Can You Help Review and Correct This Salary Structure Under the New Wage Code?

Dear All, my request to all of you is to review and correct the following salary structure, which I have prepared in accordance with the new code of wages:

Salary Structure for General Employees

Basic + DA = 43,000
HRA = 12,750
CONV. ALLO = 6,012
MED. ALLO = 3,400
LTA = 3,400
SPL/AL = 9,422
GROSS SAL = 77,984
EMPR PF = 5,160
GRATUITY = 2,068

CTC = 85,212

Employees Covered Under Bonus/ESI Act

Basic + DA = 11,380
HRA = 3,300
CONV. ALL = 2,200
LTA = 880
SPL/ALL = 2,348
GROSS SAL = 20,108
EMPLR PF = 1,366
ESI = 151
GRATUITY = 547
BONUS = 583

CTC = 22,755

Dear Gopal Ji, the definition is very clear: whatever your total CTC may be, you have to ensure that your Basic will be 50% of CTC.

Dear Arihant Sir, thank you for your reply. I am still confused about whether, as per the Code of Wages 2019, the Basic Salary should be 50% of Gross Salary or 50% of CTC.

Currently, our Monthly Salary components are: Basic + DA, HRA, CONV ALLOW, MED ALLOW, SPL/ALLOW, LTA = GROSS SALARY, and GROSS SALARY, EMPLR PF, GRATUITY = CTC.

I kindly request you to clarify the above. Thank you.

Dear Mr. Gopal, I really appreciate the clear salary structure given above. However, a more detailed explanation would have been better. We pay ex-gratia for senior management. If you could provide us with the structure on CTC/gross, it would be advisable. For example, 50% basic on gross, 30% HRA on basic, and a maximum limit for LTA/Medical split into two parts.

Employees earning below 21k are covered under ESI. How about bonuses?

Dear Sir,

Our salary components are a certain percentage of Gross Salary, i.e., Basic + DA = 40%, HRA = 20%, Conveyance Allowance = 10%, Medical Allowance = 5%, LTA = 10%, Special Allowance = 15% of Gross Salary. CTC = Gross Salary, Employer PF is 12% of basic, Employer ESI is 3.25% of gross (wherever applicable), and Gratuity is 4.81% of basic.

Bonus is not included in our Gross salary components. It is paid once yearly. Ex gratia is not mandatory, so it's not included.

Further, please clarify whether as per the Code of Wages 2019, the Basic Salary should be 50% of Gross salary or 50% of CTC.

Considering the definition of wages as per the wage code, Basic and DA are neither 50% of the monthly gross nor 50% of CTC. It should be 50% of all remuneration payable to any employee and expressed in terms of money, whether paid daily, weekly, monthly, bi-monthly, quarterly, half-yearly, or yearly. An exception is gratuity, which, though payable, should not be considered. The value of house accommodation, light, water, medical, or any other amenity or service, though not payable and not expressed in terms of money, should be considered for calculation purposes.

Therefore, in all the above data, items like employer contributions to ESI, gratuity, premium to insurance, etc., should not be considered for the calculation purpose.

S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions

Though the employer's contribution to ESIC is not considered for calculating the 50%, the employer's contribution to PF is included, right?

Quoting Mr. S K Bandyopadhya:

Considering the definition of wages as per the wage code, Basic and DA are neither 50% of the monthly gross nor 50% of CTC. It should be 50% of all remuneration payable to any employee and expressed in terms of money, whether paid daily, weekly, monthly, bi-monthly, quarterly, half-yearly, or yearly, with the exception of gratuity, which, though payable, is not to be considered. The value of house accommodation, light, water, medical, or any other amenity or services, though not payable and not expressed in terms of money, should be considered for calculation purposes.

Therefore, in all the above data, items like employer contribution to ESI, gratuity, premium to insurance, etc., should not be considered for calculation purposes.

Definition of wages as per Wage Code

The definition of wages as per the Wage Code involves English words and sentences to explain a mathematical equation. I have already mentioned it has three different stages. In the first stage, it is mentioned in the definition that wages must be payable to a person.

PF is payable to any employee after retirement, resignation, death, etc. However, ESI contribution is not payable to any employee; instead, certain services are available. Organizations contributing premiums to Mediclaim Insurance, canteen subsidies, and company-arranged cars to bring employees from residence and back, etc., are not payable to the employee. These are services/facilities and part of CTC, including ESI contribution, but not as a part of wages.

Lawmakers are reasonably intelligent to frame the definition such that the employer cannot deprive employees at the same time. The amount which is not payable to the employee should not be considered as part of wages. Exceptions like gratuity, value of house accommodation, etc., are mentioned in the definition as special items.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons]