Is Our Salary Structure Compliant with the Minimum Wages Act in Maharashtra? Seeking Advice

Hi All,

As per the notification of the labor office (DA), the minimum wages (Maharashtra) amount for unskilled labor is basic (3600) + DA (3927) = 7527 + 5% HRA (376) = 7903. My question is, if we are paying a gross salary more than the minimum wages, i.e., Rs. 10000, but to save PF costs, we are showing basic + DA = 7000, HRA (2800), Team Allowance (200).

I need your advice on whether it is okay as per the Minimum Wages Act to follow the above salary structure. If not, please suggest some alternatives.

Dear Roysonbanet,

We are not supposed to deviate from any statutory practices as prescribed by the law for any reason. The basic salary should always be the same or more than Basic + DA as prescribed in the minimum wages notification. Not following the right practice may attract statutory problems during inspections.

Thank you.

Dear Manoj Sir, I have a question regarding the same. I have gone through a judgment of the Karnataka High Court in which they mentioned that "Minimum Wages-Basis-One Package of fixed amount comprising various components based on the cost of living- not to be split into components-Cost of Living includes also Variable Dearness Allowance-Employer paying more than the minimum wages- Not liable to pay any further amount on the basis of variable dearness allowance-Minimum Wages Act, 1948 SS.2(h), 3, 4, 5." I need your advice on the above statement.

Salary Structure and Legal Compliance

As long as you are paying a salary higher than the Minimum Wages by dividing the salary into various components, you are not violating the law. Therefore, many organizations are taking advantage of this by showing lower Basic Pay to reduce the PF and Gratuity liabilities.

Bonus Payment Requirements

Regarding Bonus, you are required to pay a minimum Bonus of Rs. 7,000 if the employee has worked for the full year without any deduction in salary. In this case, you are not allowed to take advantage of a lower Basic pay. For instance, even if an employee is receiving a Basic pay of Rs. 4,000 per month, they will receive an annual Bonus of Rs. 7,000 or as per the earned Minimum Wages, whichever is higher.

Please find attached the Court Judgments of Delhi & P&H High Courts on the subject for your reference.

Regards, Suresh

Dear Roysonbanet,

Additionally, please find attached herewith clarification by EPFO regarding the Basic and CTC amounts for contribution. Hopefully, this will be more helpful for understanding.

Thank you.

PF can be paid on minimum wages (Basic + VDA) not on gross salary. However, one cannot bifurcate minimum wages for the calculation of PF.

Regards,

Jitendra Das

Hi Manoj Kamble,

As you wrote, "Basic salary should always be the same or more than Basic + DA as prescribed in the minimum wages notification." Could you share any such notification? I need it.

Thanks
Regards,
Uday

Dear Sir,

I would like to request you to please provide the latest CTC calculator as per the Minimum Wages Act.

Regards,
Pravin Rajurkar
hrd@tirumallaoil.com