Is It Legal to Base Holiday Pay on Basic Salary Instead of CTC? Let's Discuss!

My company is paying extra to the employees who work on Sundays and other holidays. But the amount is calculated based on the basic salary and not on CTC (only for extra days). All such employees are earning a monthly salary of more than Rs. 50,000, and the company is paying PF and for medical insurance. I was wondering whether it is specifically against the law to do so?

Dear friend, I wish to congratulate you for doing good for your employees. Don't get confused with 'Take Home pay' and CTC. Many of the components of CTC are not payable as part of 'salary' month to month, like 'gratuity, bonus, leave salary contributions' which are deferred payments (accrued but not due), payable only when the employees become eligible for the same and become due. Therefore, there is nothing illegal in what you are currently paying.

For work rendered on Sunday or a holiday, the remuneration has to be paid at par with any other working day. It should be based on the "Gross Salary" for the month. Neither should you pay according to the basic salary nor CTC.

As of now, how do you pay for the extra working day? Is it a cash payment, or do you route this payment through the monthly salary? If the latter, under what heading of the payslip do you show this payment?

For Mr. Kumar S: For the extra workday, why should an employee get paid as per the basic and not as per the gross salary? In many companies, the basic is typically between 30% and 50%. Therefore, if paid according to the basic, would it not result in a loss for the employee?

Thanks,
Dinesh Divekar

If you are talking about annual leave under the Factories Act, then you have to pay full wages, including DA, but excluding OT and bonus. See section 80.

I have to clarify this point, as per extant rules, OT wages are to be paid on the gross salary and not restricted to Basic pay alone. This would include Basic+DA+and other routine allowances. In various cases, courts have concluded it shall be 1 1/2 times of the salary, which is clearly Basic + DA + HRA + CCA and other allowances paid as a routine.