Is a Basic Salary of 1500 P.M. Compliant with Statutory Rules? Seeking Guidance on CTC Structure

I would be framing the CTC structure of our company (software+BPO). I want to know if there is any statutory ruling about the minimum amount of basic that needs to be paid out. For example: 5000 P.M. is the CTC.

Basic: 1500 (30% of 5000)
HRA: 750 (50% of the basic)
Attendance Allowance: 1000
Grade Allowance: 500
Special Allowance: 1250

I just want to know if 1500 P.M. of basic is all right or not. I have the "REVISED MIN WAGES: WB" with me, but I could not get any information from it.

It would be good if you could help me out with this.

What is the position? Which state? There is no law about basics; we need to deduce from minimum wages. If minimum wages are applicable to the industry and to that job, then whatever is the minimum basic plus DA prescribed should be fixed as basic.

Give more information to help you understand better.

Siva

Ayona,

From what I know, your basic needs to be a minimum of 40% of the overall CTC, and HRA is 40% of the basic. This is as per the new regulations. As far as I know, the minimum wage applies to the overall salary taken home, not the basic or anything.

Hope this helps.

Thanks,
Chitra

Dear Chitra,

Minimum wages will include only the Basic and DA as per the judgment of the SC. If you provide other benefits and still pay less Basic and DA, you are not meeting the requirements of the law.

Siva

Hello Sivasankaran,

I am in WB, and my company has both the software and the BPO division. As specified earlier, I want to know what is the minimum amount that we can give out as basic. Is there any statutory ruling regarding that? I am attaching herewith the revised salary for all the states. However, I do not know if that's current or not. We are a software company, and we also have the BPO division! Do let me know. Is it that DA + basic will have to be 50% of the CTC? We do not have DA though.

Thanks and regards, Ayona

Hi, I would be framing the CTC structure of our company (software+BPO). I want to know if there is any statutory ruling about the minimum amount of basic that needs to be paid out. For instance, if the CTC is 5000 P.M., the breakdown is as follows:
- Basic: 1500 (30% of 5000)
- HRA: 750 (50% of the basic)
- Attendance Allowance: 1000
- Grade Allowance: 500
- Special Allowance: 1250

I am unsure if 1500 P.M. of basic is appropriate. I have the "REVISED MIN WAGES: WB" with me, but I could not find any relevant information in it. I would appreciate your help with this.

It is not necessary to pay more than the minimum wages; if you pay only the minimum wages, it is applicable to the total amount, for example, basic + d.a. However, even in this case, the P.F. Act does not define any limit. Some companies bifurcate minimum wages into basic (50%) + HRA (25%) + conveyance (25%), as the Minimum Wages Act does not define it in the P.F. Act.

Thank you for your assistance.

Regards,
Ayona

Hi all,

I require a small clarification. What should be the salary structure for a take-home salary of 7500/- Rs? Please help me out in this matter. How should I consider the ESI (1.75%)?

My components are:
- Basic: 3000
- HRA: 1800
- Conveyance: 1500
- Others: 1200

Net Home: 7500
PT: 80
PF
ESI

What should be the ESI and PF calculation for the above package? Please help me out in this regard.

Waiting for a reply.

Hi Nanda Kishore,

ESI is calculated on Basic, DA, CCA, Conveyance, and all allowances except washing allowance, which are allowable for any manufacturing unit. This calculation is based on the gross earnings of a person. It is not applicable if a person's gross salary is more than Rs. 10,000. In the case of PF, it is calculated only on Basic salary.

HRA is calculated at 40% of Basic if it's a non-metro city, and at 50% if it's a metro city. Your breakdown may be as follows:

Basic: 3000 (40% of the fixed salary)
HRA: 1200 (40% of Basic)
Conveyance: 1800
Others: 1500
Total Earnings (a): 7500

Deductions:
- Employee's contribution to PF: 360 (12% of 3000)
- Employee's contribution to ESI Fund: 131 (1.75% of 7500)
- Professional tax: 80
Total deductions (b): 571 (360+131+80)
Take Home (a)-(b) = 7500 - 571 = 6929.

Please correct me if I am wrong.

Regards,
Debasmita
debasmita_dm@yahoo.com

[bmnandakishore;391590]Hi All,

I require a small clarification on what the salary structure should be for a take-home salary of Rs. 7500.

Could you please help me out with this matter? How should I consider the ESI (1.75%)?

My components are:
- Basic: 3000
- HRA: 1800
- Conveyance: 1500
- Others: 1200

Net Home: 7500
PT: 80
PF
ESI

What should be the ESI and PF calculation for the above package? Please help me out in this regard. Waiting for a reply.[/quote]

Dear All,

Please note that the basic wages should be around 60% of gross wages. Basic wages should not be less than the minimum wages of the state.

Regards,
U. C. Kaushik
9911366133

Hi there,

I would be framing the CTC structure of our company (software + BPO), and I want to know if there is any statutory ruling about the minimum amount of basic that needs to be paid out. For example, if the CTC is 5000 P.M., the breakdown could be as follows:

Basic: 1500 (30% of 5000) - It's essential to keep 35% or more as basic to comply with PF basic rules and the Minimum Wages Act.
HRA: 750 (50% of the basic) - According to minimum wage requirements, basic + HRA + DA should be more than 103.10 Rs. per day's wages, so ensure your minimum wages are above 2800 Rs. If the DA increases, you must adjust your minimum wages accordingly to avoid revisions throughout the year.

