An existing company is having its own structure of wages for various levels such as Basic as per scale of pay, Variable and Fixed Dearness Allowance, HRA calculated as percentage on Basic pay, Conveyance, Special Allowance, Medical Allowance, Washing Allowance, Shift Allowance, LTA etc apart from paying yearly Bonus and Production Incentive as per 12(3) Agreement entered with their Unions once in four years. The monthly Gross wages (exclusive of yearly payments like Bonus and Incentive) in all levels of employees being paid are more than the stipulation as per payment of minimum wages Act. But the minimum wages Act is having only two elements such as Basic wage and DA.

The Basic wages being paid by the company is less than the minimum wages Act whereas the DA being paid is very much higher than the Act. PF and ESI purposes, the company is taking into account the Basic wages, VDA & FDA and Special pay elements.

For example in our existing wage structure for a bottom level employee the Basic pay is Rs.1000/-, HRA - Rs.400/-, VDA & FDA - Rs. 16100, Conveyance - Rs.300, Special Allowance - Rs.900/- and other allowances altogether Rs. 700/- and thus the Gross wage comes to Rs.19400/-. Whereas as per the minimum wages act for this level, it has been stipulated as the Basic pay of Rs.8050/- and DA of Rs.7850/- and in that the Gross wages is only Rs 15900/-.

My query is whether we have to restructure the the monthly wages with only two parts as per Minimum wages Act namely Basic wages and DA.

I request expert's opinion on this issue please.

From India, New Delhi
Seasoned Ir Professional


So long as your gross salary is above the basic and DA as per the minimum wages notified, you are said to comply with the legal requirements. When you calculate the bonus or gratuity payable also, you will exceed the requirements. Therefore, the present salary structure is okay. If required, in the next settlement, you can take a portion of the DA and merge it with the basic salary, thereby the basic will increase and DA will come down.
From India, Kannur
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