Navigating Basic Salary Compliance and Appointment Letter Issues: What Should You Do?

Hi Seniors, Thanks in advance.

Question 1: Basic Salary and Minimum Wages

My first question is whether the basic salary should be as per minimum wages, or if the in-hand salary should comply with the Minimum Wages Act. Companies are deducting the PF on a basic salary that is less than the minimum wages to save their contribution. When asked to increase the basic salary, it is being denied by the employer.

Question 2: Appointment Letter and Company Name Change

My second question is about an employee who joined a company 8 years ago and was not given an appointment letter at that time. Now, the company wants to provide one, but the registered name of the company has changed, and the company has not maintained any record of his date of joining.

What should be done in this situation?

Regards

Gross wages should be equal to or more than the minimum wages prescribed by your state government. It is not required that the basic wage should be the same as the minimum wage. The gross wages alone will be considered for deviations.

Basic is also to be viewed with respect to PF. There are judgments and notifications from the PF office providing guidelines that PF should be dedicated at least on minimum wages. Hence, the Basic should be at least equal to minimum wages where total wages are at least minimum or more.

Regards,
Shailesh Parikh
9998971065
Vadodara, Gujarat

The concept of basic is not defined in the various acts, so there is ambiguity. However, minimum wage notifications state that basic and DA together should be more than a particular amount. In effect, minimum wages are based on basic plus DA. The PF department has also taken the same stand. However, the courts have given different judgments, and the Supreme Court is yet to make a decision on it.

As per the PF Notification, the PF deductions should be based on minimum wages or half the gross wages, whichever is higher. One cannot bifurcate the minimum wages as the decision on this issue has not yet been taken by the Honourable Supreme Court.

I think it's the other way around. The various courts have given conflicting decisions. The Supreme Court has not given the final decisions. Therefore, until the decision comes, you can get away with bifurcating the salary.

Can anybody let me know about the basics? While designing the salary components, I will calculate DA as per the 6-monthly circular, but from where can I get the basic rate for the metal industry? Also, are DA and special allowance the same?

Regards,
Bittu

I assume you are talking about the basic and DA as per the Minimum Wages Act. It is specified in the minimum wages notification (which is issued every 6 months by your state government). The special allowance specified in the notification is the same as DA.

Dear Mr. Saswata,

Thank you for your reply. I understand that special allowance and DA are the same. However, when designing the CTC, where should I take the basic rate from?

Secondly, how can I identify in which Zone (I, II, III) my company is included?

Thank you.

Understanding Zone Classifications and Minimum Wages

Check the latest notification of the state. It already defines what is Zone 1, 2, 3, and 4. All metro and large cities are Zone 1, while rural and backward areas are Zone 4.

Minimum Wages and CTC Considerations

Generally, the concept of CTC rarely comes up when you are talking about minimum wages. First, your basic and DA have to be above the minimum wage level (basic plus special allowance). After that, it does not matter what you put in allowances. If the person has a taxable salary, put 1600 in travel allowance and the relevant part in HRA. Nothing else matters.

Only remember, the higher the basic, the higher the PF contribution.