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Shobharam Dhama (Prop)     05 January 2010

Keeping low basic wages for [aying less PF contribution

 Dear All, Warm Greetings

The definition of wagesunder PF Act does not include HRA. Can a company structure its salary to employees so as Basic salary be Rs 2000 and HRA Rs 9000 per month? If Yesthan how can the real intenton of the legislature be implemented? And f no than what action can be taken against the company?


 10 Replies

Asha Pole (Legal)     06 January 2010

No the basic amount cannot be less than the HRA

Computation of salary

1) Basic is 30-50% of CTC not more than that.
2) HRA is taken 40% of Basic(for non Metros) and 50% for Metros, as it is the HRA exemption limit as per tax.
But if you want to pay less p.f then you may deduct 12% p.f on the basic amount of Rs.6500 (min amount on which P.F can be deducted ), whereby the p.f liability will decline from the employer side & the employee side.

Ravindra R. Wankhede (Manager)     06 January 2010

You cannot deny the wages less than Minimum wages. Please note that PF authority insist for Books of account which reveals every aspect of Salary/wages. The Max. ceiling of Basic for PF deduction is Rs. 6500/-


1 Like

V. VASUDEVAN (LEGAL COUNSEL)     06 January 2010

 I agree with Mr. Ravidra wakade.


Raj Kumar Makkad (Adv P & H High Court Chandigarh)     06 January 2010

The quarry is illegal itself. law is nothing but a common sense. How an employee getting basic salary of mere Rs. 2000/- is expected to live in a house of Rs. 9,000/- per month?????


HRA means almost equal to the amount employee has to pay on his rent of residential house. So company cannot be allowed to adopt such void and illegal practice under payment of wages Act as well as by EPF officials.

manishvansh1 (n/a)     09 January 2010

Dear sir's,

plz any one can tell me that the %age of basic for daily wages workers

e.g. minimum wages of punjab is 130.70/day

in that case what will be the Basic and Hra 

Thanks and Regards,

Manish Sharma




Ravindra R. Wankhede (Manager)     09 January 2010

First please understand the defination of Minimum Wages.  For clarification please refer 1999 CLR 537 SC Airfreight Ltd Vs. State of Karnnataka


Vijayarajan (Executive Director)     22 January 2010

Intersting answers to interesting query. But if amanagement does a similar thing subject to the mininimum basic wages as per MW act, and the entire balance to HRA or some other account what is the remedy? Is their any previous case or orders?


The company should follow the  minimum wages act. According to the act, the employer has to pay. If the wages itself is according to law then the HRA is also to be paid according to law. In my opinion there is no provision for the min or max payment for HRA. If so please let me know

Tapan Amoria (Manager H.R.)     13 June 2010

Please note that basic wages does not mean the minimum wages therefore it is not compulsory for the company to fix the basic salary at the level of minimum wages. It is perfectly legal for the company to fix the basic wages at the rate lower than the minimum wages and pays other allowances.Moreover P.F. authorities can not make enquiry related to minimum wages it has to be enquired by Labour office only.

Now the point whether company can pay Rs. 2000 as basic pay and Rs. 9000 as  H.R.A. is legal or not in my opinion it appears to unreasonable but not illegal. 

Sarjooram Sharma (Assistant Labour commissioner)     13 June 2010

This also a kind of unfair labout pratice adopted by many employers. If basic and vda is kept at very low, the subsequent benefits such as bonus, EPF, Gratuity all are affected. In this connection, it is suggested that the wages which defined under payment of wages act 1936 should not be less than the prescribed Minimum wages. In this way the so many allowance which have been excluded from the definition of wages should be excluded while assessing the minimum wages. A case decided by Hon'ble Suprem Court is worth perusable which is annexed herewith.

Attached File : 57 57 air freight courier vs state of karnataka.doc downloaded: 206 times

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