B. Earning Components | 2. Minimum Wages
Minimum Wages refer to the minimum basic salary that an employer is legally required to pay an employee. These rates are determined and regulated by the respective State Governments and are typically revised once every year.
💡 How Minimum Wages Impact Basic Salary Calculation:
When calculating salary breakup, Basic Salary is usually considered as:
- 60% of Gross Salary for employees in metro cities, and
- 50% of Gross Salary for those in non-metro cities.
However, if the calculated Basic Salary (as per the 50%/60% rule) falls below the applicable State Minimum Wages, then the Minimum Wages amount must be adopted as the Basic Salary, regardless of the percentage-based calculation.
✅ Conclusion:
Basic Salary should be the higher of the following two:
- The prescribed State Minimum Wages, or
- 50%–60% of Gross Salary, depending on location
This ensures compliance with wage laws while aligning with standard salary structuring practices.
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