Understanding Basic Salary in Manufacturing: How Should It Be Calculated?

I am working with a manufacturing company of glass as an HR manager. Every company has different norms for HR policy. They are providing 40% of the gross salary as basic because PF is calculated on the basic salary. However, as I know, the basic salary is typically 60% of the gross. Please advise me on what percentage should be the basic salary and how it should be calculated within the current norms.

Warm Regards,
Kavita Pal

Yes, basic wages should be 60% of the gross salary, but the government-fixed minimum wages should be the basic wages for which EPF has to be contributed. In other words, the basic wages should not be less than the minimum wages announced for the particular zone and industry type.

Thank you.

Since you cannot reduce the existing Basic, you can increase other components while keeping the Basic stagnant during increments. This will decrease the percentage of Basic from the Gross Salary.

As of now, there is no change in PF except for the ceiling increase to accommodate more employees. Please don't be in a hurry until the Supreme Court decides on the splitting of minimum wages. Please note that as per Sec 2(h) of the Minimum Wages Act 1948, HRA is included as part of minimum wages. The Government of Punjab has notified that the minimum wages fixed by the Government should be the basic rate of wages.

Regards,
N. Nataraajhan
Sakthi Management Services