Hi, Please resolve my query.
I am proposing to freeze the Basic Salary upto Rs 21000 per month. Now considering this please guide me as to:
1) In case of an increment can I make an addition only to the Special allowance component without increasing the Basic salary part. The reason to do so is to keep the gratuity pay out component permanent.
2) Is this legally possible?
3) Also I would like to fix the PF contribution @ Rs 15000 per month.
4) Currently Basic salary(without the new wage code ) is 45% of the CTC so can I tweak the same and issue new appt letters to everyone?
Please advise it will be of great help.

From India, Mumbai
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Answer to your question no. 1 is Yes. But PF contribution will be on Special allowance also. It is very difficult to say that Gratuity pay out will be restricted to one fix amount. As PF gross( Basic + othr allows) will change, Gratuity may change.

Answer to your question no. 2 is very difficult to say at this stage what will be the interpretation in future. Moreover, after implementation of new labour codes all this ambiguity will be removed.

Answer to your question no. 3 - it is well accepted in law.

Answer to question no.4 - Ok for the time being. But will be problem the moment the new labor codes will be implemented.

From India, New Delhi

Dear Mr. Bandyopadhyay
The new labor code is just a few days away. However the new wage code is silent on the treatment of Gratuity specifically with regards to Basic.
If I am wrong please guide me to the appropriate section. If the entire 50% of CTC is to be taken for gratuity calculation that is a very big hit to companies from an individual employee prescpective.

From India, Mumbai

Dear Anu, Gratuity matter is not under Wage code but under Code on Social Security. There is no change in the calculation method of Gratuity. Wage Code will determine the wage ( Basic & DA ) for the calculation of Gratuity.

Reality in the system is different. Till date there are good number of Organizations including organized sectors are maintaining Basic as 30 to 35% of monthly gross. Moreover, there are Organizations who are paying more in yearly items instead of monthly gross to keep the Basic low. The purpose of law makers are absolutely clear - not to deprive the employees irrespective of the level. That is the reason the definition of wage has been framed very scientifically.

Basic should be Annual CTC less ESIC & Insurance premium if any ( not payable to employee directly or indirectly ) and 50% of the amount. If it is the law of the land, whether we like or dislike we will be required to fix basic accordingly and there will be impact on Gratuity payment.

It will be a big project for all organizations to identify skill differentiation of the employees , check the minimum wage level and find out total remuneration payable to the employee and accordingly to determine Basic.

Thanks & regards

From India, New Delhi

Annual increment is done to Basic not on account of the Special allowance. If so done shall be treated a component of basic wages. The reason has offered by you in the matter of gratuity shall not stand as valid because an increment is considered to match the inflation.
The PF contribution can not be fixed@ Rs 15000 per month because the slab changes from time to time, if you do so there would be difficulty in accounts to make provision.
The new code on wages is applicable for the employees take on employment from the date it comes into effect.

From India, Mumbai

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