Minimum Wages Components - Can I split minimum wages in BASIC, HRA & BONUS?

Dear Folks,

Can I split minimum wages into BASIC, HRA, and BONUS? Minimum wages are considered as total gross, and 40% of the gross amount should be allocated to basic wages. Is this correct, guys?

I am inquiring about this for security guards. If we provide quarters to them, can I include HRA as part of the components?

Thank you.

Statutorily, you have to follow the minimum wages notified for the industry concerned and as per the skill level. The minimum wages notified have Basic pay and DA components, and the sum of the two has to be paid as gross wages. Statutory Bonus cannot be paid monthly, as has been repeatedly clarified in this forum. Deduction for house accommodation is permissible.

Further to KK's post, to the best of my knowledge, you will have to pay Basic+DA as minimum wages. Therefore, if you break up the salary, the Basic + DA should still be equal to or higher than minimum wages.

However, I was told by someone that one high court has declared that the legislative intent is to have the workman get the minimum wages, so the breakup is allowed. I have not been able to find the judgment, so I go by what is written in the notification. Basic + DA needs to be at least equal to minimum wages.

Dear Colleague,

On Splitting of Minimum Wages, you may go through the article for better understanding.

URL: [https://boardhr.blogspot.com/2020/04/splitting-of-minimum-wages-is.html?m=1#:~:text=In%20relation%20to%20segregati on%20of,in%20compliance%20with%20the%20Minimum](https://boardhr.blogspot.com/2020/04/splitting-of-minimum-wages-is.html?m=1#:~:text=In%20relation%20to%20segregati on%20of,in%20compliance%20with%20the%20Minimum)

In the case of Bonus, as rightly guided by our colleagues, it cannot be on a monthly basis but has to be paid annually if you want to be in compliance under the provisions of the Payment of Bonus Act 1965.

Even if you split the minimum wages and are compliant under the Minimum Wages Act, you cannot comply with PF/ESI/Gratuity contributions below the Minimum Wages concerning Basic and DA on your own.

As per a press note, a 2008 EPFO circular stated that PF contributions on at least minimum wages must be remitted by employers. Some field offices seemed confused about whether basic wages can be lower than minimum wages or whether organizations can split up wages into various allowances, an EPFO circular issued recently said.

"The basic wage can in no case be lesser than the minimum wage as the same is not only contrary to the law of the land but is also beyond logic and rational."

Read more at: [https://economictimes.indiatimes.com/news/company/corporate-trends/employers-warned-by-epfo-for-splitting-salaries-for-lowering-pf-contributions/articleshow/8720848.cms?utm_source=contentofinterest&u tm_medium=text&utm_campaign=cppst](https://economictimes.indiatimes.com/news/company/corporate-trends/employers-warned-by-epfo-for-splitting-salaries-for-lowering-pf-contributions/articleshow/8720848.cms?utm_source=contentofinterest&u tm_medium=text&utm_campaign=cppst)

In short, you need to comply with PF/ESI/Gratuity and Bonus, etc., for not less than Minimum Wages.

There are a lot of posts on CiteHR on this, and you can further browse for more understanding.

The answer to this question can differ from company to company.

That being said, here are some common factors that are applicable to every organization:

As per laws, companies are required to follow the minimum wages according to an employee’s skills/experience and industry standards
The minimum wage includes Basic pay as well as dearness allowance components. The sum of these two factors is supposed to be paid as gross wages.
Talking about bonuses, they cannot be paid every month as per laws.
Deductions for house rent allowance are permitted by laws.

Hope it helps.

As Dr. P. Sivakumar mentioned on the splitting of minimum wages, you may go through the article for better understanding - https://boardhr.blogspot.com/2020/04...-wages-is.html

Thanks for sharing.