Is My Company's Wage Structure for Skilled Workers Compliant with Minimum Wage Laws?

Understanding Minimum Wage Components

I need some clarity regarding minimum wages. Is the minimum wage only comprised of BASIC+DA? For example, if the minimum wage for skilled workers is Rs. 5000 and our company pays skilled staff as follows:

- BASIC+DA - 4000/-
- Mobile Allowance - 1000/-

The total figure amounts to the minimum wage, i.e., Rs. 5000/-. Is this arrangement compliant with labor laws, or should I make adjustments?

I am eagerly awaiting your valuable guidance.

Best Regards,
Amod

Please read the definition of minimum wages in the Minimum Wages Act 1948. It contains two parts (i) and (ii). Try to understand (ii), as the answer lies in the definition. If you are convinced, please revert.

Whatever the breakdown, the total amount should be more than the minimum wage. Then it is okay.

Dear Amodsemilo,

Please see some earlier threads on this topic. Certain companies have been trying to devise illegal means of depriving the poorest section of workers (who earn the minimum wages) by reducing their basic pay and introducing some 'fictitious' or 'dubious' heads of salary. This practice deprives them of the statutory benefits that are based on Basic Pay, such as P.F., E.S.I., or other compensation.

Tell me, if you are reducing their basic pay in the name of MOBILE ALLOWANCE, is there really any need for a mobile phone for a worker earning Minimum Wages? If it is necessary, why not give a Mobile allowance OVER & ABOVE the Minimum Wages?

If such practices go unchecked, one wonders whether someday the poor workers will receive only Rs. 1 as their basic Pay, with the rest of the amount shown as some other 'fictitious' and sham allowances.

As a conscientious and enlightened HR professional, don't you think this is a way of exploiting the poorest of the poor workers? I wonder how the value system of such companies and their HR professionals function.

Warm regards.

Dear Amod,

Understanding the Minimum Wages Act

The Minimum Wages Act is enacted by the respective State Governments and is amended from time to time (normally every 5 years) after due consultations.

The Minimum Wages Act clearly defines two aspects: Basic Wages and the Dearness Allowance payable in the industry, leaving no room for ambiguity. Employers are required to adhere to the stipulations laid down.

Dearness Allowance is generally linked to the Cost of Living Index, with the base year being clearly specified. The amount payable for every point over and above an index will be explicitly mentioned.

Calculation of Monthly Wages

For the purpose of the Minimum Wages Act, monthly wages are considered for 26 days. The basis for arriving at 26, as indicated to me by my senior, is (365 days - 52 weekly offs - 9 National and Festival Holidays = 304/12 = 25.33 rounded off to 26 days).

Resources for Minimum Wages Information

You can obtain a copy of the Minimum Wages applicable to your industry from the Labour office. If you are in Tamil Nadu, you can subscribe to the monthly journal "UZHAIPAVAR ULAGAM" by paying an annual subscription of Rs.80/- or a lifetime subscription of Rs.750/- (20 years). However, please note that it will be published in Tamil.

If you are in a different state, similar initiatives are likely available in the respective labor offices.

This book will provide you with updates on recent amendments in Minimum Wages and also a summary of the Cost of Living Indices for a specified period. It also offers updates on leading judgments and queries raised by members.

I trust this information will be useful to you.

Regards,
M.V. KANNAN

Dear kannanmv,

Thank you for your contribution. However, the following needs to be corrected:

Only in the Payment of Gratuity Act, for the purpose of arriving at daily wages/salary (to then multiply it by 15 to get 15 days' salary, rather than dividing the monthly salary by 2), the 26-day formula has been proposed. Please note that it is not applicable elsewhere and may be detrimental to workers' salaries.

Moreover, also note that a worker working continuously is eligible for a paid weekly off.

Warm regards.

Dear Kannan,

I sincerely appreciate your interest in the issue and the effort you are willing to put in to clarify certain matters. Both of us stand corrected to some extent. Let me explain the significance of 26 days, the basic concept of which you have already explained and is widely accepted as: the exclusion of Weekly Off in a month (4 or 5); making the working days as 26.

Another way of looking at this is: 365 - (52 weekly Off) / 12 or, (313) / 12 comes to 26 days. Therefore, by working for 26 days in a month (the weekly offs being already included in a month), an employee receives the full salary for a month. So, to calculate a day's worth of work, the monthly salary should rightly be divided by 26 only.

Some unscrupulous employers try to reduce the per diem salary by dividing the monthly salary by 30. To prevent such manipulation, the law, under the Payment of Gratuity Act, devised a way to define the 15 days' salary not as half a month's salary but by determining the per diem salary (by dividing the monthly salary by 26) and then multiplying it by 15.

Minimum Wages Publication

Now, there are TWO ways in which Minimum wages are published in the government notifications: per diem wages and monthly wages. Here, I agree with you; you have rightly pointed out that the monthly wages should be divided by 26 to arrive at the per day wages (wherever the wages are given as monthly).

I hope this clarifies all doubts on the issue.

Warm regards.