Can Minimum Wage Be Split into Basic, HRA, EPF, and ESIC? Seeking Advice on Percentages

I would like to inquire whether it is possible to break down the minimum wage into components such as Basic, HRA, EPF, and ESIC. If so, could you please advise on the minimum percentage of Basic pay required for this breakdown?

Thank you.

Regards

This is a debatable issue; there have been several discussion threads on this in the past. Please use the RESEARCH option/button and study them. It is advisable not to further dissect the paltry minimum wages but to advise management to think beyond it; to the concept of Fair Wages, Living Wages, etc., unless your company wants to just meet the minimum standard laid down by law. When companies seek the best-qualified manpower, best performance, etc., why can they not think beyond Minimum Wages for their workers?

Warm regards.

Dear Gautam,

The split of minimum wages is not permissible because the minimum wage is a component of Basic + DA. Therefore, how should the basic be subdivided into other basics?

Thanks & Regards,
Sumit Kumar Saxena

Understanding Minimum Wage Components

Minimum wages consist of Basic + Special Allowance (DA), which is payable to a worker. The contractor may add other components like the cost of a uniform, transport, canteen, bonus, PF with administration charges, insurance/ESIC, etc., and make it a Cost to Company (CTC) concept. However, all these additional charges are payable by the company to the contractor and hence do not interfere with minimum wages.

In Maharashtra, you need to pay House Rent Allowance (HRA) at 5% of Basic under the Maharashtra HRA Act.

Regards

There are various components taken into consideration while deciding the Minimum Wages. Basic wages and Minimum wages are not synonyms. Minimum Wage is to ensure a dignified life for a worker, whereas Basic Wages provide a scale on which other allowances/benefits are to be ascertained. There are approximately 40 labor-related enactments relevant for this purpose. Since every enactment has a specified objective, it has a different parameter or definition of wages.

I agree with Mr. Raj Kumar in this regard, especially when the HR Department is not regarded as a profit center. Why should we make efforts to reduce the benefits of the workers that cost a minuscule percentage of the total expenditure of a company? Our aim should be procuring contentment among the workforce by providing an additional advantage. The importance of the worker has to be realized now before it is too late.

It appears that the issue of whether an employer can split minimum wages is still pending before the Supreme Court in a case. You can await the decision and keep track of it. In the meantime, it is advisable not to split it.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai