Minimum Wages Confusion: Can Other Allowances Be Included and Affect PF Contributions?

Apart from House Rent Allowance, can all other allowances be part of minimum wages? And if special allowance is also one of the components, does it attract PF contribution?

1. Basic (minimum wage rate as per criteria & Zone).
2. Special Allowance (DA declared by the Government).
3. HRA (Basic + DA) 5% - no other components are part of minimum wages.
PF contributions are calculated on Basic + DA only.
Hope this information is sufficient for you.

Please note that Basic, DA, and HRA are wages as defined in the Payment of Minimum Wages Act. As far as special allowance is concerned, it should be over and above the applicable minimum wages, and contribution to EPF can be claimed by the enforcement officer if it is found unjustifiable. You have to justify the grounds of disbursement of special allowance, and the value should be reasonable.

P K Sharma

Thank you for sharing your views.

As mentioned by Kenneth Dias, please provide more details about HRA 5%. From my understanding, HRA is applicable in certain cases only and is not a general rule. For example, in Maharashtra, under the Shop & Establishment Act, HRA 5% is applicable to establishments with more than 50 employees. Providing more information about the applicability of HRA would be helpful to many of us.

Regards

Dear all,

The minimum wage means an amount required to fulfill the basic minimum requirements of livelihood. At the time of framing the Act, the housing component was assumed to be at 5%. This is why certain states have capped the House Rent Allowance (HRA) at 5% in the minimum wages.

P. K. Sharma

As per Maharashtra Workmen's House Rent Allowance (Rent) Act 1983, the guidelines for HRA in Maharashtra are as follows:

1) In Maharashtra, the minimum HRA amount is 5% of (Basic + DA).
2) The maximum HRA allowed is 50% of (Basic + DA).

Is there a minimum limit of 5% of the basic wages as HRA? I have read that the HRA is 40% of the basic in non-metro cities and 50% of the basic in metro cities. Is there such a range? And if so, is it stated in any act? I would appreciate it if someone could shed some light on this.

Only basic plus DA is considered as the minimum wage.