employees salary structure need to be revised from April 1st 2021 as per new wage code

Wage Code – Expected to implement from New Financial year – (April 1st , 2021)

Mandatory to look and compare existing wage structure which may be needed to revise as per new wage rules.

The new Wage code subsume of four Acts

Minimum Wages

Payment of Wages Act

Payment Of Bonus Act

Equal Remuneration Act.

Here I am analyzing and talking about a definition of wages which defines in the notified Gazette under “y”

By this definition employer and employees both would be affected.

Though, those employee’s take home pay will be reduced as compare to existing still they would be more benefited in long terms as compare to existing salary structure.

Another side, Now Employer have to take care mandatory that employee’s basic + da never less than 50% of total CTC

Also, Now for all the statutory benefits calculation base wages would apply according to this definition for like PF, Gratuity, Bonus etc.

As per New wage code Definition

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(y) “wages” means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would,if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,—

(i) basic pay;

(ii) dearness allowance; and

(iii) retaining allowance, if any,

but does not include––

(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;

(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;

(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;

(d) any conveyance allowance or the value of any travelling concession;

(e) any sum paid to the employed person to defray special expenses entaile don him by the nature of his employment;

(f) house rent allowance;

(g) remuneration payable under any award or settlement between the parties or order of a court or Tribunal;

(h) any overtime allowance;

(i) any commission payable to the employee;

(j) any gratuity payable on the termination of employment;

(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:

Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent. as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such14 of 1947. 42 of 2005.one-half, or the per cent.

so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause: Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f),(g)and(h) shall be taken for computation of wage.

Explanation.––Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. of the total wages payable to him, shall be deemed to form part of the wages of such employee;

IN SUMMARY

In Conclusion

Wages means

  1. Basic + DA and retaining allowance if any
  2. All other allowances whether Special allowance, other allowance etc.

Will be considered part of salary/wages which not mentioned a to i

( i.e Bonus, HRA, PF and pension employer share, Conveyance allowance, overtime , commission or incentive)

  • If exclusions total (( i.e Bonus, HRA, PF and pension employer share, Conveyance allowance, overtime , commission or incentive) exceeds 50% of Basic + DA then exceeds part would be consider part of wages and need to be modify in salary structure.

Understand by an Examples

ParticularsExisting StructureRevised Structure
 Rs.Rs.
Basic75008650
HRA37503750
Medical Allowance  
Internet & Telephone Allowance5000
Conveyance Allowance30002850
Other Allowance5000
   
Bonus advance583583
ESI Employer Share00
Pf employer share13801380
Gross Salary1525015250
Total of exclutions87138563
%  
Total CTC1721317213
   
Take home1387013870
 50.62%49.75%
Exclusion 8713 more than 50% of CTC
also Basic less than 50% of total ctc

*For few cases may be employee’s take home will reduced. This will vary case to case. Need to deep scrutinizes and revise case to case.

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