New Wage Rules w.e.f. 01/04/2021

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Ashwani Narnoli (Querist)
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16 March 2021 Whether new salary / wage rule is effective from 1st April, 2021 in which Basic Salary has to be 50% of Total Salary ??

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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04 August 2024 The concept of having basic salary as 50% of total salary is a recommendation that has been discussed in the context of employee compensation structures in India. However, as of April 1, 2021, there is no specific new wage rule mandated by the government or any regulatory authority that requires basic salary to be exactly 50% of total salary across all industries or sectors.

Here’s the clarification:

1. **Basic Salary and Total Salary Components:** Typically, an ideal salary structure is recommended to have basic salary as a significant portion of the total salary package. This is because certain statutory benefits such as provident fund contributions and gratuity calculations are based on the basic salary component.

2. **Government Recommendations:** Various government bodies and committees have recommended that employers should ensure basic salary constitutes a higher percentage of the total salary package to provide adequate social security benefits to employees.

3. **Impact of Recommendations:** While these recommendations are advisory in nature and encourage fair compensation practices, they are not enforceable as a strict rule. Employers have the flexibility to structure salaries based on their industry standards, business requirements, and negotiations with employees.

4. **Legal Compliance:** Employers must comply with minimum wage laws and statutory requirements applicable in their respective industries, which often specify minimum wages based on region, type of employment, and other factors. These laws do not necessarily mandate a specific proportion for basic salary as 50% of total salary.

In conclusion, as of April 1, 2021, there is no new wage rule enforced by the government in India requiring basic salary to be exactly 50% of total salary. It remains advisable for employers to structure salaries in a manner that balances compliance with statutory requirements and fair compensation practices, while considering the recommendations for a higher basic salary component for employee welfare.