Is My Company's Salary Structure and Minimum Wage Calculation Correct? Seeking Advice

Dear Seniors, My company is using a salary breakup as per the details below: 1. Gross = Basic * 60% of Gross + HRA * 30% of Gross + Convy. * 10% of Gross

SALARY STRUCTURE FOR DELHI:

- BASIC 5400
- HRA 2700
- CONV. 900
- GROSS 9000
- EMPLOYEE P.F. 648
- EMPLOYEE E.S.I. 158
- IN HAND 8194
- EMPLOYER P.F. 735
- EMPLOYER E.S.I 428
- INSURANCE 250
- TOTAL CTC 10413

2. They are using minimum wages = Gross. I request all of you to please address my points below:

- Is the salary structure correct?
- Also, inform me about the minimum wages.

Thank you.

Salary structures differ from company to company. It's up to the company to decide their salary structure so that their employees can benefit more.

For your first question, my answer is yes, it can be said that the correct salary structure is in place. However, they have not mentioned other perquisite items, so you may not receive many benefits for tax purposes (but not to worry, you are under the tax bracket).

Now, for the second question, my answer is that the minimum wages are applicable to workmen (Skilled/Semiskilled/Unskilled/Clerk). Therefore, I don't think you fall under the category of workmen, so minimum wages are not applicable to you.

Regards,
Arun J.

If you fall under the semi-skilled category, you need to refer to the minimum wages circular of your zone to determine the exact amount.

Regards,
Arun J.

As per the minimum wages circular, the minimum wage is Rs. 8,008 per month and Rs. 308 per day for semi-skilled workers effective from 1st October 2012.

Regards,
Pradeep Sharma

I also agree with Arun, but there is one correction. Conveyance is taxable when it exceeds ₹800. Please rectify the conveyance amount to ₹800 instead of ₹900. If ESI is applicable, then group insurance is not applicable for that employee.

Thank you.

It's a disputable question, but what the court will consider is how much aggregate wages you are receiving. In your case, the monthly aggregate wages you receive are higher than the minimum wages, so there is no question of minimum wages. However, the important point is that due to this, your PF contribution on ₹1100 is decreasing (₹6500 - ₹5400). For this reason, you can speak with HR and request to increase your basic salary to the maximum limit of ₹6500 so that you can avail the benefits.

Regards,
Arun J.

This is in response to the query about minimum wages raised by P Sharma. As has been brought out above, the minimum wages (Basic + VDA) for a semi-skilled worker in Delhi is Rs 8,008 per month as of the current date. The company is only paying Rs 5,400 as Basic + VDA, which is incorrect. By reducing the Basic + VDA, the company is gaining on the 'Employer's share' of EPF, as has also been mentioned above.

Presuming that you approach the HR Manager, what proposal would you give? The company may not want to increase your CTC significantly while ensuring compliance with the statutory minimum wages. In that case, you may propose - Basic + VDA. If the company follows the norms and provides Rs 8,008 as the Basic + VDA, it will have to shell out.

This is in response to the query about minimum wages raised by P. Sharma.

As has been brought out above, the minimum wages (Basic + VDA) of a semi-skilled worker in Delhi is Rs 8,008 per month as of the current date. The company is paying only Rs 5,400 as Basic + VDA, which is incorrect.

Presuming that you approach the HR Manager and bring out the anomaly in your wages to his notice and the company decides to give you the wages as per the minimum wages without tinkering much with your CTC, one of the options with them is:

- Basic + VDA: Rs 8,010
- Conv Allowance: Rs 990
- Gross: Rs 9,000
- Less EPF: Rs 780
- Less ESI: Rs 158
- Take-Home: Rs 8,062
- Employer's EPF share: Rs 885 (13.61% of Basic & VDA)
- Employer's ESI share: Rs 428
- Insurance: Rs 250
- CTC: Rs 10,563

What are the implications?

Your take-home salary goes down by Rs 132. The total contribution to EPF goes up by Rs 264. Your CTC goes up by Rs 150. Your tax liability goes up by Rs 2,610 per month.

Seniors,

Is my contention above correct? Is the ESI not paid only on Basic + VDA? Why is the company paying it on Gross? Since an employee is covered under ESI, what is the need to cover him under another insurance scheme? Please advise.