Components of Pay Structures in India

The pay structure of a company depends on several factors such as labour market conditions, company’s paying capacity and legal provisions.
In India, different acts include different items under wages though all the Acts include basic wage and dearness allowance under the term wages. Under the workmen’s compensation act, 1923 wages for leave period, holiday pay, overtime pay, bonus and good conduct bonus form part of wages.
Under the payments of wages act, 1936, section 2(vi) any awards of settlement and production bonus, if paid constitute wages.
Under the payment of wages act 1948, retrenchment compensation payment in lieu of notices and gratuity payable on discharge constitute wages.
However the following types of remuneration if paid do not amount to wages under any of the acts.
1) Bonus or other payments under a profit sharing scheme which do not form a part of contract of employment.
2) Value of any house accommodation supply of light water, medical attendance, travelling allowances, or payment in lieu thereof or any other concession.
3) A sum paid to defray special expenses entailed by the nature of the employment of a workman
4) Any contribution to pension, provident fund or a scheme of social security and social insurance benefits.
5) Any other amenity or service excluded from the computation of wages by general or special order of an appropriate governmental authority.
The term Allowances includes amounts paid in addition to wages over a period of time including holiday pay, overtime pay, bonus, social security benefit etc. The wage structure in India may be examined broadly under the following heads:
Basic wage:
The basic wage in India corresponds with what has been recommended by the Fair wages committee (1948) and the 15th Indian Labour conference (1957). The various awards by wage tribunals, wage boards, pay commission reports and job evaluation also serve as guiding principles in determining basic wage. While deciding the basic wage, the following criteria may be considered : (1) Skills needed for the job (2) Experience needed (3) Difficulty of work; mental as well as physical (4) Training needed (5) Responsibilities involved (6) hazardous nature of job.

Dearness allowance (DA):

It is the allowance paid to employees in order to enable them to face the increasing dearness of essential commodities. It serves as a cushion. A sort of insurance against increase in price levels of commodities. Instead of increasing wages every time there is a rise in price level. DA is paid to neutralize the effects of inflation, when prices go down. DA can always be reduced. This has, however, remained a hypothetical situation as prices never come down to necessitate cut in dearness allowances payable to employees.
DA is linked in India to three factors the index factor, the point factor, and the time factor:
1) All India consumer price index (AICIPI) The labour Bureau Shimla computes the AICPI base 1960= 100 points) from time to time.
2) Time factor: in this case DA is linked to the rise in the All India Consumer Price Index (AICPI) in a related period, instead of linking it to fortnightly or monthly fluctuations in index.
3) Point factor: Here DA rises in line with a rise in the number of index points above a specific level.
4) Other allowances: the list of allowances granted by employers in India has been expanding thanks to the increasing competition in the job market and the growing awareness on the part of employees. An illustrative list of allowances
List of the organized sectors in India:
1) Attendance 2) Books 3) Car 4) Card (Credit card) 5) City Compensatory 6) Club membership 7) Computer 8) Deputation 9) Driver.
Source: HRM

  • Raju Patel

    what is the minimum wages in maharashtra state ?

  • Devendra Arekar

    new mlwf slab

  • Trumanath

    we are a pvt ltd co. and pay our employees basic salary much better than the basic minimum wages stipulated… Now we are in a confusion… is it mandatory to pay Variable DA or we can have a fixed DA for an year….

  • Baaz_servicesbpl28

    What is the break up wages + other allowances