How Can We Adjust Minimum Wage Components to Boost Take-Home Pay in Gujarat?

Respected Seniors,

I am working in an Engineering organization in Gujarat. Presently in Gujarat, the minimum wage rate has increased tremendously.

My question is, can we split the minimum wages into two or three components like Basic + HRA + CONV so that the net take-home salary can be increased? Because all workers who work on a minimum wage focus more on the take-home salary than on what they are saving from PF, Gratuity, Bonus, etc.

Please answer me as soon as possible so that I can define the structure properly.

Regards,
Aliabbas Saiyed

Hi Saiyaed,

I'm just a new member. I can tell you that minimum wages comprise of two elements, namely Basic and Dearness Allowances. You cannot split the minimum wages as per your choice of Basic + D.A. + Conveyances. The only thing you can do is to increase the minimum wages slightly higher and then choose the Basic wages of your preference (but you can opt for any lowest minimal rate from which it can be assumed or proved that you are trying to avoid your liability towards PF, ESI, etc). You can then divide the remaining part of the total salary (i.e. Gross Salary - Basic Salary/wage) into different allowances. In this way, you can provide more take-home pay to your employees as well as minimize the liability towards P.F. and ESI. However, remember that if somebody's PF deduction is already made as per the minimum wages slab, you cannot decrease that.

Regards,
Koustav

Minimum wages can be split into two components only. One of my contractors failed a social compliance audit because of this issue. Group 4 Securicor had a case running in the Karnataka High Court, etc.

Let me know if you need further information.

Surya

Thank you, Koustav and Surya, for your prompt reply. I have already deducted PF on minimum wages, so it will not be possible to decrease the minimum wages now. Thanks once again. Please keep on posting.

Aliabbas

Hi, I am Piyush from Baroda and associated with labor law field for 25 years. As per the Supreme Court judgment in the matter of Airfreight Corporation, if your total wages are more than the minimum wages, then you can split the minimum wages.

Dear All,

Please provide me an ideal salary breakdown for the current minimum wage of Delhi, which is Rs 3,470.

Regards,
Tribikram

Hi group!

Can any of you tell me what is the minimum wage amount for Maharashtra currently?

Thanks and regards,
Garima

Dear Saiyed,

If you see the definition of 'wages' under the Minimum Wages Act, it includes all remuneration capable of being expressed in terms of money and includes HRA. Also, please refer to the case Airfright Ltd v. State of Karnataka & Others, 1999 LLR 1008 (SC), wherein it is held that:
i) an employer paying higher than the minimum rates of wages is NOT REQUIRED TO PAY variable dearness allowance separately; and
ii) An establishment will be excluded from the applicability of the Minimum Wages Act when the wages are more than the prescribed rates. Keeping the above in mind, you can fix the components of wages.

Regards,
Surendranath

Hello Piyush,

So you mean to say that if the minimum wage is Rs. 3470/-, it can be split as follows:
- Basic: 1735/-
- HRA: 867.5/-
- Conv: 800/-
- Sp. Allow: 67.5/-

Kindly confirm the same.

Regards,
Sashmita

Hi,

I am continuing on this topic. Minimum wages cannot be split. There are 2 components of minimum wages, i.e., Basic and Dearness Allowance (DA) for three classes of labor, namely:

- Unskilled
- Semi-skilled
- Skilled

The state government, as per the consumer index number and various other measures, increases the DA every six months, which is enforced from 1st April and 1st October of every year.

In earlier times, the government used to only mention the increase in DA, and that DA was supposed to be added to each employee's pay. But now, the government has also fixed a minimum basic for each class, below which you can't fix the basic wage and the DA, which is given every six months. The government took this measure because it merged DA in 2005.

For your information, I have enclosed the Government Order of Delhi Government for the minimum wages in Delhi for the current period.

I hope this will be helpful.

Please keep one thing in mind, labor laws work only in a forward direction. This means you can reduce the basic wages or reduce the contribution in the form of PF and ESIC. One more thing, once you reduce the basic, the contribution of PF and ESIC from both ends will also decrease, which means the company is defaulting not only in the minimum wages but also in the payment of wages, PF Act, ESIC Act, etc.

Any replies are welcome.

Umesh (umesh.chaudhary@ril.com)

Dear Umesh,

Thank you very much. So, that means the breakup given above is not valid legally. However, I have seen organizations providing the above breakup. Are they legally incorrect? 🤔🤔 Please confirm the same.

Thank you in anticipation.

Sashmita