practice.
4) Threshold limit of wages for EPF can be modified by the Central Government by means of notification. Therefore it is to be calculated on the basis of threshold of salary or wages comprising of the inclusive components only. I leave the impact of tax on excess contribution over and above the threshold limit to other senior members.
5) I am not able to understand this question. The poster may refer to the definition of wages occurring in the respective Codes.
From India, Salem
6016Let me first ask you to carefully go through the definition of the term " wages" as defined u/s 2(y) of the Code on Wages,2019 and then read my following answers to your queries.
1) The definition of wages certainly connotes that the term is defined in such a manner that wages is a single package of remuneration comprising of different components which are actually or can be expressed in terms of money. However, as the COW,2019 consolidates the existing laws on payment of wages, payment of bonus, minimum wages and equal remuneration transcending gender distinction, the definition needs to be uniformly applicable to all these inevitable aspects of employment. Therefore, the legal necessity arises to distinguish the various components in the remuneration structure as inclusive ones and excluded ones for the sake of uniform application and avoidance of misinterpretation resulting in exploitation. So far so good so as to cover the aspect of uniform application. of the term. But, still the possibility of exploitation looms large and therefore a rider becomes imperative to fix a mark of demarcation between the included components and the excluded components in terms of percentage of the sum of their broader classification viz., Inclusive Components comprising of basic, dearness allowance and retaining allowance, if any and the Excluded Components viz., all other allowances which stands at a general ratio of 50:50. So there is no cap or limitation on any of the inclusive components as you hold but in fact only a minimum is prescribed in relation to the total package of remuneration. By and large, therefore, the percentage of the sum of inclusive components can be anything over and above 50 depending on the discretion of the employer or the bargaining power of the employee.
2) I may not be wrong if I presume that by "consultant", you actually mean a fixed term contract employee and as per sec.53 of the Code on Social Security,2020, such an employee is entitled to gratuity on pro-rata basis. Gratuity comes under Chapter V of the Code which does not otherwise qualify the term employee as defined u/s 2(26) and therefore the conditions for payment of gratuity remain as they are depending on the type of his contract of employment like regular, FTE etc.
3) D.A is not mandatory so long as the industry wages does not fall short of the statutory minimum wages. Even then it is not mandatory to introduce the component of D.A and parity can be maintained by raising the basic or the consolidated wages, if it is the practice.
4) Threshold limit of wages for EPF can be modified by the Central Government by means of notification. Therefore it is to be calculated on the basis of threshold of salary or wages comprising of the inclusive components only. I leave the impact of tax on excess contribution over and above the threshold limit to other senior members.
5) I am not able to understand this question. The poster may refer to the definition of wages occurring in the respective Codes.
From India, Salem
Currently, as I understand, if a person is getting total wages >15,000 the PF has to be calculated on 15,000 and if person is getting <15,000 the PF has to be calculated on full wages only. So what will change with the new Wage Code? If someone is getting say 50,000 then does PF need to be deducted on 25,000 or will the limit of 15,000 for PF deduction remain. Can someone please clarify?
From India, Aurangabad
From India, Aurangabad
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.
GD PI Related queries.doc
Minimum Wage of UP & UK.pdf