Minimum Wage and How to Design Salary Structure

This is to all the Senior HRs,

My organization is in a dicey situation. We are based out of Gujarat and have employed some of our workers in the same state but for a different company working in oil fields.

Recently, we were asked by our client to adjust the wages of employees as per the central new wage for semi-skilled (557/day) but Gujarat state has a lower wage of 371/day.

Now, 557*26 = Rs. 14,482 has to be the basic salary per month, right?

And subsequently, there are going to be PF and ESIC burden.

Can someone explain if we can just have Basic or Basic+DA = 14,482 as a component in the salary structure and nothing else?

This way we can save some costs. Or have HRA and all the necessary components?

Additionally, is the client right to ask for such central wages to be applied in this case?

Dear friend,

Since the subject matter of 'LABOR' is placed under the Concurrent List of the Constitution of India, both the Central and State Governments are empowered to legislate laws in the matter. Therefore, certain Central labor laws like the Industrial Disputes Act, 1947, Minimum Wages Act, 1948, Contract Labor (Regulation and Abolition) Act, 1970 have the concept of "appropriate Government" incorporated into them by means of which both the Central and State Governments are enabled to administer such laws exclusively within their respective jurisdictions. Therefore, first one has to ascertain which is the appropriate Government for one's industrial activity or establishment with reference to the nature of activity undertaken. In this connection, you may refer to section 2(b) of the MW Act, 1948 which defines the term "appropriate Government" for the purposes of the Act.

Since employment in oilfield comes under the purview of the Central Government, the Central Government is the appropriate Government in respect of the same. Therefore, your employees deputed to work there on whatever basis should be paid the minimum rates of wages fixed by the Central Government.

Can someone guide me with the best possible salary structure with a basic of 14482?

Since the basic is already on the higher side as per the organization, is HRA and other components required? Or can we simply have basic pay, PF, and ESI to be compliant?

So long as the total wages exceed the notified minimum wages (of the Central Government in this case), the breakup does not matter. As a matter of principle, don't tinker with the wage pattern lest it creates apprehension or suspicion in the workmen's minds.

In the case of scheduled employment under the MW Act, 1948, it is imperative to consider the componential structure and the gross wages, as well as the statutory minimum rates, while deciding the industry wages and their components. If the industry wages comprise more components, only those falling within the inclusive part of the definition of the term 'wages' under the MW Act, 1948 should be taken into account for the purpose of determining parity between the industry wages and the statutory minimum wages. In such an exercise, it is essential to bear in mind the periodic increase in the minimum wages due to the linkage of the dearness allowance to some cost of living index or other.

Hence, let the poster decide on their own with reference to the salary structure of their industry wages vis-à-vis the applicable minimum rate of wages.

So far, as far as my knowledge goes, Gujarat has the State House Rent Allowance Act, which is 5% of the Basic and DA. Please check and, if necessary, implement the same.

To avoid the six-monthly review as per the Minimum Wages Act, fix the remuneration at 10% more than the existing MW and review yearly with increments, not just considering minimum wages. This will help minimize remuneration-related grievances to some extent.

S K Bandyopadhyay (WB, Howrah)
CEO - USD HR Solutions
+91 98310 81531
skb@usdhrs.in
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