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Hi, Kindly guide as to what components are to be taken while calculating the minimum wages in India & the percentages to be taken.

The components in our salary structure is
Basic (50%)
Conveyance allowance (1600/-)
HRA (which is basic - convey)

Need to know the whether
a) only basic is covered in the minimum wages calculation
b) an additional 5% HRA to be considered

Kindly advice on an urgent basis

best Regards

From India, Mumbai
Labour Law & Hr Consultant
Seasoned Ir Professional
Agm - Hr&admin
Ceo-usd Hr Solutions
Ram K Navaratna
Hr Consultancy
Manager Hr
+1 Other


Hi, All components of salary (before statutory deductions) form part of minimum wages.
From India, Madras

If you mean to ask whether all these components will be considered as part of wages for legal compliance? Then the answer would be Yes But for all calculations these allowances should be considered. It should not be like for compliance/ to find out whether the company is paying the minimum wages or not, the entire components will be taken but for deciding the payments like Bonus, PF, Gratuity, leave encashment etc only the basic pay will be taken in to account.
From India, Kannur

As per present definition of wages under minimum wages Act it consists Basic, DA & HRA. At Maharashtra there is House rent allowance act of 5% on Basic & DA, it has also to be paid. Better to Pay Basic and DA as per declared Minimum Wages and 5% HRA on Basic and DA. Bonus, PF, Gratuity will be on Basic and DA but ESIC will be on monthly gross and in this case it is Basic, DA & HRA.

If the organization is interested to pay more than Minimum Wages, it is always welcome.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

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From India, New Delhi

Dear Ferozi,

Statutory minimum wages fixed by the Central Government and all State Governments under the Minimum Wages Act,1948 generally comprise of two components viz., basic wages and variable dearness allowance. But the actual industry practice may be different like consolidated wages or with a componential structure such as basic and other allowances with or without the component of dearness allowance. So far as I know there is no rule for any percentage-wise apportionment of these components forming the salary structure for any given wage period as of now. [ The position would be certainly different when the Code on Wages,2019 comes into force as the definition clause of wages under the Code requires a constant proportionality at the ratio of 50:50 between the sum of basic, dearness allowance and/or retaining allowance and the sum of all other allowances specifically excluded in the definition u/s 2(y) ]. Therefore, the absence of dearness allowance as a separate component in the industry wage structure does not constitute non-compliance so long as the sum total of basic and other allowances which fall within the inclusive part of the definition of the term 'wages; u/s 2 (h) of the MW Act,1948 always remains equal to the sum total of the statutory minimum wages. This is the ratio decidendi of the judgment of the hon'ble Supreme Court of India in Airfrieght Corporation case [ 1999 LLR 1008 ].I would like to add that this would be a right principle only for the purpose of determination of the parity between the gross minimum wages and gross industry wages.

However, in view of Mr.Madhu's apt observation in the foregoing reply, I would also hasten to add whether a contention based on this principle by an employer who has not included dearness allowance as a distinct component in his employees' salary structure will hold good in a dispute relating to gratuity.
Yes, such a contention by the employer can be possibly upheld provided the last drawn basic pay is equal to the sum of last drawable basic and D.A under the statutory minimum wages rate. In such a situation, the employee cannot rightfully claim higher gratuity based on the component of D.A actually not included in the salary structure under the contract of employment.
Otherwise, the non-inclusion of D,A as a distinct component can reduce the factor for calculation of statutory gratuity and would result in lesser sum of statutory gratuity.

Therefore, it is advisable to keep the components of basic and dearness allowance always on par with the statutory minimum rates of wages and adjustments can be made against other allowances so as to reduce the employer's indirect financial commitments.

From India, Salem
Ram K Navaratna

Good discussions Ram K Navaratna
From India, Bangalore

In one of the cases in my industry sixty parentage are allowances and remaining forty percentage are Basic and D A , these total wages are much higher in comparison to minimum wages but this basic and D A are lesser than the minimum wages.
Please let me know whether this bifurcation is okay or we need to adjust this
With this arrangement with respect to P F there is no issue keeping in view of latest supreme court verdict but THIS EFFECT GRATUITY HENCE THIS QUESTION
Ranjan Kumar Dixit

From India, New Delhi

So long as you are keeping your total salary higher than the minimum wages, there is no issue with regard to Minimum Wages Act but if the gratuity qualifying salary falls short of it, you will have to calculate it according to the minimum wages. Even the payment of gratuity is not a regular payment but it takes place one or twice a year. At that time, work it on the statutory wages. But what will go wrong is the provision for Gratuity Fund or investment of that fund in LIC. Therefore, at the time of actuarial valuation and payment towards LIC's gratuity fund, the wages of the employees may have to be worked out at the then minimum wages. Then the payment made by the LIC will tally with the amount payable to the employee.

NOTE: One thing I would say that it is not merely the basic salary or the basic plus DA which will qualify to gratuity, but it should be the total salary as per contract of service that should qualify to gratuity. This is my perception about calculation of gratuity.

From India, Kannur
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