I'm seeking clarification on a salary-related matter. Is it permissible under the Minimum Wages Act for Uttar Pradesh to offer a CTC of ₹9800 while the actual in-hand salary for employees is ₹8500?
I would greatly appreciate any insights or experiences regarding this scenario. Thank you for your time and expertise.
From India, Lucknow
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I would greatly appreciate any insights or experiences regarding this scenario. Thank you for your time and expertise.
From India, Lucknow
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Understanding the Minimum Wages Act and CTC
The Minimum Wages Act or notification of minimum wages does not contain any term called CTC. The Act only specifies the minimum wages below which no employer should pay wages. As observed by the Supreme Court in the Crown Aluminium Company case (Crown Aluminium Works vs Their Workmen-1958 AIR 30, 1958 SCR 651), "no industry has a right to exist unless it is able to pay its workmen at least a bare minimum wage." Therefore, first determine what the statutory wages are, and then add the employer's contributions towards ESI and PF to arrive at the CTC. Many employers take the monthly value of the bonus payable annually to make the CTC appear larger. It should not be calculated from the net (take-home) salary but from the gross salary before deducting the employee's share of ESI, EPF, etc.
Concerns with CTC for Unskilled Workers
A person receiving a take-home salary of ₹8500 should be considered an unskilled worker. By adding the employer contributions to the salary and inflating it to ₹9800, i.e., CTC, what benefit do you gain? The worker may accept the job thinking they would receive ₹9800 every month. If so, you will be misleading the worker, which may even create unnecessary disputes. Therefore, as far as possible, avoid using the CTC concept to attract workers. You can use CTC, but only when the salary is significantly above the market cost of labor and in respect of employees who can understand what CTC is. This is my personal opinion.
From India, Kannur
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4526The Minimum Wages Act or notification of minimum wages does not contain any term called CTC. The Act only specifies the minimum wages below which no employer should pay wages. As observed by the Supreme Court in the Crown Aluminium Company case (Crown Aluminium Works vs Their Workmen-1958 AIR 30, 1958 SCR 651), "no industry has a right to exist unless it is able to pay its workmen at least a bare minimum wage." Therefore, first determine what the statutory wages are, and then add the employer's contributions towards ESI and PF to arrive at the CTC. Many employers take the monthly value of the bonus payable annually to make the CTC appear larger. It should not be calculated from the net (take-home) salary but from the gross salary before deducting the employee's share of ESI, EPF, etc.
Concerns with CTC for Unskilled Workers
A person receiving a take-home salary of ₹8500 should be considered an unskilled worker. By adding the employer contributions to the salary and inflating it to ₹9800, i.e., CTC, what benefit do you gain? The worker may accept the job thinking they would receive ₹9800 every month. If so, you will be misleading the worker, which may even create unnecessary disputes. Therefore, as far as possible, avoid using the CTC concept to attract workers. You can use CTC, but only when the salary is significantly above the market cost of labor and in respect of employees who can understand what CTC is. This is my personal opinion.
From India, Kannur
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