Understanding Minimum Wage Requirements
In order to satisfy the minimum wage requirements, you can take the gross salary into account. If you are paying a gross salary that is equal to or more than the basic plus special allowance (DA) as per the minimum wage notification, you are deemed to comply with the statutory requirements. It is acceptable even if there is no DA (Special Allowance), but what is essential is the gross salary.
Case Study: Airfreight Ltd vs State of Karnataka
In the case of Airfreight Ltd vs State of Karnataka, the Supreme Court observed that an establishment paying a gross salary without any component called DA, exceeding the minimum wages as per the notification, need not separately pay DA.
Implications on Basic Wages and Statutory Contributions
Based on the above judgment, many have begun setting their basic wages at a very low level so that various statutory contributions like PF, Gratuity, and Bonus can be minimized. However, the definition of wages should be understood as the total remuneration that an employer agreed to pay the employee in exchange for the labor or service the employee provided when the employment contract was formed at the time of joining. Therefore, there is no point in paying PF based solely on the basic wage or providing gratuity or bonus based on basic wages; it should strictly be calculated on the gross salary.