I am unsure if keeping 1500 P.M. of basic is appropriate. It's crucial to consider the right approach to setting the basic wage.

I have the "REVISED MIN WAGES: WB" document, but I couldn't find relevant information in it. The rules for minimum wage revisions vary by state, so it's important to follow the regulations specific to your state.

I hope this helps clarify the considerations for structuring the CTC. Thank you.

Hi,

The breakup of the demand for minimum wages or state government notification, recently Himachal Government revised minimum wages to Rs. 3000 per month. They clearly state and instruct that you can pay 95% of the total salary in Basic and the remaining 5% can be used as HRA. What to do in this situation?

In Delhi, you can pay 70% in basic and the remaining 30% should be used in HRA only. The PF department may declare after some time that you should pay the PF contribution on minimum wages. Then, how can you break the salary?

Manoj

Hi,

Please guide me on how the basic salary is determined for an employee. Are there any statutory policies (government rules) for this? Is there a fixed percentage set by the government?

I am looking for a quick response from all of you.

Thank you & Regards,
Meenakshi

Hi Ayona,

I could not open the attachment.

However, it is immaterial to the reply at present.

1. There is no law giving guidelines for basic salaries or DA.
2. The only law prescribing basic and DA is the Minimum Wages Act.
3. According to this, establishments shall pay minimum wages as notified.
4. State governments shall notify for different industries and different trades/jobs.
5. As per the Supreme Court verdict, only basic and DA paid by you shall be taken into consideration to verify whether the establishment is paying minimum wages or not.
6. If you are paying 5000 rupees to an assistant, then your basic and DA put together shall be equivalent or more than the minimum prescribed. BPOs, call centres fall under shops and establishments, and you can look at this category.
7. You can pay more.
8. There is no law that says that you have to pay DA separately. As long as you make adjustments every year in tune with minimum wages (basic plus DA), there is no need to pay DA separately.
9. My advice would be to fix basic and DA as prescribed by the Minimum Wages to avoid confusion from Labour authorities and revise every year. You can even round off to a higher figure.
10. Then pay other allowances.
11. There is no percentage specified by law for this purpose.
12. For example, if you are paying wages of 10000 rupees for an assistant, then you may have to pay approximately Rs 4000 as basic plus DA together. The balance of 60% can be paid as allowances.
13. Having said this, we generally recommend 50% of the total CTC towards basic plus DA at lower levels. At higher levels, it could go down to 20% to 30%.

Siva

Shops and Establishment Act and Factories Act are two laws that cover most companies, shops, factories, etc., where manpower is employed. When the total staff exceeds 20, almost all labor laws are applicable. Therefore, the Minimum Wages Act cannot be neglected when deciding the salary structure.

Minimum wages are reviewed once every 6 months by the Labor Commissioner Department. If the license for commencing your establishment was issued by Central Government agencies, you will be covered under the Central Labor Commissioner's office; otherwise, it will be the State Labor Commissioner. You can obtain a copy from the respective office.

Minimum wages comprise Basic pay and Special Allowance for 26 days.

Many companies keep Basic pay and Special Allowance very minimal to reduce EPF and ESIC expenses for the company, which is illegal. The Muster is often fabricated to authenticate this, for example, by not showing that an employee worked for 26 days but instead showing only 10 or 9 days per month.

It is important to note that EPF or ESIC authorities are not concerned about the Minimum Wages; they only check whether you have paid contributions for the amount in the Salary Register. Consider a scenario where your staff files a case against your company alleging exploitation. Therefore, ensure that the Basic pay + Salary is higher than the Minimum Wages.

Thank you.
Siva

Hi Ayona,

As per the Minimum Wages Act, the minimum wage for West Bengal is Rs 3764, which comprises basic pay and DA. However, it is not mandatory to include DA in your salary structure. It is advisable to allocate 40% of the Cost to Company (CTC) as the basic salary for non-metro areas and 50% for metros.

Regards

Thank you very much, Sivasankaran. I still have some doubts and I would like to jot them down:

1) We are a BPO and a software development company. You have already mentioned that the BPO would fall under the Shops and Establishment Act. What about the software division?

2) We do not have DA; we only have the basic salary. So, does this mean that the basic salary should always be the amount equivalent to the minimum wages as specified... right?

3) We operate in Kolkata. Could you please provide me with information on where to obtain the revised minimum wages form? I downloaded it from this site, but it's quite confusing. It would be helpful if you could clear my doubts.

Thanks and Regards,
AYona

Hello Dear,

I believe the minimum base salary should be 60% of Gross. For example, if the Gross salary is 10,000/-, the Basic salary should be 6,000/-, HRA should be 2,000/-, and other allowances should be 1,000/-.

Thank you.

Dear all,

Please tell me what will be the minimum wages for Delhi employees if it is an institute. If anyone's salary is Rs 5000, what will be his/her basic and what will come in other.

Hi Ayona,

I think it's not CTC, it's gross salary. CTC is different from gross salary. CTC includes all the expenses paid by the company to its employees (i.e., Company PF & ESI contribution). Basic + DA should be 50%; if we don't show DA, then basic alone should be 50% of the gross.

Thanks,
Guru Prasad K.

Dear Guru Prasad,

If Gross & Net Salary are the same, for example, if the salary is $5000 (same gross & net) and currently, there are no deductions, could you please tell me what the basic pay will be and the breakdown of other components such as HRA, Special Allowance, etc.?

Dear,

Please tell me the minimum wage of the employees if they are working in an institute in Delhi.

