Is It Fair for Our Client to Deny HRA While Following Central Wages in Maharashtra?

Dear Seniors,

Please advise on the below-mentioned issue. We are a manpower supplier company. One of our clients follows the minimum wages set by the central government. Our employees are working at this client's place in Mumbai. The client is denying paying House Rent Allowance (HRA) to these employees, stating that since they are following the central wages in Maharashtra, HRA won't be applicable. Is it a valid reason to deny HRA? Our stance is to pay a minimum of 5% HRA to the employees.

Your earliest response will be highly appreciated.

Thanks

Central vs. Maharashtra Minimum Wages

If the client establishment is covered by the Central Minimum Wages, the employees deployed in that establishment need to be paid wages according to Central Minimum Wages. If that is satisfied, then there is no legal issue. Obviously, when you send the same employee to some other establishment where the Maharashtra Minimum Wages are applicable, you can demand HRA as part of wages. Therefore, as long as the wages paid are not below the statutory minimum wages fixed at any point in time, you cannot demand some component over and above it.

Hi Santosh, For specific legal advice regarding your situation, it's recommended to consult with a labor attorney or legal expert in your jurisdiction.

Minimum Wages in India

In India, both central and state governments can set minimum wages, and employers are required to comply with the higher of the two rates (central or state). In Mumbai, Maharashtra, the state government sets its own minimum wages.

House Rent Allowance (HRA)

Regarding HRA (House Rent Allowance), this is typically provided to employees to help them meet the cost of accommodation, and it's a common component of a compensation package. While the central government may set certain guidelines, it's important to note that state governments may have their own regulations regarding HRA.

In your case, if your employees are working in Mumbai, Maharashtra, and the state government's minimum wage includes a provision for HRA, it is generally expected that this should be followed. The central government's guidelines are meant to be a minimum standard, and employers are expected to adhere to the higher of the two standards (central or state).

If your client is denying HRA based on following central wages, and Maharashtra's HRA is applicable, this could potentially be in violation of the state's labor laws. It would be advisable to consult with a labor lawyer or legal expert in Maharashtra to get specific advice about your situation.

It's important to ensure that you are in compliance with all relevant labor laws and regulations to protect both your company and your employees.

Thanks

Dear Seniors,

Thanks for your inputs. However, if we refer to the Maharashtra Minimum HRA Act, it clearly states that every establishment employing more than 50 employees in Maharashtra needs to pay at least 5% HRA to its employees. This requirement is distinct from the Minimum Wages Act. Accordingly, it must be followed separately and should not be substituted with the Minimum Wages Act.

Santosh Kondam only asked the question, and we all gave our suggestions. Now Santosh himself has come up with the answer. If the solution was known to him, then why did he ask the question?

Understanding Minimum Wages and HRA in Maharashtra

Santosh, the Maharashtra Minimum Wages contain an element called HRA. For example, for unskilled workers, if the wages for Zone 1 cities are, say, Rs 12,500, this amount includes a basic salary, VDA, and HRA. If you pay Rs 12,500 to an unskilled worker without any bifurcation, you are said to comply with the legal requirements, and there is no need to pay VDA or HRA in addition to the amount paid. The Supreme Court in Airfreight India Vs State of Karnataka clarified that as long as the employer is paying wages above the minimum wages, they are said to comply with the legal requirements, and there is no need to pay VDA, which is a part of minimum wages as per notification. The same principle will apply to you also, and if your wages for a particular category of employee are not less than the Basic + VDA + HRA fixed by the government for that particular scheduled employment, there is no need to pay VDA or HRA in addition to the total amount paid.

Dear Santosh,

You have not specified which scheduled industry your Principal Employer comes under. If your Principal Employer (PE) is licensed by the Central Licensing Authority, you are exempt from paying HRA because it applies to the entire country and is always much greater than any other scheduled employment in the country. If the firm is in real estate (building construction), the State Minimum Wage for Building and Other Construction Workers will apply, with a 5% HRA on Basic + VDA. This is the country's highest MW. (God only knows what reasoning or cost of living index is taken into account or utilized in this industry.)

I am providing the Central and State Minimum Wages published by Shri Tej Bahadur, the Deputy Chief Labour Commissioner, Mumbai on 12.10.2023 for Employment in Construction or Maintenance and in Building Operations for members' convenience.

Regards,
Suresh