How Do We Adjust Salaries for New Minimum Wage Rules Without Cutting Take-Home Pay?

Hello all, I am working as an HR professional in one of the leading brands. As we all know, the government has recently revised the minimum wages for each category/zone, i.e., for Jul'2020 - Dec'2020.

My doubts are:

1. Being a private company, is it mandatory to revise?
2. If the answer to the above is yes, then how can we revise without affecting the annual CTC and in-hand salary? For example, one skilled employee currently has a Basic+DA of 12,350 and now needs to be adjusted to 12,532 (newly revised MW for Skilled-Zone 1 - Engineering). The employee's monthly gross salary is 30,149 (basic + HRA + all other allowances).

Please provide valuable insights.

Minimum Wage Notification Applicability

1. Minimum wage notification is applicable to all without any exceptions for any industry or sector.

Compliance with Minimum Wage Requirements

2. If you are already paying more than the minimum wages, you need not worry about compliance as long as that is the position you need. The wage factor can be decided by you; there is no requirement to strictly adhere to the notification regarding the bifurcation of minimum wages.

Remember, there should be a single line break between paragraphs to ensure proper formatting. Let me know if you need further assistance with grammar or spelling corrections.

Minimum Wage Act Applicability

The Minimum Wage Act is applicable to the industries listed as scheduled industries. If your company falls under any of the scheduled industries, then irrespective of the ownership of your company (i.e., whether it is a proprietary, LLP/Partnership, Pvt Ltd, or Ltd), you need to follow the minimum rates of wages. It seems you are from the Engineering Industry, and the Minimum Wage Act is applicable to you.

Industries Excluded from Scheduled Industry

Now, a big question arises: which industry or sector is excluded from the scheduled industry? To my knowledge, the teaching staff is not considered an industry. All other industries that are not covered under scheduled employment are either included under residuary factories or under shops and commercial establishments.

Dear Anamik,

First of all, your query is incorrect.

Revised Minimum Wage for Engineering Industries

The Revised MW for Engineering Industries for the Skilled Category (Zone I) for the period July 2020 to December 2020 is as follows:

Basic: Rs. 7,800

Special Allowance: Rs. 4,536

Total: Rs. 12,336 (and not 12,532 as you mentioned)

HRA Minimum 5%: Rs. 617

Gross Total: Rs. 12,953

Now, as long as you are paying salary/wages more than the MW, you need not worry about any prosecution from the Labour department. However, if you wish to have the same salary (Basic + DA) as per MW, you may do so by reducing the differential amount from the other allowance components. With this solution, the employee's salary will remain the same, and you will also gain satisfaction. I don't think there will be any additional impact on PF because you must be deducting PF on the gross salary minus HRA or Rs. 15,000/- ceiling, whichever is higher.

I hope this will solve your problem.

Alternative Solution During Annual Appraisal

The second alternative is during the Annual Appraisal/increment, you can round up basic wages by an additional Rs. 1000 to 1500 as the half-yearly MW revision is around Rs. 500/- per month.

Regards,

Suresh

Good observation regarding the rate of minimum wages. I read only the first doubt of the querist and the response by our learned friend KK!HR. If I am the employee and you are revising my basic quantum, i.e., basic plus cost of living, by adjusting my allowances while keeping my gross and PF deduction intact, I will still object to it. Let's discuss this point.

Thank you.

Dear Suresh, in the revised MWA (Jul-Dec '20), the Special Allowance for the Engineering Industry-Zone 1 is 4732. Hence, Basic + SA = 7800 + 4732 = 12,532/-.

@Others: Really, thanks for your views. This helps.

Yes, a good point to discuss. If we increase the basic by adjusting the amount from other components (e.g., Adhoc Allowance-Balancing amount), Gratuity, HRA, Medical, Conveyance, LTA (in my company) components also get increased as they are driven by Basic Salary. So eventually, his entire CTC structure gets disturbed!

Regards

Basic DA and HRA: Statutory Payments

Basic DA and HRA are statutory payments that cannot be reduced below the rates fixed by the government. The allowances granted by the company can be adjusted after strengthening the statutory structure of wages so that the worker's interest in PF, ESI contribution, Gratuity, and Retrenchment compensation (if need be) will not be affected. There will not be any violation of labor laws related to the payment of the above-mentioned statutory dues.

Dear Anamik, I am extremely sorry, I erroneously picked up the 1st half Special Allowance. However, I still suggest that you discuss this with the concerned employee and, with his consent, revise the pay structure until the next salary revision. This issue is likely to arise every 6 months.

Furthermore, as previously suggested, do not alter your existing pay structure, as you are already paying double the minimum wage and are therefore not violating any government rules.

Additionally, you may need to wait for another month or two, as a decision on the Code on Wages 2019 is expected shortly. During this time, you will be required to pay 50% of the gross salary as a Basic salary.

Regards, Suresh

Further to the last post by our learned member Suresh ji, the COW is an enactment as of now, yet to be enforced soon upon passing the rules framed under it. Central Rules are finalized and may receive assent at any time from the President. CTC restructuring has to be done by you, keeping in mind the provisions in this COW as correctly and timely suggested by Suresh ji.