Dear Ayona,

Point 1
We are a BPO and a software development company. You have already mentioned that the BPO would fall under the Shops and Establishment Act. What about the software division?

Software will also be considered an establishment and falls under Shops and Establishments.

2) We do not have DA, we only have the basic. So, this means that the basic should always be the amount equivalent to the minimum wages as specified, right?

You are correct. For the notified positions, please check whether they have specified a position such as software engineer. If not, then that category will not fall under the minimum wages.

3) We operate in Kolkata. Could you please provide me with information on where to get the revised minimum wages form? I downloaded it from this site, but it's very confusing.

These notifications will be available with the Labour Department. The easiest way is to approach any Employers' Organization, especially CII, FICCI, etc. They have these copies and circulate them to all members. Otherwise, you can walk into the Headquarters of the Labour Department, known as the Commissioners Office, where you will find the Minimum Wages wing and can get a copy. Most of the unions will have it in their office.

I suggest you go to the Commissioner's Office and get a copy. It is authentic.

Siva

Dear Ayonadehr,

In reply to your query, I would suggest you to prepare the breakup in this way that the basic amount should not be less than the minimum wages applied to West Bengal location. According to the latest minimum wages of West Bengal (Notification dated 7th April 2008), the basic amount should be Rs 3540, i.e., per day Rs 118 (see in the link below). The rest of the amount you can adjust in HRA, conveyance, or special allowance.

http://labour.nic.in [<link updated to site home>]

For further clarification on this, you are most welcome.

Dear Friends,

Lot's confusion on this... would like to add a few words.

The state government has the right to decide the minimum wages, which vary from industry to industry. So, first, do not give any kind of information about India unless we know which state the person is asking for minimum wages. Minimum wages include Basic+DA and HRA. For chemical industries in Maharashtra, they are defined in three criteria:
1. Skilled
2. Semi-Skilled
3. Non-Skilled

For all the above categories, the government has fixed an amount to pay. It could also vary from location to location if defined by the government (see the case of Maharashtra).

Generally, an organization requires most of the semi-skilled employees/workers. In the case of a chemical company in Maharashtra, it has been decided as follows:

Basic + DA + HRA (not below 5% of Basic + DA) = 3258/month, whereas Rs. 648 has been decided as DA (for the chemical industry, it can also vary as per the industry). The rest of the calculation can be done easily, and we can get the minimum required amount for Basic.

Best Regards,
Deepak Dwivedi

Basic DA is fixed as per the Govt rules, which varies depending on the nature of the company. In my knowledge, the basic DA is compulsory when determining the employee's salary. The basic DA will be approximately Rs. 3200 per month, i.e., Rs. 2800 + VDA Rs. 400, which depends on the city's class and may be revised from April 2008.

Hope this information is helpful.

Ram
HR

Dear All,

Whenever we talk about minimum wages, we should consider the reference we are using for the rates. All BPOs, IT companies, private or limited, and all offices come under "Shops and Establishments."

That's why I mentioned the amount of Rs 3540 in my previous query about "ayonadehr." This amount applies to the Shops and Establishments category as BPOs fall under that. The amount of Rs 118 reflects the "Skilled" category.

There is a rule called 40:60 that means 40% of the gross salary will be taken as basic. The maximum allowance for House Rent Allowance (HRA) is set at 50% of the basic salary, and the remaining amount can be distributed among other components such as conveyance, education, medical, site allowance, City Compensatory Allowance (CCA), Personal Pay, etc., based on your corporate policy.

Hi,

The minimum wages are different for various categories of employees and also vary from state to state. This is revised every six months by the Labour Department in January and June based on the Consumer Price Index. The components for minimum wages are Basic and HRA, of which only 5% can be considered for HRA.

In West Bengal, the minimum wage for establishments from 1st Jan. 2008 is Rs. 3140.00 for Peon/Messenger/Workmen engaged in loading and unloading works. This means the basic salary can be Rs. 3000 and HRA Rs. 140.

Regards,
Subrato

Dear Friends,

The respective State Government may fix the Minimum Wages for their local industries/establishments (as per the Minimum Wages Act). To know the details of the Minimum Wages, please refer to the attachment.

Regards,
PBS KUMAR
9848499629

Hi Ayona,

After going through all the responses, I summarize the same:

1. Minimum wage is different in different states.
2. Minimum wage also varies for different positions (unskilled, skilled, semi-skilled, matriculate, graduate (white-collar job), etc.).
3. Any basic pay should not be less than the minimum wage (i.e., Basic + DA). In the private sector, you will rarely find DA in any organization.
4. After fixing the minimum basic pay, you can allocate other amounts in any category (like HRA - it depends on the city, but in any case, it should not exceed 60%, transport maximum of Rs. 800, etc.).
5. As far as bonus is concerned, it should not be part of the gross salary but could be included in CTC.

If you have any further queries, feel free to email me or call me at +91-9818067206.

Hope this clarifies your ideas.

Hi Ayona,

After going through all the responses, I summarize the same:
1. Minimum wage differs in different states.
2. Minimum wage also varies for different positions (unskilled, skilled, semi-skilled, matriculate, graduate (white-collar job), etc.).
3. Any basic pay should not be less than the minimum wage (i.e., Basic+DA). Here in the private sector, you will rarely find DA in any organization.
4. After fixing the minimum basic pay, you can allocate other amounts in any category (like HRA - it depends on the city but should not exceed 60%, transport maximum of Rs. 800, etc.).
5. As far as bonuses are concerned, they should not be part of the gross salary but could be included in the CTC.

