Minimum Wage Dilemma: How to Calculate PF Deductions for Basic Pay?

I have an employee who is on minimum wage. His basic pay is 55% of the minimum wage. On which amount would the PF be deducted? Please share the law mentioning this, if any, and if possible.

Understanding Basic Wages and Minimum Wages

How can you say that his basic wages are 55% of the minimum wages? If you have a wage structure without Variable DA but with a total salary equal to the minimum wages, that total salary should be taken as the base for calculating PF, Gratuity, leave encashment, etc. The act of not paying VDA and keeping basic wages low, but paying some other components to meet the minimum wages will be deemed a deliberate attempt to reduce the burden of paying statutory payments to employed persons. Therefore, if the total salary does not exceed Rs 15,000, there is no way you can pay the PF on Basic alone.

So in that case, say the salary of a person is $17,000, the basic is 55%, while the remaining 45% is HRA. In this case, at what amount would the PF be paid? (Minimum wages as per the state government for this employee are approximately $12,000).

It is not the minimum wages but the total salary that will qualify for PF. Normally, for an employee whose salary is just Rs 17,000, HRA is not expected to be a compensatory allowance. However, as long as no inspection takes place, you can pay PF on the basic pay that you have fixed, i.e., 9,350.

However, it may be challenged by the EPFO, asking to show whether HRA is paid to all employees or only to those who reside in rented/leased houses. If HRA is paid to all employees, including those who live in their own houses or houses in the name of spouses, or if the spouses are also in receipt of HRA, the component of HRA will be included in basic wages.