Over the years one of the most common questions I have been asked is
What is the “correct” salary break-up of employees or out-sourced employees covered under minimum wages act?
In this letter, I would be attempting to “de-mystify” all the heads that are applicable to employees / outsourced employees covered under minimum wages act.
I claim to be no expert in this area but by virtue of heading a manpower intensive business and having gone through various inspections do have a fair idea about it. The break-up is supposed to be compliant with ESI, PF, Bonus, Minimum wages amongst other acts.
Let me explain with an example of an ideal break-up of Security Guard in Delhi doing 8 hours of work.
|1||Basic – Minimum Wages||13,584||Minimum wages for Unskilled (non-matriculate) in Delhi|
|2||Relieving Charges @ 16.67 % (for 7th Day of working)||2,264||N.A. for where staff works for 6 days.|
|3||Total Minimum Wages (MW)||15,848|
|4||Leave @ 6.73 % of Total MW||1,067||Total of 37 days leave (CL-12, EL-15, Festivals & national holidays -10)|
|5||PF @ 13.15 % of 60% of Total MW (Basic)||1,369||Our view is you can deduct PF by bifurcating minimum wages into Basic plus other heads as long as Basic is reasonable, say 60% of minimum wages. However service provider cannot claim full PF from client and deposit only on bifurcated amount.|
|6||ESI @ 4.75 % of Total MW||753|
|7||Bonus @ 8.33 % of Total MW||1,320||Minimum bonus payable is 8.33% of minimum wages though terms and conditions apply.|
|8||Uniform Allowance||200||Mandatorily to be given to service providers as they are not supposed to charge the employee for it.|
|10||Service Charges @ 10 % of above||2,056||N.A. for non-service providers and cannot be a unreasonable figure like 2% so as seeming to encourage service provider to cheat.|
The majority of heads remain common whether a person is an outsourced or a direct employee.
By the way, I do not charge this much ???? as most of you guys would not pay.
I hope it helps. Feel free to connect with me if you need any help including how to handle these issues “creatively”? I and/or HOD – Personnel Department will be happy to engage with you / your employee.
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