Help me bifurcate the salary as per the minimum wages act, suppose if an employee is withdrawing Rs. 70200 p.m

Hi sir/madam,

Please help me bifurcate the salary as per the minimum wages act. Suppose an employee is withdrawing Rs. 70,200 per month. What should be the Basic, DA, HRA, conveyance, and any other components? Please guide me.

Dear Colleague,

50% of the total components as Basic and DA:

In view of the proposed changes in the Code on Wages, the suggestion is to keep the Basic and DA at 50% of the total components.

The remaining 50% may be HRA and other allowances:

- The HRA may be 30% to 50%, depending on the city. (Workmen in Maharashtra have specific provisions in a separate Act on HRA, so please take care for your academic interest.)
- Your allowances should be accommodated within the rest of the HRA part percentage out of the 50% as per the organization's guidelines or compensation policy.

As per the present situation and based on the latest verdict by the Apex Court on PF Contribution, other than HRA (as per the present definition of Basic Salary), whatever will be paid in the monthly gross salary except for a few exceptions (e.g., Productivity-linked payment, etc.), PF contributions will be required to be paid on the entire amount. Therefore, one can set any distribution - 40%, 50%, 60%, etc. - as Basic and DA of the monthly gross and the rest in other allowances such as HRA, CCA, etc.

As per the Wage Code (yet to be implemented), it is different. There are three parts in the definition of wages. In the first part, wages mean all remuneration payable to a person and includes Basic Pay, DA, and Retaining allowance if any.

The second part includes a significant exclusion list (a) to (k) where monthly components like HRA, statutory components like contributions to pension or PF, and yearly components like Bonus, LTC/LTA, as per clause (e), for some employees may be entitled to yearly furnishing allowances for the nature of employment, etc., are included.

In part three, it is mentioned that if payments made under sub-clauses (a) to (i), which include yearly components like Bonus, LTC/LTA, statutory components like Employer PF contributions, etc., exceed 50% of all remuneration calculated under the clause, it shall be deemed as remuneration and shall be accordingly added to wages under this clause.

Therefore, for calculating wages (Basic & DA) as per the Wage Code, it is essential to start with the summation of all payable components in the remuneration structure, which should include monthly components, yearly components, and any other components payable during the year, employer contributions to PF, Statutory Bonus, etc., and 50% of that will be considered as Wages (Basic & DA). This calculation will vary from organization to organization as different organizations have different remuneration structures.

S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in

Whatever be the bifurcation and whatever be the definition of basic wages under the new code, one should understand that if you have agreed to give Rs 70,000 as salary, that should be his basic salary. If, over and above the salary, he is offered rent-free accommodation, the rental value of that accommodation is the HRA, which is not part of the salary (though you can use it for constructing your CTC!).

Very simply, the amount of salary deducted when you are absent without pay is the salary. Obviously, it is not from the 40% or 50% of Rs 70,000 (Gross salary) that you deduct the days' salary for LOP, but it is from the whole salary that LOP is deducted proportionately. Therefore, at the end of the day, the salary means the actual salary as per the agreement and not the one as per the structure of the salary on which various contributions are made.

Salary does not mean only the Basic Salary. It is the monthly gross salary. It may include Basic, DA, HRA, CCA, etc.

As rightly pointed out by Madhu T.K., in the case of LOP, the deduction is made proportionately from all the components of the Monthly Salary, not only from Basic & DA.

Even in the Government Sector (Bank), the monthly salary structure consists of Basic, DA, HRA, CCA, etc. During the recent two-day all-India Bank strike (16th & 17th Dec 2021), there will be LOP for two days proportionately for all components, as has happened on several occasions in the past.

In the original post, the monthly gross salary is 70200/-, where Basic may be 30,000/- per month, and the rest of the amount will be distributed between HRA, DA, Conveyance, etc.

S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in

But the officers who receive house rent allowance get full HRA even if the employee is absent for two days due to a strike. This is because rent paid by the bank or the amount of rent reimbursed by the bank is not part of the basic salary, but it is an allowance. It is only in private establishments that the total salary means the entire sum, including allowances.

My wife is a nationalized rural bank employee for about 33 years, of which 15 years as an officer. HRA is part of the monthly remuneration. In the past, for any strike and even in the December 2021 strike, salary will be proportionately deducted as LOP, including HRA.

If any Sr. Manager stays at a bank lease apartment and the rent is paid by the bank, then no deduction is made as it is an agreement between the landlord and the bank. For those at that level, chances of LOP are very low.

But in general, whether government or private, LOP is made proportionately in all components of salary. This is reality.

S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in

Please correct me if I am wrong.

In the case of HRA being a certain percentage of basic pay, the loss of pay will naturally be reflected in the HRA as well. House Rent Allowance, whether reimbursed or paid directly by the employer, is not considered part of the salary. Therefore, it will be paid in full even if the employee is absent without leave for a couple of days. This is the essence of House Rent Allowance – an allowance provided to an employee to secure accommodation near the office for work-related purposes. Service rules often define distances to determine an employee's eligibility for HRA.