Can Companies Legally Split Minimum Wages into Basic and HRA to Cut Costs?

Seniors and fellow colleagues,

Breaking Minimum Wages into Components

As per the current statute, can we break minimum wages into (BASIC + HRA)? Being a realist, given the current scenario and unforeseen future, companies these days are trying their best to reduce their financial liabilities. Doing so can help them reduce PF contributions. Can the same be done, especially in the case of existing workers, by readjusting their pay breakup?

PF contribution below the minimum wages is viewed as noncompliance by EPFO. Please see the attached circular from EPFO.

Regards, Shailesh Parikh

[Phone Number Removed For Privacy-Reasons]

Forwarding Hon'ble Presiding Officer - EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, New Delhi - Shri Harish Gupta's order dated 26.11.2015, wherein it is mentioned that:

Bifurcation of wages and jurisdiction of PF authorities

Bifurcation of wages below minimum wages or basic wages and DA etc. are issues completely out of the purview of PF authorities. PF authorities have no jurisdiction to ensure compliance with the Minimum Wages Act or to issue any direction in this regard. Wages are to be determined as a decision between employee and employer, and further authority appointed under the Minimum Wages Act is only empowered to raise issues regarding Minimum Wages to be given to the employee.

This was tolerable until 28.02.2019 (Before Supreme Court Judgement).

Regards,
Suresh

As per the principle settled by the Supreme Court, an employer is free to give any breakup to the salary of an employee, provided the total salary is not less than the minimum wage for his/her category of employees.