Can I Restructure Minimum Wages to Increase Take-Home Pay for Employees? Seeking Advice on Legalities

Dear seniors,

I have a doubt regarding minimizing basic in minimum wages. To make it clear, take an example of an office assistant. As per the Minimum Wages Act:

- Basic: 3700/-
- D.A: 538/-
- Total: 4237/-

My query is, can I restructure it as:
- Basic: 50% of 4237/- : 2119
- D.A remains the same: 538
- Other amount as allowance: 1580, in total - 4237/-

Can I do this? I have discussed it before; some say it can be possible as we are to maintain 50% of gross, some say it is illegal, some talk of a judgment by the Supreme Court given in the case of Gujarat Cypromet Ltd vs. Asst P.F Commissioner 2004 III CLR 485.

I just want to do a favor to the low-level employees by reducing their contribution in PF deductions and making it more as take-home pay. Actually, they are not even interested in having PF. A simple reason they say is, they may not be able to solve their present problems; how could you say preserve for the future.

So please help me out so I can do something about it.

Dear Raj,

Legally, you cannot do anything. Please refer to Section 12 of the EPF and MP Act 1952, where it is clearly mentioned that you cannot reduce the wages from a PF standpoint. This was discussed in the forum earlier as well.

Thanks,
J.S. Malik

In a minimum wage case, you cannot bifurcate the salary into various components. It should remain the same. However, where the gross salary is more than 6500/-, you can, but it should not be less than 50% of the gross. This has been confirmed by the Assistant PF Commissioner, enforcement.

Regards,

Dear Raj,

In reply to your query, I would like to share with you that in the case of a workman, the minimum wages are to be reckoned as basic wages, and the PF needs to be deducted on the same. This needs to be done to avoid any legal hassles in the smooth functioning of the organization. If you intend to make it 50% of the gross salary, that would mean it will be less than the prescribed minimum wages for that category of workman. In the coming days, these workmen may take advantage of this policy and may request the same benefits under the Minimum Wages Act.

I faced a similar situation last year due to the management's reluctance to pay. The employees lodged a complaint with the PF commissioner under the RTI Act, and we had to pay arrears amounting to lakhs of rupees, which we were unable to recover from the workmen.

It is advisable to pay minimum wages as basic wages, and PF should be deducted based on the minimum wages to safeguard the interests of both management and workmen in the long run.

Thanks,
Amit Anand Gera

Dear Raj One U,

I have gone through the discussions, and this type of matter has already been discussed earlier. Mr. Mallik JS and Mr. Amit Kr. Gera are quite right on the subject. Do not bifurcate minimum wages in many parts; you can divide it into only two parts: basic + dearness allowance. P.F. has to be deducted on both the salary heads, and it is applicable and acceptable for gratuity as well as for minimum wages.

In my opinion, don't divide minimum wages into parts. Over the minimum wages, you can divide the salary and wages to the head of your choice.

SHISH:lol:

Dear Raj,

There is a Supreme Court judgment that if you are paying more than minimum wages, then you may bifurcate minimum wages into different heads, but the basic wage should be 60%.

Thanks & Regards,
Arun Gupta

Dear sir,

If there is any Supreme Court judgement, please give us the details so that it will help all of us.

Regards,
dpgunturi