Navigating Minimum Wage Rules: Which Salary Components Count and Does Location Matter?

Please consider the below:

1) My company is registered under the Shops and Establishment Act.
2) Our employees are located in Delhi and outside of Delhi as well.
3) Which parts of the salary components can be considered under Minimum Wages? The current components we are using are Basic Pay, HRA, CCA, Adhoc Pay, DA/DWR Allowances.
4) Do the components and minimum wage rules change based on the employee's location? If yes, how so?

Hi,

It is basic + DA or special allowance + HRA. HRA is at 5% on basic + spl. all. It is applicable only if you are engaging 50 or more than 50 employees.

Dear Sir,

Thank you for your prompt reply. Just to confirm, I got your point. I am converting the above into numbers. If I am wrong, please correct me.

Basic: 7000
HRA: 3500
CCA: 1000
Adhoc Pay: 2000
Gross: 13500
DA per day basis: 100 (given for working in the field)
Monthly: 25 * 100 = 2500
Minimum wages paid = 7000 + (5% 3500) = 175 + (adhoc) 2000 + 2500 (DA per month) = 11675 ??

Section 4. Minimum rate of wages

(1) Any minimum rate of wages fixed or revised by the appropriate Government in respect of scheduled employments under section 3 may consist of:

(i) A basic rate of wages and a special allowance at a rate to be adjusted, at such intervals and in such manner as the appropriate Government may direct, to accord as nearly as practicable with the variation in the cost of living index number applicable to such workers (hereinafter referred to as the "cost of living allowance"); or

(ii) A basic rate of wages with or without the cost of living allowance and the cash value of the concessions in respect of supplies of essential commodities at concessional rates, where so authorized; or

(iii) An all-inclusive rate allowing for the basic rate, the cost of living allowance, and the cash value of the concessions, if any.

(2) The cost of living allowance and the cash value of the concessions in respect of supplies of essential commodities at concessional rates shall be computed by the competent authority at such intervals and in accordance with such directions as may be specified or given by the appropriate Government.

This is what the bare Act says about components of Minimum wages.

Minimum Wages Structure

The Minimum Wages Structure is a state-oriented matter. In some states, it consists only of Basic Wages, while in others, it includes Basic + DA. I think your question is not clear. Instead of Minimum Wages, you should ask about components under CTC. However, the Basic + DA should not be less than the Minimum Wages Notification as issued by the appropriate government.

When the salary is paid over and above the Minimum Wages, we require a salary structure to make it more optimized (tax-friendly and increased in-hand salary). The components can be Basic + DA (minimum should be as per the MW Act, no bar for maximum; you can consider 40%-50% of the CTC), HRA (to take IT exemption), CCA, Special Allowance, etc.

Yes, the components can change according to the nature of employment. But the rules apply only at a minimum level. Different wage structures can be applicable for different types of employment (Industry, Factory, Special Zones, Seasonal employment, etc.). For example, in a state, it can be different under the S&E Act and in a refinery located in the same state and mines, and so on.

In your example, you mentioned two HRA amounts: 3500 and (5% of 3500) = 175. Please correct it. It should be Rs. 3500 in both places. Since there is no deduction of PF, ESI, PT, etc., the wages paid should be the same in both places.

Dear Members,

First of all, let me thank you all for the responses, but I think I am not making myself clear. What I want to understand is how to calculate whether the proposed break up of a salary is fulfilling the minimum wages or not? So, to be specific, let me pinpoint the case:

Location: Delhi under the Shops and Establishment Act.

If the company wants to incur a total of 15k on an employee, how to break up so that it is under the Minimum Wages Act and the statutory deductions are minimum?

My dear friend, the Minimum Wages in the Delhi region are almost equal to 15K, and in some cases, it is even more. There is no need to make a breakup; you need to pay the MW in the Basic Wages only. I understand that your question is not clear. No problem, it happens when you learn new things. That's why we are here for learning on a sharing basis.

Details of Applicable Minimum Wages in Delhi Regions

Unskilled = 13,896.00

Semi-Skilled and Non-Matriculate (office work) = 15,296.00

Skilled and Matriculate but not Graduates (office work) = 16,858.00

Graduate and above (Supervisor or office work) = 16,858.00

However, with respect to minimum statutory deductions/costs, you can freeze the PF Wages up to Rs. 15,000.00. Then you can save on employer PF Contribution, and the "In Hand" salary will also increase. Hope the above will solve your query.