Understanding Minimum Wage Laws: Can Basic Salary Be Lower Than Minimum Wages?

Hi all, I wanted to ask if there is any law or provision that mentions the basic salary should not be less than the minimum wages. If the gross salary is higher than the minimum, does it matter if we keep the basic salary lower?

This is not correct as recently the government has clearly notified that minimum wages must not be separated or bifurcated as PF must be deducted from the basic wage.

Warm Regards,
Amit

Supreme Court Judgment Reference

Please read the judgment of the Honourable Supreme Court of India in CASE NO.: Appeal (civil) 4259 of 1999 PETITIONER: AIRFREIGHT LTD. RESPONDENT: STATE OF KARNATAKA AND ORS. DATE OF JUDGMENT: 04/08/1999. The answer to the query would be found in this judgment. This judgment is available on the website of the Honourable Supreme Court of India.

Regards

Understanding Basic Wages and Minimum Wage Compliance

Basic wages cannot be less than the minimum wage, regardless of the gross salary. Basic wages should comply with wage laws.

Sub - Basic Pay - Minimum Wages

What Mr. Hariharan said is right. The essence of the Airfreight case is that, as far as compliance with the Minimum Wages Act is concerned, the employer is deemed to have complied with the Act if they pay wages higher than the prescribed minimum wages, irrespective of whether the components of basic pay or dearness allowance are lower than those notified by the appropriate government under the M.W. Act.

The case of Harilal Jechand Doshi v. State of Maharashtra 1999 II CLR 799 (Bombay H.C.) directly covers your case.

Regards,
B. Saikumar
HR & Labour Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
Tel: [Phone Number Removed For Privacy Reasons]

What Mr. Hariharan and Mr. Saikumar stated is correct. What is required to be compared is the gross pay with that of the minimum wage prescribed by the government under the Minimum Wages Act.

Regards,
Kumar

Notification from PF Authority

I am sharing the notification that has already been shared by a worthy member. This notification is issued by the PF Authority, which has put in abeyance the earlier circular regarding not splitting the minimum wage. This action has been taken in view of a decision of the Honorable Supreme Court of India, as mentioned in the circular itself.

Regards

Hi all, I had posted this notification. With the help of this, the PF inspector did not penalize our company for not maintaining the basic as minimum wages.

Salary Components

What one needs to understand is that once you become covered by the P.F. Act, you need to pay a contribution under Sec. 6 of the P.F. Act on the basic wages + D.A + Retaining allowance + cash value of food concession, if any, given by your company. Even though the definition of basic wages under Sec. 2(b) of the P.F. Act excludes HRA, bonus, commission, or any other similar allowance and thus excludes them from being counted for contribution, the Hon'ble High Court of Gujarat in Gujarat Cypromete Ltd V. Assistant P.F. Commissioner, 2004 III CLR 485 held that the 'basic wages' under Sec. 2(b) of the Act includes various allowances like lunch, medical, conveyance allowance except HRA. Thus, the position in law is that except for HRA, bonus, or commission, many other allowances may count for the contribution of P.F. It is to be ascertained whether this judgment has been challenged before a division bench/Supreme Court. Till then, the legal position is as held in Gujarat Cypromete's case.

Regards,
B. Saikumar
HR & Labour Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
Tel: [Phone Number Removed For Privacy Reasons]

As far as my concern, there is no PF contribution made on Conveyance allowance. PF is deducted on Basic + DA.

Treating the conveyance as part of the basic salary is not correct. You can challenge this in a court of law by citing the Government Pay Commission Report, which states that conveyance allowance is independent of the basic salary and is in no way related to it. The best approach is to obtain a stay on the EPF contention immediately from the court and then seek legal recourse on the issue.

Regards,
Kumar

There is no law stipulating that basic wages shall not be less than the minimum wages. The Courts in the AirFreight case and the Hiralal's case, which I have referred to in my earlier reply, have abundantly recognized the employer's discretion to fix the quantum of basic wages and the quantum of other allowances. They did not consider it a violation of the Minimum Wages Act, even though the employer pays a lesser basic or dearness allowance as part of wages than what was notified as basic and D.A. by the Government, as long as the total wages paid by them are equal to or more than the minimum wages notified by the Government.

Regards,
B. Saikumar

Subject: Basic Calculation

In my response, I have referred to the legal position that would likely explain why the P.F. authorities are requesting contributions on conveyance allowance as well.

Regards,
[Name Removed For Privacy Reasons]