Understanding Wage Splitting Under New Labor Codes
There may be monthly gross wages or yearly CTC. As per the new labor codes (yet to be implemented), the definition of wages (common in all labor codes) provides guidelines to split the total payable amount. One may follow the same—not necessarily in total at this moment but to some extent.
As per the definition, there are three steps to determine wages (Basic and DA) and other allowances, including the employer's portion of PF, Statutory Bonus, etc. If we read the definition properly, it is mentioned that there is an exclusion list (a) to (k), of which payment under (a) to (i) should not be more than 50% of all remuneration calculated under this clause (definition of wages).
It may start from the CTC of each employee (which varies randomly from organization to organization in India) to determine all remuneration that is payable to the employee. For example, the employer's portion of ESI contribution, premiums to insurances, etc., may be subtracted from the CTC.
As labor codes are not yet implemented, one may consider 40% of all remuneration that is payable to the employee as Basic & DA at this stage (which will be 50% after the implementation of labor codes), and the rest of the amount will be distributed to pockets as per the organization's policy—employer portion of PF, Statutory Bonus, HRA, LTA, etc. This will help to fulfill the conditions of the definition of wages easily after it is implemented.
Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons]
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