Hello everyone, I need your suggestion. If the gross salary is < 50,001, can the basic salary be 30% of the gross salary?
From India, Kolkata
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From India, Kolkata
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No, if the total monthly salary is less than ₹50,000, the basic salary cannot be 30%. The basic salary should be at least 50% of the total salary (CTC), according to the New Wage Code. This means that if a salary is less than ₹50,000, the basic salary would need to be at least ₹25,000.
From India, Hyderabad
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1From India, Hyderabad
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Dear HR Sujoy,
The Basic pay in general ranges between 50% to 60% of the gross salary.
The basic should not be less than 50% of the Gross pay, as per the wage code.
The other 40- 50% constitute DA 25-30%, HRA 10-15% and other Allowances 10% of the gross wages.
This is an ideal structure for a working class, the HR should consider a sound package, where Basic+DA = 80 % of gross wages.
From India, Mumbai
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The Basic pay in general ranges between 50% to 60% of the gross salary.
The basic should not be less than 50% of the Gross pay, as per the wage code.
The other 40- 50% constitute DA 25-30%, HRA 10-15% and other Allowances 10% of the gross wages.
This is an ideal structure for a working class, the HR should consider a sound package, where Basic+DA = 80 % of gross wages.
From India, Mumbai
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Why Should the Basic Be Fixed at 30% of Gross Salary?
An employment contract is an agreement between an employer and an employee, where the consideration (without which a contract becomes invalid) is the salary or remuneration. This is also embodied in the contract. This means a person agrees to work for another person for an agreed consideration or remuneration for services of Rs 50,001. This is the wages. Any bifurcation therein is purely secondary and has no meaning at all. The present labor laws also support this concept. However, the proposed Wage Code has made it more complicated by stating that 50% of allowances, considering anything above 50%, etc., should be included in the basic salary. For what reason?
In such a scenario, interestingly, a part of the overtime allowance or part of the PF contribution by the employer would also become part of wages!
When we have a ceiling of Rs 21,000 for ESI coverage or bonus coverage and Rs 15,000 for PF coverage, the only statutory contribution payable to an employee based on wages is gratuity. It is payable only to those who complete 5 years of service. Employers want this amount to be reduced. But if the employee says that the total amount he earns is his salary, how can he defend it? The term wages for computing gratuity is the total wages at the time of retirement. There are certain allowances excluded from the scope of wages. They are commission, bonus, overtime wages, and HRA. These are allowances not appearing in the contract of employment. In the appointment order, you cannot find an amount as "commission" because it is based on some results. You cannot find an amount as overtime wages because it will depend on hours of work over and above the scheduled working hours. You will not include an amount called Bonus because it depends on the profitability, etc., of the establishment. Yes, there will be an amount appearing as HRA. But in actual parlance, it is paid only to those who stay in leased accommodation and to those employees whose spouses are not getting HRA. The amount of HRA depends on the place of posting and the category of employees. Not all employees will be entitled to get it. Obviously, the amount of HRA will not form part of salary or remuneration. But if the amount of these allowances is mentioned as fixed in the salary, then certainly, all these amounts will qualify for gratuity as well. Then what is the relevance of keeping the basic wages at 30% or 60%?
From India, Kannur
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An employment contract is an agreement between an employer and an employee, where the consideration (without which a contract becomes invalid) is the salary or remuneration. This is also embodied in the contract. This means a person agrees to work for another person for an agreed consideration or remuneration for services of Rs 50,001. This is the wages. Any bifurcation therein is purely secondary and has no meaning at all. The present labor laws also support this concept. However, the proposed Wage Code has made it more complicated by stating that 50% of allowances, considering anything above 50%, etc., should be included in the basic salary. For what reason?
In such a scenario, interestingly, a part of the overtime allowance or part of the PF contribution by the employer would also become part of wages!
When we have a ceiling of Rs 21,000 for ESI coverage or bonus coverage and Rs 15,000 for PF coverage, the only statutory contribution payable to an employee based on wages is gratuity. It is payable only to those who complete 5 years of service. Employers want this amount to be reduced. But if the employee says that the total amount he earns is his salary, how can he defend it? The term wages for computing gratuity is the total wages at the time of retirement. There are certain allowances excluded from the scope of wages. They are commission, bonus, overtime wages, and HRA. These are allowances not appearing in the contract of employment. In the appointment order, you cannot find an amount as "commission" because it is based on some results. You cannot find an amount as overtime wages because it will depend on hours of work over and above the scheduled working hours. You will not include an amount called Bonus because it depends on the profitability, etc., of the establishment. Yes, there will be an amount appearing as HRA. But in actual parlance, it is paid only to those who stay in leased accommodation and to those employees whose spouses are not getting HRA. The amount of HRA depends on the place of posting and the category of employees. Not all employees will be entitled to get it. Obviously, the amount of HRA will not form part of salary or remuneration. But if the amount of these allowances is mentioned as fixed in the salary, then certainly, all these amounts will qualify for gratuity as well. Then what is the relevance of keeping the basic wages at 30% or 60%?
From India, Kannur
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(Fact Checked)-Your explanation is comprehensive and accurate, highlighting the complexities of wage structure under Indian labor laws. Well done! (1 Acknowledge point)
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CiteHR.AI
(Fact Checked)-Your information is correct. The New Wage Code mandates a basic salary of at least 50% of the total salary. Keep sharing your knowledge! (1 Acknowledge point)