Understanding Salary Structure for Factory Workers: How to Align with Minimum Labour Wages Act?

Dear Senior, I am working with a manufacturing company where I need to create a salary structure as per the Minimum Labour Wages Act. I am attaching the Minimum Wages Matrix of Telangana. I am not sure if this is the updated one.

My queries are:
1) What is the basic amount (percentage)?
2) Is it a minimum of 50% of the gross amount?
3) Why is the fixed amount of 3700 mentioned in the basic amount?

Kindly share a salary structure in accordance with the Minimum Labour Wages Act.

Minimum Wages Structure

The minimum wages shall contain a basic salary and a dearness allowance variable according to changes in the Cost of Living Index. The basic pay will vary depending upon the skill required. It is a prefixed amount. Rs 3700 given in the example is the basic salary of a certain category of employees. Apart from this basic wage, all are required to be paid VDA (variable dearness allowance) based on CPI (Consumer Price Index or Cost of Living Index). The VDA fixed is Rs 6848. It will change whenever there is a change in the CPI. Some states keep it fixed for a year, some other states make it applicable for 6 months, and some other states change the CPI every quarter. The sum of the basic pay and VDA is the minimum gross salary payable. In the given case, it is Rs 10548. This is the amount on which you are expected to pay your contributions to PF, Bonus, gratuity, etc.

Common Mistakes in Salary Structuring

Fixing the gross salary first and then bifurcating the same into basic, HRA, etc., as percentages of gross salary is a wrong practice followed by the new generation HR professionals. It has no legal backing. Like any structure, salary structure is also 'constructive' and not 'destructive'. You can add any other allowance to the basic salary and then form a gross salary.

You can go through the minimum wages notification itself, which says that for each particular category of employment, the basic salary should be this much and in addition to this, there should be a dearness allowance.