Understanding Minimum Wages vs. Basic Salary: Do They Need to Be the Same?

Hi, myself Naveen, and I am a Senior HR Executive handling payroll in Delhi. I would like to understand the difference between minimum wages and basic salary. Is it necessary for minimum wages and basic salary to be the same? Please guide me.

Yes, it's mandatory in Haryana.

I think I am not sure for Delhi because in Haryana, our previous employer deducts employees' PF below the minimum rate. According to the Haryana Minimum Wages Circular in 2015, the basic head will be greater than the minimum rate of his category.

The rate for minimum wages is notified by the state government every six months. If you look at the latest notifications, you will notice that the notification specifies the minimum wages in terms of basic and DA/special allowance.

Many companies are paying gross wages at the level of minimum wages. However, this is not allowed for long. Rarely, action is taken on it.

Minimum wage is separately defined by the state as well as the central government. We have to follow whichever is higher as per our registration. The basic and VDA defined by the government have to be the same or higher in your salary structure. If it is lower than the defined slab, then your company has to face the consequences.

The Supreme Court has clearly stated that the notification is only guidance for employers, and the state cannot compel payment as basic + DA. It can be different, but the quantum cannot change. Case reference: Air Cargo Bengaluru vs State of Karnataka.

Minimum Wages in West Bengal

In West Bengal, the Labour Department declares the Minimum Wages for each category twice a year, in January and July. The figure provided is the minimum wage to be paid for a person working 48 hours a week and 6 days a week, with one weekly off day. The minimum wage is equal to gross pay (but not CTC) and is not divided into Basic + DA + any other allowance. The employer can divide this gross pay into any divisions or terminologies. The whole gross amount may also be given as a consolidated pay or as a smaller basic salary along with D.A. (variable or fixed) to cover inflation and/or other allowances.

According to the Act, minimum wages are to cover the basic needs of an employee having a four-member family, namely "Roti, Kapada aur Makaan," and basic needs of life including medical care and education of children. Thus, HRA and other allowances for daily living will be taken into account for minimum wages purposes. Any festival allowance/bonus or any other allowance given once a year is not taken into account for this purpose. Some states declare minimum wages as Basic + D.A., and this variation is possible because labour welfare is a 'State' subject.