Confused About Minimum Wage and P.F. Calculations in Chennai? Seeking Legal Clarity

Dear all, I am in Chennai and am paying my employees gross salaries ranging from 4900 to 11350, which are split into 60% basic, 30% HRA, and 10% conveyance. Only recently, I registered under the Factories Act. Now, as per my lawyer, the minimum wages payable under the Tamil Nadu government is 4790 (basic + D.A.). However, my P.F. consultant has split the gross salary (basic 60% + HRA 30% + conveyance 10%) in a different way, stating that this is how the calculation should be done for P.F. Only recently did I come to know that such bifurcations could lead to legal complications. I am prepared to pay P.F. and minimum wages according to government rules. Now, I have a few questions here:

1. If we calculate only the basic, I do not comply with minimum wages.

2. Will there be a problem in the P.F. department regarding this matter?

3. Is it legal to state that my gross salary is more than the total of minimum wages (basic + D.A.) prescribed by the government?

Apart from the gross salary, I also pay conveyance. For example, if a person's salary is 11350 (basic + HRA + conveyance), I add 350 for conveyance and 400 for tea expenses per month.

Even after paying so much money, I'm still facing legal complications. Please help me out. What is the remedy in this situation?

With regards,

Vivek

Hi Vivek, you have to follow all the rules of the Factory Act. So, review whatever you have done till today. It's my suggestion to you that you better hire an HR guy so he can handle all the problems. Consultants are a short-term solution for the process.

Understanding Basic and DA Calculations

You can use Basic (Basic + DA) in one term. For example, if 4000 is basic and 300 Rs is DA, then you can take 4300 Rs as basic. Always use Basic = CTC's 50% for metro and 40% for other locations.

HRA and Other Allowances

HRA = Basic's 50% for metro and 40% for other locations. Conveyance is 800 Rs, and you can use CCA, Special Allowances, etc.

Hi Anish, now my query is:

1. As per the rule, is the labor department taking the CTC (gross salary) as the minimum wages, or is only the basic taken into account?
2. Should I pay PF for the gross salary, or is the bifurcation of gross salary okay?

Thank you for your valuable advice, sir.

With regards,
Vivek

It does not matter what breakup you have given, as long as:

- The gross wages paid are more than the government-declared minimum wages.
- In case HRA is applicable to you, then please add 5% HRA to the Basic + Spl. All (DA) declared by the government, and then match the wages.
- Basic wages are in the range of 40% to 60% - depending upon your location, company policy, and trends in the area. Please take care that the OT rate is double the gross.

Please read the articles available on this forum on this subject.

Regards,
Kalpana Iyer

What your PF consultant has said is almost correct. At the worst, you may have to add 10% as a conveyance for the purpose of EPF contribution. 30% of HRA can continue. HRA does not attract EPF and can still be included in wages to be considered in Minimum Wages calculations.

Regards,

Hi Vivek,

You may break up the salary components as Basic + DA + HRA + Conveyance Allowance + Education Allowance + Medical Allowance. PFA contribution may be 15% of the basic.

D. Majumder MD, Apisa Biotech Extn Pvt Limited Hyderabad [Login to view]