Minimum Wage Dilemma: Can We Lower Other Salary Parts to Boost Base Pay?

Dear All,

Can we decrease other salary components to increase minimum wages, or not? I need your valuable advice.

Thank you.

Dear Surjeet Singh, generally, wages should be taken as a single package. However, when your industry wages comprise more components than the statutory minimum wages, for the purpose of comparison to determine the parity between the two, you have to take into account only those components falling within the ambit of the definition of the term 'wages' under section 2(h) of the Minimum Wages Act, 1948, and leave out the excluded items of payment mentioned therein. After this exercise, if both the sum totals are equal or the industry wages sum total is more than the sum total of the minimum wages, it is considered 100% compliance. If not, you should bring out parity by adjusting any of the components. Since the D.A. component fixed under the Minimum Wages Act, 1948, is linked to the Cost of Living Index, it has to be revised periodically as prescribed in the Government Order. Therefore, it is imperative that constant parity should be ensured.

I hope this helps you understand the compliance requirements better.

Thank you.

Sincerely, [Your Name]

Mandatory wage components and compulsory entitlements, as applicable to the type of employment, cannot be decreased. Even the standard established rate of components cannot be altered. Therefore, to maintain parity, any other additional components, if they exist, can be altered. However, care must be taken to avoid employee unrest due to changes in the salary structure.

You cannot do so because it is illegal.

Understanding Wage Adjustments and Legal Implications

Once salary or wages are agreed upon, fixed, and paid, they cannot be reduced just to adjust for future increases in minimum wages. This would be in violation of Sec. 9A of the Industrial Disputes Act, which stipulates that a 21-day notice must be given to all affected employees before making any adverse changes to service conditions. The schedule attached to this section explains that one of the subjects covered is wages.

Reducing the wages component would lead to an industrial dispute, and in all likelihood, the court would strike down any wage reduction attempts. Therefore, you should exercise caution before making any such adjustments.

Regards