What is statutory wage/ salary?
Statutory wage means wage as defined under various labour enactments. Different Acts have defined wages/salary differently. But almost all Acts have included the Basic Wage and Dearness allowance as part of wages/ salary. For instance, section 2(h) of the Minimum Wages Act, 1948, wages means an all inclusive remuneration payable to a worker as per the terms of contract of employment and includes house rent allowance. However, wage as per the said Act does not include any other facilities or amenity like rental value of house accommodation given to the employee, electricity or water bills paid in respect of them or medical attention given to them, special allowance paid to defray special expenses entailed on an employee or a class of employees by the nature of his or their nature of employment or any travel allowance or concession paid. Certainly, any contribution payable by the employer towards Provident or Pension Fund, Employees State Insurance, amount payable as bonus or amount payable as gratuity at the time of discharge of the employees is also not part of wages/ salary. The latter part is common under all legislations whereas under the CTC concept of salary fixation all contributions payable by the employer in respect of an employee is included in the salary or the so called Cost To Company.
Section 2(iv) of the Payment of Wages Act, 1936, also defines the wages in the similar manner by including all amounts payable as per contract of employment. Section 2(rr) of the Industrial Disputes Act, however, includes in wages the value of house accommodation, supply of water and electricity, medical attendance or other amenity like value of concessional supply of food grains, travelling concession and any commission payable on the promotion of business.
Section 2 (s) of the Payment of Gratuity Act, 1972, excludes all allowances like HRA, travelling allowance etc from wages. Section 3(n) of the Maternity Benefit Act, 1961, includes HRA and value of food grains in wages. However, section 2(21) of the Payment of Bonus Act, 1965, excludes all allowances other than dearness allowance from wages.
The scheme 29(3) of the Employees Provident Funds Schemes, 1952, requires that provident fund contributions shall be on basic wages, dearness allowances, retaining allowance and value of food concessions payable to the employees. At the same time, section 2(22) of the Employees State Insurance Act, 1948, includes in wages all allowances which are paid in intervals of not exceeding two months. Though the treatment of travelling allowance has been a subject of dispute, its inclusion for coverage and contribution are being regulated by court ruling and separate notifications. However, the frequency of its payment and the nature of its payment as to whether as part of contract of employment or as reimbursement are also determining factors.
In short the two basic components of salary which should be treated as salary for the purpose any Act concerned are the Basic wage and the Dearness Allowance. It is accordingly that the appropriate authorities under the Minimum Wages Act fix the minimum rates of wages. As such there is expected to have a basic rate of wage and a dearness allowance variable according to changes in the consumer price index. However, in many establishments the practice of paying variable dearness allowance (VDA) is not present. They pay under different heads like, Basic, HRA, Conveyance etc. Under such pay scales, the only component which qualifies all the tests of a statutory salary would be basic salary. This is often done with a view to reducing the employer’s burden of payment of bonus, gratuity, provident fund contribution etc.
An Illegal Practise...
The minimum wage as per the Minimum Wages Act is expected to include a basic rate and a dearness allowance which is adjustable according to the changes in cost of living indices. However, the employer is said to comply with the Act even if he is not paying DA under a separate head but the total pay is an all inclusive amount at par with or higher than the basic and DA as per the Minimum Wages Act. This was supported in the ruling by the Apex Court in Airfreight Ltd Vs. State of Karnataka. Therefore, an employer can split the total salary into basic salary, HRA, Conveyance, washing allowances etc and thereby can reduce his burden of payment of contribution to EPF, Bonus and Gratuity. In many instances the basic salary is kept at a very lower level and the major portion of salary would be in the form of HRA, conveyance allowance and even washing allowances!
courtesy :- TK sir..
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