Dear everyone, I want to know how to divide a salary of Rs. 18,000 and Rs. 8,000 when there is no PF deduction as the firm has below 15 employees and most of us live in our own houses. What must be the basic salary, and can dearness allowance be availed by a private sector employee, or is it just for government employees? Also, please inform me about medical allowance. My firm policy does not include any medical benefits. Can anyone suggest how the salary division can be done to be helpful for employees to avail loans and for other work with the help of a salary statement? Additionally, please explain which part of the divided salary is considered by any bank before providing loans. Is it mandatory to divide the salary? If not, what can be done?
Thanks and regards,
Taisha
From India, Bhopal
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Thanks and regards,
Taisha
From India, Bhopal
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Dear Taisha-Prabhakar, Notwithstanding the etymological differences, pay, salary, or wages refer to the compensation or remuneration that can be computed in terms of money payable by the employer to a paid employee as per the terms of the contract of employment for the services rendered by him/her. It can be wholesome or bifurcated into basic and other allowances. Allowances are paid to meet certain specific heads of expenses likely to be incurred by the employed person on account of his/her employment as well as in the form of fringe benefits. Thus, the overall structure of wages/salary/remuneration can be wholesome or consolidated or divided into components such as basic, dearness allowance, house rent allowance, conveyance allowance, etc.
Factors Influencing Wage Determination
Generally, several factors influence the determination of the quantum/level of wages in an organization that hires the services of the employees. The most significant ones among them are (1) the capacity of the employer to pay out of the value addition contributed by the employees (2) remuneration in comparable industries in the region or in the same industry (3) cost of living (4) productivity (5) bargaining power of the workmen/trade union based on the demand and supply of labor (6) mandatory statutory regulations applicable to the industry.
Therefore, the emerging structure of the wages depends on the above factors. If it is a consolidated fixed sum, a certain percentage on the basis of which has to be compulsorily set aside as indirect statutory employment benefits such as contributions to ESI and EPF, gratuity, bonus, which will cost more than the same wages broken into components. Thus, the practice of dividing the entire salary/wages into components came into vogue in the field of wage and salary administration. The statutory regulatory measures of payment of wages, including authorized deductions thereof, fixation and enforcement of minimum wages, compulsory contributions both from the employer and employee to ESI and EPF, contribution to gratuity fund, and income tax concessions make the apportionment of wage/salary into several components inevitable.
Code on Wages, 2019
However, with a view to curbing the tendency to devise the salary structure into disproportionate components so as to deprive the working classes of the indirect employment benefits, section 2(y) of the Code on Wages, 2019, which is slated to come into force w.e.f 01-04-2021, defines the term wages in such a manner that the proportion of the sum of the components of basic, dearness allowance, and retaining allowance, if any, shall always remain 50:50 to the sum total of all other allowances and the eventual shortfall if any, in the former would be made good from the latter.
Therefore, the take is yours to devise the wage/salary structure of your employees according to the statute as well as future developments.
From India, Salem
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6108Factors Influencing Wage Determination
Generally, several factors influence the determination of the quantum/level of wages in an organization that hires the services of the employees. The most significant ones among them are (1) the capacity of the employer to pay out of the value addition contributed by the employees (2) remuneration in comparable industries in the region or in the same industry (3) cost of living (4) productivity (5) bargaining power of the workmen/trade union based on the demand and supply of labor (6) mandatory statutory regulations applicable to the industry.
Therefore, the emerging structure of the wages depends on the above factors. If it is a consolidated fixed sum, a certain percentage on the basis of which has to be compulsorily set aside as indirect statutory employment benefits such as contributions to ESI and EPF, gratuity, bonus, which will cost more than the same wages broken into components. Thus, the practice of dividing the entire salary/wages into components came into vogue in the field of wage and salary administration. The statutory regulatory measures of payment of wages, including authorized deductions thereof, fixation and enforcement of minimum wages, compulsory contributions both from the employer and employee to ESI and EPF, contribution to gratuity fund, and income tax concessions make the apportionment of wage/salary into several components inevitable.
Code on Wages, 2019
However, with a view to curbing the tendency to devise the salary structure into disproportionate components so as to deprive the working classes of the indirect employment benefits, section 2(y) of the Code on Wages, 2019, which is slated to come into force w.e.f 01-04-2021, defines the term wages in such a manner that the proportion of the sum of the components of basic, dearness allowance, and retaining allowance, if any, shall always remain 50:50 to the sum total of all other allowances and the eventual shortfall if any, in the former would be made good from the latter.
Therefore, the take is yours to devise the wage/salary structure of your employees according to the statute as well as future developments.
From India, Salem
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