Revised Minimum Wages in Karnataka: Do They Apply If Salaries Are Already Higher?

1. Is it mandatory to give the revised minimum wages as per Karnataka Shops and Establishment Act Notification in Basic only?

2. What if an employee is already drawing more gross salary than the revised Minimum Wages?

3. Is there any guideline on this?

Understanding Minimum Wage Compliance

It is not mandatory to pay basic salary and dearness allowance exactly as per Minimum Wages notifications. You can follow your own pattern of salary, provided the total fixed part of the salary is not less than the sum of basic wages and VDA as per the minimum wages notification. Therefore, if you do not give VDA, you can follow that system. The only thing to be noted is that the total salary should never be less than the minimum wages.

The notification will contain a provision that in respect of any employee who is getting a salary more than what is prescribed under the notification, the higher wages will prevail. That means you should not reduce the salary of any person to make it equal to the minimum wages.

Hi Praful,

In Karnataka, the basic and DA are fixed by the government of Karnataka, and that needs to be paid as minimum wages (Basic + DA). Additionally, wages/salary can be divided into HRA or Conveyance, etc.

Thank you.

Please refer to the Supreme Court judgment in Air Freight Ltd vs. State of Karnataka (1999 LLR 1008), in which the Apex Court has stated that if you are paying a salary equal to or above the minimum wages fixed by the government, you are considered to be compliant with the minimum wage requirements, and there is no need to consider each component of the salary. Therefore, under your payment system, if there is no DA, that is not a problem as long as the total of the basic plus other allowances is above the minimum wages. This topic has been discussed in this forum many times, and you can review various discussions.

Hi Madhu Sir,

Thank you for your inputs. I searched in the toolbar for the same but did not find the link. If wages are more than the notified amount, DA cannot be considered. However, if the employer is paying the same as the minimum wages, then it should not be divided into other heads. Employers may purposefully divide the salary to avoid PF contributions.

Your input will be highly appreciated.

Understanding Basic Wage and PF Contributions

Paying PF on a reduced basic wage is a practice that new-generation employers have adopted without fully understanding the definition of basic wage as per the EPF & MP Act. PF is payable only on basic wages and DA, if any. According to the Act, the basic wage includes the entire salary, encompassing all allowances except HRA. There has been a misinterpretation where employers considered basic pay as a fixed amount, rather than the basic salary as defined by the Act. This results in a low basic wage, which does not align with the employment contract. The basic wage refers to the agreed-upon wage to be paid to an employee.

Even the PF authorities have been negligent in enforcing this, until realizing that employers have been misinterpreting the term "basic wage" to refer only to the basic wage within their salary structures. However, this is not the main topic of discussion here. In summary, if your total salary does not include VDA or DA, yet the wages paid are equal to or higher than the minimum rates set by the government, you are deemed to be compliant with the statutory requirements. In such cases, restructuring the salary with DA or paying additional DA is unnecessary.