Monthly Profit Distribution /Incentive Is A Part Of Wage?

Dear sir,

Is monthly profit distribution/incentive considered part of the wage if it is not included with the salary?

Regards,
Kumar Gautam

Hi.

It depends on the company. It could be part of an employee's CTC but not included in the wages. Wages are fixed and calculated based on the number of working days. However, performance-linked incentives/variable pay are paid depending on the company's performance, so they can be kept separately as they will not deduct any statutory requirements either.

Thanks for your reply. I wanted to know, can incentives be added to the fixed salary to show that the total income of an employee is more than the minimum wages of the state?

Kumar Gautam

Hi,

No, you can't do that. If you add a component as an incentive/allowance in your salary, then it has to be calculated based on your salary calculation. You can't keep it separately. If in the case of ESI, yes, you can do it, but not in fixing minimum wages.

Minimum wages in each state are defined with the components also defined. Usually, it is basic and DA only. Therefore, you cannot include incentives as incentives are not part of basic or DA.