If you still have any queries, you can email me at "karnarun@rediffmail.com" or call me at +91-9818067206.

I hope this clears up your ideas.

Regards,
Arun

Dear Chitra,

Minimum wages will include only the Basic and DA as per the judgment of the Supreme Court. If you provide other benefits and still pay lower Basic and DA, you are not meeting the requirements of the law.

Siva

Siva Sir is correct. Minimum wages include Basic+DA, and it varies in different states and according to the type of industry. For example, the auto industry has higher wage rates compared to the food industry.

Dear Chirta,

Mr. T. Sivasankaran is absolutely right in stating the minimum basic as per law. He clearly states that the Minimum Basic = Minimum wages + D.A. I have gone through the U.P. & Haryana state ruling regarding the Minimum basic. As per the guidelines, you cannot keep the basic lower than the minimum wages.

With regards,
Shish Ram Uniyal
Junior Member Citehr

Hi,

The basic salary should not be less than the minimum wage, which varies from state to state because the minimum wage act is applicable to all organizations, shops, BPOs, and offices. Nobody can pay less than the minimum wage amount.

For PF deduction: PF should be deducted based on the minimum wage as per the Supreme Court decision. Basic wages should equal the minimum wage.

For payroll, all components of salary should not exceed the basic wage. The basic wage should be the higher portion of the salary, constituting 50% or 40% of the gross salary.

Regards,
Jalaj

Dear All,

Recently, Himachal Pradesh has fixed minimum wages at Rs. 3000 per month along with the condition that the basic salary should not be less than 95% of the minimum wages, and House Rent Allowance (HRA) should only be 5% in Himachal Pradesh.

The 40% and 50% HRA rule is only applicable for the Income Tax Department. For instance, if you live in a metro city, you can claim a 50% HRA tax exemption based on the basic salary, whereas in non-metro cities, it is only 40% instead of 50%.

The Delhi government has set the following minimum wages:
- Unskilled: Rs. 3633
- Semi-Skilled: Rs. 3799
- Skilled: Rs. 4057

Punjab has also fixed the minimum wage at Rs. 2620 per month, effective from 01/03/2008, with only a Rs. 50 revision across all grades, including Unskilled and Semi-unskilled categories.

For further queries, please obtain a brief note on minimum wages from any bookstore. Short notes are now available online or at bookstores.

Thanks & regards,
Manoj Kumar
teotiamanoj@gmail.com

Compensation and Benefits: A Total Guide

Hi, I am new to this forum and just joined. I would like to know (a to z info about C &amp; B), i.e., compensation, and benefits. Can anyone help out please? It's very important and needed desperately.

Dear Siva,

I would appreciate it if you could please guide me on some of these points. I'm a bit confused now and not getting the correct way to learn how to prepare the salary break-up. Our company falls under the Shop & Establishment Act. So, how much should the basic be? What should be the breakup if the CTC is 16250/-? Please go through the below-mentioned and correct me if I'm wrong at any point (this is what we follow).

Basic: 30%
HRA: 40%
CCA: 15%
Conveyance: 800/- max
Special Allowance: rest of the CTC

PF: employer
Basic: 12%
Employer contribution: 12% + 1.61% S/charge

ESI
Gross: 1.75%
Company contribution: 4.75%

Looking forward to hearing from you...

Best Regards,
Meenakshi

Hi all,

I hope this will clarify all questions related to CTC salary working format. If you need any clarification, please do let me know. I have just shared the format for your information. The calculation may vary between companies but will be similar to this.

Regards,
Ramesh A
HR Specialist
Chennai

Dear Friend,

Please follow the following principles while bifurcating CTC.

60% of Gross should be basic, and 40% of basic should be HRA in the case of metro cities; otherwise, it depends on the class of cities. The remaining amount can be allocated to different heads prevailing in your company. There are no statutory obligations such as all-purpose allowances, conveyance allowances, medical allowances, washing allowances, etc.

However, generally, PF authorities will check that 60% of the gross should be the basic component. The rest, as you may be aware, includes PF, ESI, Professional tax, etc.

Best regards,
Ravindra Shenvi

Hi,

Every organization has its own policies for the salary break-up. If you are formulating a new policy for salary breakdown, you can start by allocating 40% to the basic salary and then distribute the remaining amount among various components to reach 100%.

For example:
- Basic: 40%
- HRA: 10%
- Office wear allowance: 10%
- Conveyance: 20%
- Medical: 10%
- Other: 10%
You can also create different combinations for the salary components.

This breakdown is applicable to salaried employees only and not to wage-paid employees (who are paid according to the Minimum Wages Act).

Regards,
Sandip

Hi Siva,

That was very informative. One point: You have mentioned that if the position is that of a Software Engineer, then the minimum wages would not be applicable. Could you please elaborate on that?

Thanks and regards,
Ayona

Dear All,

I also have a doubt regarding Minimum wages & basic -

1. Is the basic equal to minimum wage or not? If the basic wages are not equal to minimum wages, how do we calculate the PF & ESI, which is compulsory to calculate on the basic?

2. For example, the minimum wage for a skilled person in UP is Rs. 150/-. According to that, the basic is equal to Rs. 4500/- per month. If the salary structure for any employee is like this:

Basic - 2795.00
Educational Allowance - 200.00
HRA - 1118.00
Medical Reimbursement - 700
Other Allowance - 108.00
Transport Allowance - 800.00
PF -

Please provide the missing information for PF calculation.

Dear friends,

I also have some doubts regarding the difference between minimum wages and Basic pay:

1. Is Basic equivalent to the minimum wages or not?
2. As per the Central Govt., the current minimum wage is Rs. 150/- daily for a skilled person in UP. Based on this, the salary or wages of an employee would be Rs. 4500/- + DA (applicable at 30% on basic).
3. For PF and ESI calculation, it is computed based on the basic salary of the employee, and as far as I know, the basic is equal to the minimum wages.
4. What is the correct method of calculating the basic salary? Is it equal to the minimum wages, or can it be less than that?

For example, I am providing a salary breakup. Please clarify if this is correct as per the law:

Earnings
Basic - 2795.00
EA - 200.00
HRA - 1118.00
MR - 700.00
OA - 108.00
TA - 800.00
Total: 5721.00

Total Deductions
PT - 60.00
PF - 335.00
Total: 395.00

Net Salary in Hand: 5326.00

Is this salary breakup in compliance with the law?

Looking forward to your prompt reply.

Thanks and Regards,
Vijay

Thanks, Katyana, that was very informative! I still have a few queries:

As I was going through the attachment that you sent, I could not find out in which category our organization (A BPO and a software development company in Kolkata) would fall into. There, we have categories like commercial establishments other than shops. So, where did you get $118.00 as the rate per day? It would be good if you could elaborate a little bit on that.

Regards,
Ayona

Dear Guy,

What we follow: Basic + DA = 60% of the current CTC. If you don't follow DA, then you can fix your Basic within the range of 20% to 40%, plus other allowances. The higher the Basic + DA, the higher the PF you are going to pay.

Regards,

Arunkumar M.
Pondicherry

Dear Ayona,

As per the instructions of EPFO, we can't bifurcate the minimum salary. PF should be deducted in full from the minimum wages applicable to each category of employee in that state. Instructions have already been issued in Himachal Pradesh and Haryana by EPFO.

Hence, it is ideal to keep the (basic + DA) salary at the minimum wages.

Regards,
Saroj Kumar

Dear Friend,

Basic and DA are combined in the private industry and are set as Basic only for any further statutory calculations. Basic should cover an employee's minimum expenses. It can be set on average as follows:
- Unskilled employees <= 3500
- Skilled employees <= 4000
- Highly skilled <= 5000

Case 1: Let us suppose an employee joins with a salary of Rs. 4000. Then give his Basic alone as Rs. 4000.

Case 2: Let us suppose an employee's monthly salary is Rs. 5000. Set his basic as Rs. 4000 and other allowances as Rs. 1000.

Case 3: If an employee joins with a salary of Rs. 6000:
- Basic: 4000
- HRA: 1000
- MA: 500
- TA: 500
- Gross Rs. 6000

The breakup for these salaries is only for basic as we pay PF and ESI, and the breakup does not give the employees any benefits as they do not come into the taxable limit.

Let his salary be Rs. 10,250:
- Basic: 7000
- HRA: 3000
- Others: 250
Here, the total is 10,250, and the advantage is the employer need not pay his PF or ESI contribution.

For the same structure of Rs. 10,000 if the company is paying PF and ESI:
- Basic: 5000
- HRA: 2500 if the office is in Chennai, Mumbai, Kolkata, or Delhi; else 40% of Basic
- TA: 800
- MA: 1250
- LTA: 450
- Gross: 10,250

Regards,
R. Ramamurthy

Hello Quereshi,

Please take a look at the CTC structure that I am framing: for example, the monthly CTC is Rs. 12,000 P.M., so the CTC breakup would be as follows:
Basic: 3600 (30% of 12,000)
HRA: 1800 (50% of basic)
C.A.: 800 (up to this amount it is tax-free)
P.F.: 1440 (12% of basic) - employer's contribution
S.A.: 4360 (remaining amount)
Less:
Employee's contribution: 12% of basic

Please note the following points:

1) Basic + DA must be equivalent to the minimum wages prescribed by the commissioner's office (if you do not have D.A., then the basic alone should compensate for that; this may vary from state to state).
2) HRA should always be 50% of the basic (in metro cities) and 40% in non-metro cities.
3) Conveyance Allowance (C.A.) should be 800 P.M. as up to that amount it is tax-free.

You can also include other components like LTA (Leave Travel Allowance) and CCA (City Compensatory Allowance).

Please let me know if you need further clarifications.

Thanks and regards,

Ayona

Dear,

Please note that there is no specific guideline for framing the basic point. The main consideration is whether you are paying the minimum wage to the candidate or not. If PF is applicable to your company, ensure that the basic salary you offer is not less than what the candidate was receiving earlier (with the previous company), if the candidate has prior work experience. While it is not mandatory, try to adjust accordingly.

It is advisable to establish a policy that specifies the range of basic salaries for different levels, for example:
- Junior Level: $1500 - $2500
- Medium Level: $3000 - $5000
and so on.

Cheers

Hi,

Please let me know the written rules from the PF department as you may deduct PF on minimum wages. The PF department only states that you can deduct PF @ 12% from basic. Can anybody send me any notification/rules that specify the employer's eligibility to pay PF @ 12% on minimum wages?

Only ESI is applicable on minimum wages for both employer and employee share. You can show the breakdown as Basic 70% and the remaining as HRA in case of minimum wages. Otherwise, if your salary is Rs. 20,000/-, then you should calculate as follows: Basic 50% of Rs. 20K, and 40% (in non-metro city) or 50% (in metro city) for HRA calculated on basic. The rest can be paid as medical reimbursement @ Rs. 15,000/- per annum {as per the income tax department, if you provide medical bills, etc.} and you can pay as transport allowance and special allowances. This is the organizational policy, so don't worry, guys.

