Minimum Wage Dilemma: Is It Possible to Split It into Basic and VDA Allowances?

Can we split the minimum wage into other allowances, including basic and VDA?

Understanding Minimum Wage and Allowances

Minimum wage cannot be divided into any form, sir. Usually, Basic Pay is considered the minimum wage. Every six months, the Variable Dearness Allowance (V.D.A.) is added to Basic Pay in Government Orders circulated by the State Government for all private employees.

Suppose you want to pay a minimum wage to a clerk of Rs. 15,000 per month as per existing labor laws. Take Rs. 15,000 as Basic Pay and add anything more to it. But never break Rs. 15,000 into Rs. 10,000 and Rs. 5,000 like this. Basic Pay Rs. 10,000 + V.D.A. Rs. 5,000 equals Rs. 15,000. Why? Because you have no right to break the minimum wage fixed for a certain employee as Basic Pay by the State Labour Department. You should realize that Basic Pay is fixed by the government as a minimum wage. One has no right to divide or break up the Basic Pay into different names like HRA, TTA, etc.

I always wonder why I find in many small and reputed firms the desire to take away the workers' monetary benefits, whether they are working or leaving by resigning, or on ill health medical leave, those who are innocent of labor laws.

Dear Gannahope,

Our state minimum wage is $222 per day, and $27 per day is VDA. Please tell me, will I have to provide a minimum of $249 per day ($222 plus $27)?

Please revert...

Thank you.

Dear Mr. Bhawani Singh Tanwar,

The State Government is empowered to fix the minimum wages for scheduled employments under Section 3 of the Minimum Wages Act. The house rent component, without any cap, is treated as wage as defined in Section 2(h) of the Minimum Wages Act. Certain State Governments have further restricted the percentage of HRA in minimum wages.

Accordingly, you can split your minimum wages into BASIC and HRA in consultation with the applicable norms of your State.

P.K. Sharma

Understanding Minimum Wages and Salary Structure

Minimum wages mean Basic + VDA/Special allowances as revised by the appropriate government (central or state). It shall not be split by any means.

Further, for any company deciding the salary structure of its employees, ensure that their basic salary is not less than the minimum wages (basic + VDA/special allowance) applicable to that industry's scheduled employment as per the MW Act.

Moreover, for the purpose of PF contribution, please refer to EPFO Circular No. Coord/4(6)2003/Clarification/Vol II/7394 dated 23 May 2011. Copy attached.

Dear All,

Can anybody provide me with the Himachal Pradesh minimum wages notification where it is mentioned that we can allocate 5% of the minimum wages to the House Rent Allowance (HRA) and 95% to the basic pay?

Warm Regards,
Gaurav Mehta.

Can minimum wage be split into other allowances, including basic and VDA?