Is It Legal to Set Basic Pay at 25% for an Employee Earning Rs. 18,000 Gross? Seeking HR Guidance

Can we bifurcate Basic as Rs. 4,500/- (25%) for an employee having Rs. 18,000/- as Gross.

As per my knowledge, and as an HR professional, I hope we shouldn't do it because it violates the Payment of Wages Act and P.F. Act.

Please suggest and guide me.

Dear spsr,

Please do mention the reason for calculating the basic percentage as 25% where generally it is calculated as 40% & 50% in organizations.

Dear Mahesh,

I was asking that, as per the Payment of Wages Act, basic must be more than the other components, i.e., at least 51%. We can reduce the basic to 30%, 40%, or 50% such that the basic is not less than Rs. 6,500. However, in this case, it is Rs. 4,500, which is less than Rs. 6,500.

I hope that we shouldn't, and we don't have the right to reduce it to 25%. I say that we can reduce it to a maximum of 36.11% in this case (as the Gross is Rs. 18,000, Basic is 36.11% - Rs. 6,500). However, my colleagues are telling me that we can reduce it to even 25%. I argue that if the PF commissioner finds it during inspection, he will issue a DEMAND NOTE.

Is my argument right, or are my colleagues correct?

Please help me with the issue below.

Can we bifurcate Basic as Rs. 4,500/- (25%) for an employee having Rs. 18,000/- as Gross?

As per my knowledge, and as an HR professional, I believe we shouldn't do this because it violates the Payment of Wages Act and the P.F Act.

Please suggest and guide me.

Please suggest to me on the following issue.

Can we bifurcate Basic as Rs. 4,500/- (25%) for an employee having Rs. 18,000/- as Gross?

As per my knowledge, and as an HR professional, I hope we shouldn't do it because it violates the Payment of Wages Act and the P.F. Act.

Please suggest and guide me.

Dear Member,

Please clarify which section or rule is going to be violated under these Acts?

Regards,
R.N.Khola

Please suggest me on the following issue: Can we bifurcate Basic as Rs. 4,500/- (25%) for an employee having Rs. 18,000/- as Gross? As per my knowledge, and as an HR professional, I hope we shouldn't do it because it violates the Payment of Wages Act and the P.F. Act. Please suggest and guide me.

Dear Mr. Khosla,

Regarding compensation and benefits, there is no specific rule related to the fixation of Basic Salary. However, it is always advisable to align the basic salary with the organization's structure. Other components such as PF, ESI, and Gratuity are also calculated based on the Basic and Gross Salary. It is essential to ensure that the Basic salary is always higher than the other salary components.

Thank you.

Please provide information on salary calculation, including components such as basic salary, DA, HRA, PF, professional tax, etc.

Thank you.

SPSR has raised a valid question. Of course, some companies are taking shelter under the doubt raised by R.N. Khola. All this is to avoid the Gratuity component and employer contribution to PF.

Please let me know if you need any further assistance.