Understanding Minimum Wage Requirements for Trainees: Basic Salary vs. Gross Salary?

Dear Seniors, I have recruited a few employees for company roles. As per our company policy and structure, we have allocated them grades and finalized their basic salary, HRA, conveyance, and other allowances.

Query on Salary Structure

Is it necessary for the basic salary allocated to them to be not less than the minimum wages if I have hired them for company roles or as trainees? Is it sufficient if the total gross salary is not less than the minimum wages multiplied by 26 days? Please clarify whether one of these conditions needs to be satisfied or if neither is required.

Regards,
Kiranikumari

Understanding Employee Classification Under the Minimum Wages Act

First of all, be clear in your mind whether these employees fall under the definition of a worker under the Minimum Wages Act, i.e., whether they are engaged in manual, unskilled, skilled, or clerical work. If they fall under the Act, then when you decide on their pay grades, you must ensure that their gross monthly wages for 26 days are not less than the minimum rates of wages fixed by the government for the scheduled industry under the Minimum Wages Act. Also, check whether your industry is a scheduled industry under the Minimum Wages Act of 1948.

If they do not fall under the Minimum Wages Act, then you can have your own pay structure and are not bound by the minimum wages.

If the gross salary an employer pays to the employee does not fall below the 'Minimum Wages' notified by the Government from time to time, there is no violation of the Minimum Wages Act. There is a Supreme Court decision to this effect.

Best regards,
Jaikrishnan
Company Secretary
Thiruvananthapuram

If the gross salary an employer pays to the employee does not fall below the 'Minimum Wages' notified by the Government from time to time, there is no violation of the Minimum Wages Act. There is a Supreme Court decision to this effect.

Best regards,

Jaikrishnan
Company Secretary
Thiruvananthapuram

Dear All, As per the above discussion and concerns raised by Kiranakumari regarding fixing wages according to the company structure, it is acceptable for higher-salary employees, but we must ensure that basic wages align with their respective categories. The gross salary should be equal to or higher than the minimum wage to comply with the decision made by the High Courts of Haryana and Punjab. An organization cannot separate minimum wages into other categories as all benefits, such as EPF, bonuses, and gratuity, are calculated based on the basic salary.

Thank you.

Gross Salary and Minimum Wages

Gross salary/wages should not be less than the minimum wages multiplied by 26 days. Minimum wages are applicable if the business falls under the schedule declared by central or state governments.

Regards

What Mr. Neeraj Yadav said sounds right. If you are bifurcating the gross salary and the basic falls below the minimum wage, all your contributions, mainly that of PF, will be below what you are supposed to pay by the minimum wage. Thus, noncompliance exists in this case.

For example, let's say the minimum wage is 6000, and the employer's PF contribution is 720 rupees. When you have a gross pay of 7000, bifurcated into 4000 basic and 3000 allowance, the employer's PF contribution is only 480. Therefore, you are not meeting the standards. However, for employees with higher salaries, this is not the case as Mr. Neeraj mentioned.

PF Contributions Not Attracted on Allowances Even When Part of Minimum Wages: P&H - High Court

In a writ petition No. 15443/2009 between APFC vs. G4 Security, the Punjab & Haryana High Court held on 1st February 2011 that the minimum wages can be bifurcated into allowances, and the Provident Fund contributions will not be attracted on allowances. The judgment will be published in the next issue of the Labour Law Reporter.

So, you can bifurcate the minimum wages into Basic and different allowances and can deduct PF on that Basic. However, I still have confusion about the calculation of Bonus.

Regards,
ALPESH THAKKAR
Asst. Manager - HR
Advanced Systek Pvt. Ltd.

What if the basic salary for the salary break is less than the minimum wages as per the government? As per the above discussion, only the gross salary is taken into consideration for minimum wage.

Thanks

Dear Neeraj, actually, it's the other way around.

"The decision regarding the same by the High Court of Haryana & Punjab is that an organization can bifurcate minimum wages into other heads."

Regards, Manish

Dear Alpesh, I have one question: How much should the minimum percentage of basic be in relation to the Gross, if the Gross is the minimum wage?

Regards, Manish Gupta

Dear Alpesh Thakkar, the judgment copy is enclosed here for your reference.

Minimum Wage and Gross Wages

Dear Manish, a minimum wage as gross wages is not fair, as you know. However, we can argue that fixing 60 to 70% of it as Basic would satisfy the PF authorities. Please add a few points on this idea!

Regards,
S. Sethupathy
Excellent HR Services
Erode.

I have also gone through the judgment of the Punjab & Haryana High Court in the petition, as mentioned by dear Mr. Thakkar, between APFC & G4S. However, I expect it will be challenged in the Supreme Court. I personally also don't agree with the judgment since there is no criterion for bifurcating the minimum wages as to what should be the ratio of basic and other allowances. Let me tell you all that even G4S is going to consider minimum wages as basic wages for PF purposes.

Regards,
C.B. Sehgal

At least, the basic should be 60% of the gross in the case of the minimum wage. In all other cases, the basic can be between 35-40% of the gross package (and in any case, it cannot be less than 60% of the minimum wage). This is a general rule that most factories follow, but I am looking for a judgment on which we can rely upon. Please add your comments on this issue!

Regards,
Manish Gupta

Minimum Wages in Uttar Pradesh

Please tell me what the rule is in UP. In UP, are Basic and VDA the only factors considered for minimum wages, or is the Gross Salary also taken into account, including Basic, VDA, Allowances, etc?

Regards

Mr. Neeraj is right because this pertains to various social security acts. Failure to comply with these acts will result in non-compliance with the related regulations.

Regards,
Raghu

Thank you very much for your valuable inputs regarding the subject "Company Structure linked to Minimum Wages".

Regards,
Kiranikumari