Curious About India's Latest Legal Salary Structure? Let's Discuss!

Hi all, can you please let me know the recent salary structure applicable as per the law in India?

Hi, In India, the salary structure is governed by various laws and regulations that have been put in place to protect the rights of employees and ensure fair compensation for their work. As an employer, it is crucial to be aware of the recent salary structure applicable in India to avoid any legal repercussions and ensure compliance with the law.

Laws Governing Salary Structure in India

The recent salary structure in India is primarily governed by the Payment of Wages Act, 1936, Minimum Wages Act, 1948, and the Code on Wages, 2019. These laws lay down the minimum wages that must be paid to employees based on factors such as the type of work, location, and industry. Employers are required to pay wages that are not less than the prescribed minimum wage to ensure that employees are fairly compensated for their work.

Payment of Wages Act, 1936

The Payment of Wages Act, 1936, mandates that wages must be paid in legal tender or through electronic transfer and within the specified time period. The Act also prohibits any deductions from wages except those that are authorized by law or agreed upon by the employee. Employers must maintain accurate records of wages paid to employees to ensure transparency and compliance with the law.

Minimum Wages Act, 1948

The Minimum Wages Act, 1948, sets the minimum wages that must be paid to employees in various industries and occupations. The Act aims to prevent exploitation of workers and ensure that they receive a fair wage for their work. The minimum wages are revised periodically by the respective state governments based on factors such as inflation, cost of living, and economic conditions.

Code on Wages, 2019

The Code on Wages, 2019, which came into effect on August 8, 2019, aims to streamline and simplify the existing labor laws related to wages and ensure uniformity in wage payments across all sectors. The Code consolidates and rationalizes four existing laws related to wages and provides for a universal minimum wage that applies to all employees, regardless of their location, occupation, or industry.

Employers in India are required to comply with the recent salary structure applicable as per the law to avoid any legal consequences. Failure to pay employees the prescribed minimum wage or make timely wage payments can result in penalties, fines, or legal action. It is essential for employers to stay informed about the latest developments in labor laws and ensure that their salary structure is in compliance with the law.

In conclusion, the recent salary structure applicable in India is governed by various laws and regulations that aim to protect the rights of employees and ensure fair compensation for their work. Employers must adhere to the minimum wage requirements, payment deadlines, and other provisions laid down in the relevant laws to avoid legal repercussions and maintain a harmonious work environment. Staying informed about the latest developments in labor laws and seeking legal advice when necessary can help employers ensure compliance with the law and uphold the rights of their employees.

Thanks

There is no standard salary structure in India. The law relating to wages only specifies how much salary/wages should be paid to each category of employment. It only mentions a minimum amount, and the responsibility of fixing the minimum wages lies with the state government. Therefore, each state has different minimum rates of wages, and the components of those wages also differ from state to state.

As such, while the majority of states follow a pattern of basic wages and dearness allowance variable according to changes in the consumer price indices (CPIs), there are a few states that include a certain percentage of the basic salary as house rent allowance as part of the salary structure. Some states have an allowance to compensate for the cost of living in cities, i.e., city compensatory allowance, as part of minimum wages. In some states, instead of dearness allowance, the term used is special allowance. This means there is no uniformity even in the structure of salary in India. Even in the new labor codes (which remain unimplemented and are not going to be implemented due to some technical faults in their drafting), there is no uniformity sought, and the state governments are still empowered with the duty of fixing wages for the respective scheduled industry.

The matter is, anyway, not the point of discussion here. The discussion is about how salary shall be structured legally. The salaries of many categories of employees are much above the statutory minimum wages. It is based on the statutory wages only in respect of workmen and that too in such establishments where they are not represented by any trade union for their collective bargaining. In establishments that are paying higher than minimum wages, whatever structure you follow will be acceptable, and the law does not make it mandatory that the employer should follow the exact structure of basic wages and dearness allowance as discussed above. In the Airfreight case, the Supreme Court has said that as long as the employer is paying more than the minimum wages fixed by the government, there is no need to have a component called dearness allowance in the salary structure. This permits the employer to have salary components that they prefer. It is even acceptable that out of the total salary, you keep the bare minimum as basic salary and the maximum on components that are excluded from statutory contributions and payments like PF, ESI, Bonus, or gratuity.

But my advice is that you should not completely ignore the wage structure as per law, i.e., minimum wages notified by the state. If you do not have a dearness allowance in the salary structure, then the basic salary should be an amount equal to the total of notified wages, i.e., basic wage and dearness allowance. It should be on that basic wage that you calculate the amount payable by the employer towards PF, bonus, leave encashment, or gratuity. Any amount over and above the statutory salary shall be put under any head which will not attract statutory contributions of the employer. In respect of highly paid employees whose incomes are subject to tax deduction, there can be reimbursements and other tax benefits.