If anyone has written rules from the government department, please show me the details.

Thanks & regards,
Manoj

Hi all,

Minimum wages pertain to scheduled employment. The appropriate government (Central/State) issues Government Order (G.O) for a particular industrial activity consisting of basic wages and modalities of calculating DA. In most states, there is also a residual category that takes care of industrial activity not covered by industry-specific GO. IT/BPO is normally classified as Shops & Commercial Establishments in the absence of any specific G.O. According to a Supreme Court ruling in Airfreight Industries case, if the sum total of gross emoluments is more than the minimum wages, then the employees/union cannot claim DA above this amount citing the Minimum Wages G.O. Many establishments have misused this judgment to keep the basic at very low levels without giving DA. This is inherently risky as most statutes like the Payment of Bonus Act, The EPF & MP Act, The Payment of Gratuity Act, etc., prescribe benefits based on Basic & DA. So, employees can always move to the competent forum to get benefits on par with basic, notwithstanding the SC ruling. Though there is no statutory guideline, the EPF Organization follows the thumb rule that 60% of gross salary should be reckoned for PF compliance, subject to the wage ceiling which is currently Rs 6500/- (Also note that food allowance or the cash value of any food concession is also wages for the purpose of PF compliance).

It is better to adopt a sliding scale. At the lower rungs of the salary ladder, keep the Basic and DA strictly on par with the Minimum Wages G.O. As you progress up the ladder, the percentage of Basic & DA can proportionately decrease as per the HR policy in the industry cum region.

Regards,
Dr. Patrick Ryan
Advocate
21 B MIG Flats
P.T Rajan Road,
K.K Nagar, Chennai 78

In India, there is no law that governs the minimum basic to be paid. The Minimum Wages Act only stipulates the total amount to be paid. That too, when you are paying the total amount stipulated by the act, there is no obligation on the part of the employer to pay under various headings such as dearness allowance and other allowances.

Hi,

The minimum basic is fixed so that employees can get the benefit of PF on that minimum basic. Therefore, you will have to keep the basic at minimum wages + any other benefit. For example, if the CTC is 5000 and the minimum wage is 3500, then the basic has to be 3500, and the rest of the components can make up the CTC.

Praveen.

Dear Ayona,

Make sure that the 'Gross amount Value' should meet the minimum wages in your state, particularly for Skilled or Highly Skilled Category.

'Basic' would be 40% of the Monthly Gross / CTC (as applicable).

'HRA' can be 40% to 50% of 'Basic' depending upon the 'Non-Metros' or 'Metros' as scheduled by the Standard of Living Index.

The balance can be distributed as Other Allowances as per the eligibility of an employee and/or the Company policy.

With regards,
Jayesh

In our company, we calculate the Basic as Gross Salary * 50% for staff. For laborers, there is no BASIC, DA, HRA, and all, only fixed BASIC (Gross wages) only.

kps

Dear Friend,

Minimum wages are fixed by State Governments every six months. It depends on the category of employees, which is determined by the nature of the work the employee performs. Normally, there are six categories of employees:

- Unskilled
- Semi-skilled
- Skilled
- Non-matriculate
- Matriculate but not graduate
- Graduate and Above

For your state's minimum wages, you have to check the government notification. It is a statutory obligation on the part of the management to pay minimum wages, which include only basic+D.A. Other allowances are not included in minimum wages. For PF, Bonus, and other legal payments, basic and DA are considered as minimum wages.

Thanks & Regards,
Kumaran Siva

Dear All,

Each and every person has lame excuses; the minimum basic salary is set by the state government and depends upon laws. It varies from state to state.

Thanks,

Pankaj Chandan
pankaj2ykchandan@gmail.com

Dear Indrani,

What do you mean by "Judgement"? Are you referring to the minimum wages notification? If so, it will be available from the concerned Labour Office.

Thanks & Regards,
Siva

Dear All,

As per the Supreme Court judgment in air freight, it was highlighted that...

Please let me know if you need further information on this matter.

Thank you.

Dear All,

I am Vasu, working for a software company as an HR person. Can somebody help me draw a pyramid structure for my organization, as I am unable to create one in Word or Excel? I would appreciate your quick replies on the same. Below are the number of employees from top to bottom for your reference:

MD
AGM - 1
S.M - 1
Manager - 5
Asst. Manager - 3
Sr. Development Lead - 7
Development Lead - 11
Sr. Analyst Development - 5
Analyst Development - 10
Sr. Software Engineer - 25
Software Engineer - 9

Thanks & Regards,
Vasu

I will get this info in a week's time. But I remember the year. You can check in 1990 or 1991 Supreme Court judgments. I surely will send the reference soon.

Siva

Dear Vasu,

Forget designations and salaries for a moment. Generally, all organizations will have 5 major drivers:

1. Strategic and leadership
2. Business Planning
3. Operational Planning
4. Managing Resources
5. Execution

Most of the organization's jobs will fall under this category. Now fit all your people in this irrespective of their designations. Your MD and Board will be in level 1 Strategic. Your AGM and maybe some senior people will be in Business Planning, which includes planning resources for two to three years. Your Managers will be in Operational planning. They are normally responsible for monthly and quarterly planning and discuss with Business planning for resources. Your Project leads are the operational managers. Execution is taken care of by the last layer. Every level can have three grades.

