Please help me bifurcate the salary as per the Minimum Wages Act. Suppose an employee is withdrawing Rs. 70,200 per month. What should be the Basic, DA, HRA, conveyance, and any other components? Please guide me.
From India, Mumbai
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From India, Mumbai
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Dear Colleague,
50% of the total components as Basic and DA:
In view of the proposed changes in the Code on Wages, the suggestion is to keep the Basic and DA at 50% of the total components.
The remaining 50% may be HRA and other allowances:
- The HRA may be 30% to 50%, depending on the city. (Workmen in Maharashtra have specific provisions in a separate Act on HRA, so please take care for your academic interest.)
- Your allowances should be accommodated within the rest of the HRA part percentage out of the 50% as per the organization's guidelines or compensation policy.
From India, Chennai
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32150% of the total components as Basic and DA:
In view of the proposed changes in the Code on Wages, the suggestion is to keep the Basic and DA at 50% of the total components.
The remaining 50% may be HRA and other allowances:
- The HRA may be 30% to 50%, depending on the city. (Workmen in Maharashtra have specific provisions in a separate Act on HRA, so please take care for your academic interest.)
- Your allowances should be accommodated within the rest of the HRA part percentage out of the 50% as per the organization's guidelines or compensation policy.
From India, Chennai
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PF Contribution and Wage Code Clarification
As per the present situation and based on the latest verdict by the Apex Court on PF Contribution, other than HRA (as per the present definition of Basic Salary), whatever will be paid in the monthly gross salary except for a few exceptions (e.g., Productivity-linked payment, etc.), PF contributions will be required to be paid on the entire amount. Therefore, one can set any distribution - 40%, 50%, 60%, etc. - as Basic and DA of the monthly gross and the rest in other allowances such as HRA, CCA, etc.
Wage Code Definition
As per the Wage Code (yet to be implemented), it is different. There are three parts in the definition of wages. In the first part, wages mean all remuneration payable to a person and includes Basic Pay, DA, and Retaining allowance if any.
The second part includes a significant exclusion list (a) to (k) where monthly components like HRA, statutory components like contributions to pension or PF, and yearly components like Bonus, LTC/LTA, as per clause (e), for some employees may be entitled to yearly furnishing allowances for the nature of employment, etc., are included.
In part three, it is mentioned that if payments made under sub-clauses (a) to (i), which include yearly components like Bonus, LTC/LTA, statutory components like Employer PF contributions, etc., exceed 50% of all remuneration calculated under the clause, it shall be deemed as remuneration and shall be accordingly added to wages under this clause.
Calculating Wages as per the Wage Code
Therefore, for calculating wages (Basic & DA) as per the Wage Code, it is essential to start with the summation of all payable components in the remuneration structure, which should include monthly components, yearly components, and any other components payable during the year, employer contributions to PF, Statutory Bonus, etc., and 50% of that will be considered as Wages (Basic & DA). This calculation will vary from organization to organization as different organizations have different remuneration structures.
Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] www.usdhrs.in
From India, New Delhi
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As per the present situation and based on the latest verdict by the Apex Court on PF Contribution, other than HRA (as per the present definition of Basic Salary), whatever will be paid in the monthly gross salary except for a few exceptions (e.g., Productivity-linked payment, etc.), PF contributions will be required to be paid on the entire amount. Therefore, one can set any distribution - 40%, 50%, 60%, etc. - as Basic and DA of the monthly gross and the rest in other allowances such as HRA, CCA, etc.
Wage Code Definition
As per the Wage Code (yet to be implemented), it is different. There are three parts in the definition of wages. In the first part, wages mean all remuneration payable to a person and includes Basic Pay, DA, and Retaining allowance if any.
The second part includes a significant exclusion list (a) to (k) where monthly components like HRA, statutory components like contributions to pension or PF, and yearly components like Bonus, LTC/LTA, as per clause (e), for some employees may be entitled to yearly furnishing allowances for the nature of employment, etc., are included.
In part three, it is mentioned that if payments made under sub-clauses (a) to (i), which include yearly components like Bonus, LTC/LTA, statutory components like Employer PF contributions, etc., exceed 50% of all remuneration calculated under the clause, it shall be deemed as remuneration and shall be accordingly added to wages under this clause.
Calculating Wages as per the Wage Code
Therefore, for calculating wages (Basic & DA) as per the Wage Code, it is essential to start with the summation of all payable components in the remuneration structure, which should include monthly components, yearly components, and any other components payable during the year, employer contributions to PF, Statutory Bonus, etc., and 50% of that will be considered as Wages (Basic & DA). This calculation will vary from organization to organization as different organizations have different remuneration structures.
Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] www.usdhrs.in
From India, New Delhi
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Whatever the bifurcation and definition of basic wages under the new code, one should understand that if you have agreed to give Rs 70,000 as salary, that should be his basic salary. If, over and above the salary, he is offered rent-free accommodation, the rental value of that accommodation is the HRA, which is not part of the salary (though you can use it for constructing your CTC!).
Very simply, the amount of salary deducted when you are absent without pay is the salary. Obviously, it is not from the 40% or 50% of Rs 70,000 (Gross salary) that you deduct the day's salary for LOP, but it is from the whole salary that LOP is deducted proportionately. Therefore, at the end of the day, the salary means the actual salary as per the agreement and not the one as per the structure of the salary on which various contributions are made.
From India, Kannur
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Very simply, the amount of salary deducted when you are absent without pay is the salary. Obviously, it is not from the 40% or 50% of Rs 70,000 (Gross salary) that you deduct the day's salary for LOP, but it is from the whole salary that LOP is deducted proportionately. Therefore, at the end of the day, the salary means the actual salary as per the agreement and not the one as per the structure of the salary on which various contributions are made.
From India, Kannur
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Understanding Salary Components
Salary does not mean only the Basic Salary. It is the monthly gross salary, which may include Basic, DA, HRA, CCA, etc.
As rightly pointed out by Madhu T.K., in the case of LOP (Loss of Pay), the deduction is made proportionately from all the components of the Monthly Salary, not only from Basic & DA.
Even in the Government Sector (Bank), the monthly salary structure consists of Basic, DA, HRA, CCA, etc. During the recent two-day all-India Bank strike (16th & 17th Dec 2021), there will be LOP for two days proportionately for all components, as has happened on several occasions in the past.
In the original post, the monthly gross salary is 70,200/-, where Basic may be 30,000/- per month, and the rest of the amount will be distributed between HRA, DA, Conveyance, etc.
Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] www.usdhrs.in
From India, New Delhi
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Salary does not mean only the Basic Salary. It is the monthly gross salary, which may include Basic, DA, HRA, CCA, etc.
As rightly pointed out by Madhu T.K., in the case of LOP (Loss of Pay), the deduction is made proportionately from all the components of the Monthly Salary, not only from Basic & DA.
Even in the Government Sector (Bank), the monthly salary structure consists of Basic, DA, HRA, CCA, etc. During the recent two-day all-India Bank strike (16th & 17th Dec 2021), there will be LOP for two days proportionately for all components, as has happened on several occasions in the past.
In the original post, the monthly gross salary is 70,200/-, where Basic may be 30,000/- per month, and the rest of the amount will be distributed between HRA, DA, Conveyance, etc.
Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] www.usdhrs.in
From India, New Delhi
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Salary & Compensation Guidelines.zip
Salary bifurcation.xls