Salary Structure Dilemma: Is It Legal to Offer Only Basic Salary Without Other Components?

Can an organization have Basic Salary as the only component of the salary structure? Is there any law that directs organizations to have other components?

I am trying to have mediocre job employees of an organization pay only the minimum wage in basic and no other components.

Dear friend,

First, when you pay salary/wages to an employee simply without any components, it is called consolidated wages, and the entire sum would be taken into account for the purpose of the calculation of indirect benefits like statutory bonus, contributions to EPF and ESI, gratuity if such benefits are applicable, lay-off, or retrenchment compensation, etc.

Secondly, under the Minimum Wages Act, 1948, it has been the practice of appropriate Governments to fix the basic wages with reference to the skill level required for the job and to add the component of variable dearness allowance linked to some cost of living index. To my knowledge, no other components by way of allowances are prescribed or added under the Act except the value of other amenities required by the very nature of the job like free food, etc.

If I remember correctly, some States like Maharashtra and Gujarat have separate laws prescribing compulsory payment of house rent allowance, which should also be treated as part of the statutory minimum wages.

Dear Member, Considering only basic wages is lawful. The addition of other components to basic wages entirely depends on the employer. If the employer wishes to provide extra benefits to the employee, they may choose to do so.

Minimum Wages and Salary Components
Minimum wages are declared by the competent authorities through gazette notifications. Apart from this, special allowances or dearness allowances and HRA also form part of the salary. Other statutory components need to be included in the salary structure, like bonuses, leave with wages, national holidays, and gratuity as entitlement subject to eligibility. The statutory benefits like EPF, ESIC, LWF, etc., are also part of the salary and are mandatory to be included.