Siva

Dear Kumarn,

Minimum wages are not revised once in six months. In fact, the minimum wages are fixed by the government once, and there is no specific timeframe for revision. However, the Dearness Allowance (DA) portion of the minimum wages, which is linked to the Cost of Living Index, is revised according to a formula once every three months in Kerala and once a year in Tamil Nadu. Some states also follow monthly adjustments. The adjustment of DA varies from state to state.

Siva

Hi all,

I have come across some posts showing calculation of minimum wages for 30 days. Minimum wage is calculated based on 26 days and not on 30 days. I have also seen posts linking minimum wage with ESI and PF. They are all different legally as of now. The PF Act does not state that we need to pay PF on minimum wages. Similarly, the Bonus Act does not require payment of Bonus on Minimum wages. Legally, these authorities cannot enforce payment based on minimum wages.

Having said this, let me caution that those who are not paying minimum wages are taking a risk if they are caught by concerned authorities. If the organization is compelled to pay minimum wages with retrospective effect, then the liabilities will be high. Again, I must emphasize that there is no provision to make minimum wages payable with retrospective effect.

Many organizations are managing with some of these loopholes in the law. It's important to look at various legislations in their true perspective.

Siva

Hi PC3107,

Do you have any written rules stating that the minimum wage is Rs. 3000/- in any state? If we hire an employee at the salary of Rs. 4000/-, would we need to pay Rs. 3000/- as basic, or can we pay Rs. 2500/- as basic and the remaining Rs. 1500/- in HRA? Is this possible? What are the rules regarding this? We are unaware of the company's regulations and would like clarification on this matter. We are looking for written rules from a government authority, specifying whether if the minimum wage is Rs. 3000/-, employers are allowed to deduct PF on the entire amount or if we can distribute the wages as Basic & HRA. Please provide clarity on the same.

Thank you,
Manoj
teotiamanoj@gmail.com

Hi Meenakshi,

Please find attached the breakdown of Rs 16,250 CTC. For your convenience, I have provided three breakdowns with basic salary percentages of 30%, 40%, and 50%.

I would recommend keeping the basic salary at 40% of CTC for Non-Metro locations and 50% for Metro locations.

Regards

Dear Friends,

Normally, the basic percentage would be around 25% to 30% of the CTC, but at the same time, ensure you are adhering to paying the basic amount prescribed in Minimum wages. HRA will not form a part of Minimum wages.

Hi Vasu,

Attaching here is a pyramid structure for your organization. However, it purely depends upon the role of each position to fit into the pyramid. I tried fitting them as per my understanding of your structure; however, you or your organization may choose to rework the same. Hope this would be of some help to you.

Dear All,

You are also requested to please have a look at it. It provides a clear description of the roles of the individuals who may fit into a particular band.

Regards

Dear All,

As per the Supreme Court Judgment in Airfreight v State of Karnataka (1995 - II - 705 SC), it is sufficient that the total amount paid by the employer is higher than the notified minimum wage. The law does not require a component-wise comparison.

Therefore, even if the Basic and DA amounts are lower than the minimum wage, it suffices if the total wage paid to the employee exceeds the minimum wage. The only issue an employer may face (if their Basic + DA components are relatively lower compared to the total salary) would be with the PF officials. This can be addressed by clearly defining and explaining the other allowances provided. These other allowances should not be linked to a cost-of-living increase to avoid attracting PF remittance. An example of this is a food allowance.

Regards,
Arun

Hi Everyone,

Can anyone please tell me what is the difference between payroll and compensation?

Regards,
Reshma

Hi Resma,

The payroll is the consolidated statement of the salaries of all employees at the location. It includes all deductions, earnings, and the net take-home salary. Compensation refers to the amount payable to an employee in case of any mishap.

Thank you,
Manoj

Dear Sir,

Thank you for correcting my mistake. I actually meant a revision of D.A. every six months. However, nowadays, most organizations do not differentiate between Basic and D.A. They simply mention "Basic" only, which includes D.A.

Thank you for your correction.

Kumaran Siva

Dear Arun,

Referring to the Manganese Ore Limited case in 1991 (Supreme Court), it was held that Attendance Bonus is not considered wages. The Supreme Court ruled that incentives do not fall under Minimum wages. Furthermore, in the same case, it was established that food concessions, unless specifically mentioned by the Government in a notification, will not be taken into account for Minimum Wages.

This judgment was detailed. I have not seen the judgment referred to by you. Therefore, based on my understanding of this subject from the above judgment and a few judgments from the Karnataka High Court, only Basic and DA will be considered.

Siva

Dear all,

I have seen many responses to the question of CTC and Minimum Wages. What I suggest is, when you make a breakup of CTC, try to follow the below structure:

- BASIC: According to Minimum Wages or 40-50% of C.T.C. (whichever is higher).
- H.R.A: Balance of Minimum Wages or a maximum of 50%.
- Conv: Balance of M.W. & H.R.A., maximum of Rs. 800/-
- Medical: Balance of M.W., H.R.A., & Conv., maximum of Rs. 1250/- per month.
- P.F.: 12% of the total basic or 12% of Rs. 6500/-
- ESI: 4.75% of gross if gross is less than Rs. 10000/-
- Bonus: 8.33% of basic or 8.33% of Rs. 3500/-
- Other Allowances: Balance amount of all the above components.

If there is any canteen and bus facility, that can also be included in it. Please expect suggestions from others as well.

