Minimum Wage Breakdown: Can We Allocate It to Different Salary Components?

Can we break the minimum wage as a salary part like HRA, Conv. etc., or do we have to fix this amount into basic only? Please suggest.

Dear Sunita,

We can't break the minimum wages of the labor class because basic wages are the minimum wages. Some employers bifurcate the minimum wages, but they are doing it wrong. There are some conditions for the deposit of ESIC and EPF:

1) ESIC should be deposited on the full minimum wages (no bifurcation).
2) PF minimum should be deposited (12%) Rs. 234/-, which will come to Rs. 1950/-. So, I think we can't bifurcate the minimum wages.

Regards,
Raj

Dear Sunita,

I agree with Mr. Raj. However, I see one possibility. ESI and PF contributions should be made on the entire minimum wages prescribed by the government. If you are making this payment on the prescribed sum, then you may call the same sum by whatever name you like. There will be no violation of the law. My impression is that you are trying to get mileage out of the same sum.

One thing we need to keep in mind is that the minimum wages, as prescribed by various state governments, are really minimum. Today, if you look at the price levels for essential commodities, it is horrifying. Yes, companies do have their own problems, but in one way or another, we should try to keep the salary levels to the extent possible higher than the minimum wages prescribed - or to put it differently - salaries should be set at a minimum that covers at least the essentials of life in a particular category of workers.

What do you feel?

Dattatri

Dear,

When determining the minimum wage, you can provide a breakdown including HRA, CON, and other allowances. However, once you establish the basic wage, deductions for PF are to be calculated from this amount, and ESI deductions are to be calculated from the gross wage. Additionally, 40% of the basic wage should be set aside from the total wages.

Thanks,
Uma

Dear Sunita,

As per the Minimum Wages Act of 1948, the definition of wage under sec. 2(h) of the Act is: "All remuneration capable of being expressed in terms of money, which would be payable to a person employed in respect of his employment and includes HRA."

Therefore, Minimum Wages means all remuneration expressible in terms of money and payable to an employee, including HRA but excluding the value of house accommodation, supply of light water, PF contribution, traveling allowance, and reimbursement gratuity.

Note: If commission on turnover is being paid as per the terms & conditions of employment, then it will be a part of Minimum Wages.

Thus, Minimum Wages = BASIC + HRA + Commission (as per terms & conditions of employment and payable monthly).

Now, I think it is clear that the minimum wages may be bifurcated into three components: Basic, HRA, Commission. Generally, companies do not pay commission, therefore, it may be limited to two parts i.e. Basic + HRA.

As far as ESI and EPF Acts are concerned, nowhere in the definition of Wages in these Acts has minimum wages been taken into consideration for paying contributions.

E.S.I. is calculated on gross salary, but the wages for P.F. contribution are limited to Basic or Basic+DA. Therefore, one can bifurcate Minimum wages into two parts as Basic and HRA with a reasonable % of Basic.

This is what I have understood from my study of Acts, case laws, and practice in the HR Department.

Further, I would like to highlight that there is nothing in the E.P.F. Act regarding the PF contribution to be paid on minimum wages. Even the term "minimum wages" is not used in the definition of wages in the PF Act.

Actually, it is the contractors who have started the practice of contributing PF on minimum wages (for their own benefit).

Thank you,

Mohd. Arif Khan

HR Professional (9891497178)

Hi,

The minimum wages can be bifurcated into two components: the first being the basic pay, and the other is dearness allowance, also called DA.

The government revises the DA component of the minimum wages every six months. If any of you have seen the Government Order (G.O.) on minimum wages issued by the State Labour Department, you will notice the applicability of these two components up to a specific time period.

Please refer to the attachment which contains a minimum wages GO applicable up to 30th September 2007. In it, you will find the Basic Pay in Serial No. 3 and Dearness Allowance in Sr. No. 5. You need to follow the same while determining the salary. The basic pay of an employee can be higher than the minimum basic pay stated in the GO, but it cannot be lower. Similarly, you can pay more DA to your employees, but the DA figure cannot be less than that specified in the GO.

Therefore, the minimum wage has two components: basic pay and dearness allowance. Both PF and ESIC contributions are applicable to both basic pay and dearness allowance.

I hope this is clear to you, Sunita.

Warm regards,

Umesh Chaudhary
welcomeumesh@yahoo.com

Mr. Yedu,

I want to register myself on First Appeal. However, when I tried to register on the site, I filled out all the necessary requirements in the registration form. But after that, when I tried to log in, I kept receiving an ERROR message repeatedly, and it is asking for some account information.

Could you please clarify if this is a payable site or if it is free of cost? Your help and guidance on this matter would be greatly appreciated.

Thank you,
Purshottam Saini

Dear Purshotam,

It is a free site. I would like to tell you that when you log in to this site, the site will send you an email to the email address you provided during registration. So, please check your email where you will receive a message that will allow you to log in.

Regards,
Raj