Whether Minimum Wages Should Be Only Basic Or It Can Be Divided Into Two/three Heads?

Dear all,

State Govt. is the appropriate government to monitor, regulate, and control minimum wages. Barring a few, all state govts. have notified a fixed amount, i.e., per day/month amount, as wages payable. Like in UP, an unskilled laborer is to be paid MW at Rs. 277.47 per day. In this situation, if you choose to bifurcate in your way, that will have multiple implications. Not only is it against and a violation of the Minimum Wages Act, but it is also legally objectionable from other provisions such as PF and bonus amounts being paid less. Similarly, where Basic and DA are two components of MW, a few state govts. are taking similar actions - always leading to similar situations. Apex court rulings will never guarantee to save one based on its own verdicts decided earlier. It would be prudent and more logical if we opt not to bifurcate the notified MW.

One more factor we must keep in mind is that Labor Laws are a socially beneficial piece of legislation. So, labor welfare will always be the base factor in adjudicating and regulating such issues. Any short payment of wages has a ten times penalty that should also be understood. So, let's agree not to play with the notified rates as MW.

Regards,
RDS Yadav
Labour Law Advisor
navtaranghrs@gmail.com

Dear Annonymous,

MIINIIMUM WAGES CAN BE SPLIIT IINTO ALLOWANCES,, HENCE,,

EPF CONTRIIBUTIION NOT ON MINIMUM WAGES

An appeal was filed by the appellant, before the EPF Appellate Tribunal, against the order dated 14.12.2012, passed by the EPF Authority, under Section 7A of the Act, taking into consideration of the minimum wages under the Minimum Wages Act. The EPF Appellate Tribunal observed that the employer has bifurcated the minimum wages into different heads like basic wages, house rent allowance, conveyance allowance, special allowance, skill allowance etc. the employer has been paying EPF contribution only the basic wages as provided under the EPF Act excluding allowance. The headquarters office of the EPFO, vide circular dated 23.05.2011 has stated to ensure that the PF contribution shall be remitted on not less than minimum wages. Accordingly, the EPF Authority initiated proceedings under Section 7A of the Act, taking into consideration of the minimum wages under the Minimum Wages Act and directed the employer to pay the contribution so determined. The EPF Appellate Tribunal opined that minimum wages has not been defined under the EPF Act. Only basic wages is defined under the Act. The EPF Authority has no power to hold whether minimum wages amount to basic wages or not. While interpreting a provision of any Act, the Court only has to interpret the law and cannot legislate it. If a provision of law is misused and subjected to abuse of process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary. There is no compulsion to hold that the definition of ‘minimum wages’ under the Minimum Wages Act. Employer is liable to deduct PF contribution on basic wages as defined under Section 2(b) read alongwith Section 6 of the EPF Act and not on minimum wages as per Minimum Wages Act. Hence, impugned order is set aside. Appeal not allowed.

pls refer :-

M/s. Chalet Hotel Pvt Ltd Vs. RPFC, Thane, ATA No.17(9) 2013, decided on 21.07.2014

M/s. A.K. Manpower Services Vs. RPFC, Mumbai ATA No.606(9), 2011, decided on 27.07.2011

M/s Delight Services Vs. RPFC, Indore, ATA NO. 743(8)2010, decided on 26.11.2015

Thanks & Regards

V Shakya

HR & Labour Law Advisor

Many have given their views on both judicial pronouncements and what is fair. Please consider splitting up only if your company is either facing a financial crisis or has a long practice of splitting minimum wages into various components. The details provided clearly indicate the reader's assessment, and it may be considered an attempt to deceive, which would be detrimental to the services or High Court order. This will not help as each case is unique before the authority under Section 7A of the EPF Act. Splitting minimum wages is deemed acceptable as per the Supreme Court decision in the case of Air Freight Cargo Bengaluru vs. The Government of Karnataka and others.

Hi All,

I have a query regarding this. If we see PF is deducted on Basic Plus DA, and Minimum wages are also BASIC and DA (which is revised every 6 months or so), correct me if I am wrong. Then why are the employers breaking/bifurcating Basic? Isn't bifurcating basic a violation of the Minimum Wages Act? Since they are not paying the Minimum wages (i.e., if we calculated bifurcated basic PLUS DA (HRA and other components not included, it will be less than what is declared by the Government) and only to pay less PF, for the employees who work for the employer's benefit is not practicably correct.

Please correct me if I am wrong.

Thank You.

Regards, Smita

Dear Smita,

No law can be considered by way of personal opinion. I know the government has inserted such an act just to provide benefits to employees. However, the act, such as EPF, doesn't define the definition of minimum wages. Minimum wages are not basic plus DA. As per the definition of minimum wages under section 2(h), minimum wages mean all remuneration inclusive of HRA. Hence, minimum wages may be divided into certain allowances to ensure that any employee should not receive wages/salary inclusive of all allowances less than minimum wages.

Now, regarding your query for EPF contribution, minimum wages can be bifurcated into certain allowances because minimum wages are not defined in the EPF act. Contribution shall be made as per section 2(b) of the EPF act, not based on minimum wages. Furthermore, the Supreme Court has also permitted bifurcation in the case of air freight cargo. The EPF tribunal has also permitted bifurcation in some cases as mentioned in my earlier post. Therefore, there is no doubt that minimum wages can be bifurcated for EPF contribution.

Thanks & Regards,

V. Shakya

HR & Labour Law Advisor

My Dear ANONYMOUS friend,

I have already clarified in my earlier mail that an employer is not allowed to split the minimum wage fixed by the state governments to deprive the workers of the social security benefits available to them under various Acts, viz, ESI, PF, etc. Any such splitting of minimum wages will be illegal and wrong where the contribution of ESI, PF, etc., is reduced.

BS Kalsi,
Member since August 2011

Minimum wages can be split as per various orders of EPF Tribunal.

Dr. P. Willington Jebaraj