Thanks,
Kumaran Siva

Dear Reshma,

According to me, payroll is a particular amount payable to an employee for performing a specific job for fixed hours of work (monthly or daily). Compensation, on the other hand, is a social security provided by law to an employee for any kind of loss they suffer, whether physical or financial, regardless of fault, with the employee's future in mind. For example, compensation for accidents during work or retrenchment compensation for termination of service, etc.

Thanks,
Kumaran Siva

Dear Member,

ESIC is applicable on gross salary up to Rs. 10,000 only. The employee contribution is 1.75%, and the employer contribution is 4.75%.

Thanks,
Kumaran Siva

As per my opinion and knowledge, the minimum basic should not be less than mentioned in the minimum wages decided by the government.

Pankaj

Hi Dileep,

Please note...

Eligibility: Any employee whose Gross Salary is less than or equal to 10,000 would fall under the ESIC Bracket. However, ESIC is calculated as follows:

Employees' Contribution: 1.75% of gross salary
Employer's Contribution: 4.75% of Gross Salary

Regards

Hi,

As far as I know from the new rules, basic should be 50% of gross and HRA is 40% of basic. TA - 800/month - fixed, Medical - 1250/month - fixed.

Regards, Sowmya N

Dear Ayona,

The gross salary must be as per the minimum wages. For example, if the minimum wage in your state is $4500 for unskilled workers, then we can set $1500 as the basic salary.

Thank you.

Only asking questions will not build up confidence. We should be able to get correct answers at the right time.

Hi,

I am Thiru, and I am working for P Ltd company. I would like to know about my salary breakup details. I am getting a CTC of Rs. 13,500/-. I would like to know what could be my basic, HRA, special pay, T.A., management allowance, PF, etc.

Could you please suggest me on this?

Regards,
Arasu

Dear reader,

Kindly let me know the Himachal Pradesh Shops and Establishment Act regarding leave and holidays in the state of Himachal Pradesh.

Regards

Dear Ayona,

You can fix the basic at Rs. 4000/-. It is upon you to pay your PF. ESI should be paid in full as it has a limit set by the Minimum Wages Act. The remaining amount can be allocated as other allowances (Rs. 1000/-).

In any case, you could have structured your employees' pay based on grades. For a total of Rs. 5000/-, I suggest Rs. 4000 as basic and Rs. 1000/- as other allowances, rather than the breakdown you have provided.

Regards, Ramamurthy R

Hi, I am a new joiner in this site. I am working with a manufacturing company in Ahmedabad. I want to know about the minimum wages of labor and can anybody help me to create a salary structure for the labor according to the minimum wages. Please reply seniors. 😕

Hi, I am a new joiner on this site. I am working with a manufacturing company in Ahmedabad. I want to know about the minimum wages of labor, and can anybody help me create a salary structure for the labor according to the minimum wages?

Please reply soon.

Seniors,
Ashish Singal

Dear Mr. Shankar,

Minimum basic should be 50%. HRA - 35%. Conveyance - 15%.

For example: If 5000 is gross, then 2500 will be basic, 1500 will be HRA, and 1000 will be conveyance. On the basic amount, 12% (Rs. 300) will be deducted towards PF. The total CTC will be 5300/-. PTax will be nil if the person's CTC is Rs. 5000/-.

This is for your information.

Regards,
Bhanupriya
HR

Dear All,

Section 2(h) of the Minimum Wages Act, 1948 defines "wages" as follows:

"Wages means all remunerations, capable of being expressed in terms of money, which would, if the terms of the contract of employment express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment and includes house rent allowance but does not include:

(i) the value of:

(a) any house accommodation, supply of light, water, medical attendance; or

(b) any other amenity or any service excluded by general or special order of the appropriate Government;

(ii) any contribution paid by the employer to any Pension Fund or Provident Fund or under any scheme of social insurance;

(iii) any travelling allowances or the value of any travelling concession;

(iv) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or

(v) any gratuity payable on discharge;"

Also, as per the Supreme Court judgment as well as High Court judgments in various states, we can consider that the scheme of the Act is to provide a minimum wage for each employee and so long as that minimum wage is paid, there is compliance with the provisions of the Act. It is not the requirement of the statute that each component part of the minimum wages, such as the basic wage and the dearness allowance/special allowance should be paid at the rate prescribed under the notification. In cases where an employer is paying a total sum which is higher than the minimum rates of wages fixed under the Act, including the cost of living index, i.e., Variable Dearness Allowance (V.D.A.), he is not required to pay V.D.A. separately.

Therefore, it should be understood that it is enough if the total sum paid to the employee is more than the minimum wages prescribed by the government. I am attaching a couple of judgments - one by the Honorable Supreme Court of India and the other by the Honorable Mumbai High Court for your reference.

Also, no law states how much percentage of Gross Salary or CTC should be BASIC Pay or Dearness Allowance. But normally it varies around 25-60% across industries.

Regards,

Arun

Dear Ms. Chitra,

Please provide details regarding the new regulations you mentioned in your post. Are these regulations specific to Indian law or from another state? Kindly refer to the relevant state acts and rules to avoid any confusion or misinformation.

Regards,
Ramnath

Hi,

I am working for a Facilities Management company that supplies Office Boys, Drivers, and other staff to different establishments. Could you please share the Minimum Wages Act of AP to help me in this regard?

Thank you in advance.

Best Regards,
Sree

Please refer to Mr. Arun's posting and attachment. Very well explained as per the rule and act. The minimum wages rule differs from state to state, so please refer to the state rule.