Minimum Wage Concerns: Can Employers Legally Divide Wages? Seeking Evidence and Insights

Is it legally permissible to divide minimum wages? If not, could you kindly provide a court order or an official notification as evidence?

The legality of dividing minimum wages can vary depending on the jurisdiction and specific labor laws in place. In general, minimum wage is a base rate that an employer is required to pay their employees. It's not typically permissible to divide or reduce this rate arbitrarily. However, there may be circumstances where deductions are legally allowed, such as for taxes, social security, or other legally mandated deductions.

Unfortunately, without knowing your specific jurisdiction, I cannot provide a relevant court order or official notification. I would recommend reaching out to your local labor board or a labor law attorney for advice tailored to your situation. They would be able to provide you with the most accurate information, including any relevant court orders or official notifications.

Remember, it's crucial to ensure that all wage practices comply with local labor laws to avoid potential legal issues. If you're an employer, consider consulting with a human resources professional or labor law attorney to ensure your wage practices are compliant. If you're an employee and you believe your wages are being unfairly divided, you should also reach out to a legal professional or your local labor board for assistance.

Compliance with Minimum Wages and Total Salary Considerations

For the sake of compliance, you can take the entire amount paid as wages. That is, if your total salary is above the statutory minimum wages fixed, you are said to comply with the statutory requirements. This is supported by a Supreme Court verdict (Airfreight India Vs State of Karnataka) as well. However, that whole salary should be considered for the calculation of bonus, PF, leave encashment, and finally gratuity payable at the time of exit. You cannot use only the basic salary for calculating gratuity or PF; the total salary must be considered to determine if you are paying wages as per the Minimum Wages Act.

The answer is no, legally the minimum wages cannot be split further. The court is not empowered to pass an order against the framed Act. The Act does not permit the bifurcation or splitting of minimum wages, and any agreement to do so is considered void.

Minimum Wage as a Lump Sum:
The Minimum Wages Act mandates that employers pay a minimum wage, which is a fixed, composite amount, and this amount cannot be split or segregated.

Void Contracts:
Any contract or agreement that attempts to reduce or relinquish an employee's right to the minimum wage, or any privilege or concession under the Act, is null and void.

Purpose of the Prohibition:
The prohibition against splitting minimum wages is to prevent employers from reducing their liabilities under other labor laws, such as the Employees Provident Fund (EPF) Act, by artificially lowering the basic wage component.

Basic Wage vs. Minimum Wage:
The Supreme Court has clarified that the "basic wage" defined under the EPF Act is different from the "minimum wage" under the Minimum Wages Act, and the former can be split, but not the latter.

Penalties for Violation:
Employers who violate the provisions of the Minimum Wages Act, including those related to paying the minimum wage, can face penalties, including fines and imprisonment against the Act framed.

Understanding the Minimum Wages Act

The Minimum Wages Act provides for the minimum amount of wages that should be paid to each category of workers under each scheduled employment/industry. The Act does not state that the total salary should not be bifurcated into various components. Therefore, as I mentioned, for the purpose of compliance, the total salary paid under various heads shall be considered as wages.

The Air Freight Case

In the Air Freight case, the argument of the Labour Department was that the establishment did not pay variable DA, one of the components of salary as per minimum wages notified by the state, and therefore, DA should be paid over and above the wages being paid. However, the company was paying wages above the wages fixed by the government, and therefore they are not liable to pay anything more. The Supreme Court stated that if the employer is paying more than the minimum wages fixed, there is no need to pay VDA.

Implications for Gratuity and Other Compliance

I take the second comment, that is, if your total wages are considered as wages for compliance under the Minimum Wages Act, the same total wages should be considered for the payment of gratuity as well. You cannot have total wages for Minimum Wages compliance and only the basic wages for other compliance, including PF contribution and gratuity calculation.