Wages, Compensation and Employee Benefits
Wages, Compensation and Employee Benefits
This domain tests wage concepts, lawful pay components and the calculation of gross pay and benefits. Questions often mix legal minima with pay design.
Core rules
- Minimum wage is statutory; fair wage is industry-linked; living wage supports a decent standard. They are not synonyms.
- Components include basic pay, dearness allowance, house rent allowance, other allowances, bonus and incentives.
- Key statutes include the Payment of Wages Act 1936, Minimum Wages Act 1948, Payment of Bonus Act 1965 and Equal Remuneration Act 1976; the Code on Wages 2019 consolidates these when in force.
- Bonus: eligible employees generally earn up to the prescribed wage ceiling; minimum bonus is 8.33% and maximum 20% of wages.
- Benefits may be statutory (PF, gratuity, ESI) or voluntary (transport, meals, insurance).
Worked example
Basic pay is ₹12,000; DA is 30% of basic (₹3,600); HRA is 40% of basic (₹4,800). Gross pay is ₹20,400. Employer PF at 12% of basic plus DA is 12% × ₹15,600 = ₹1,872. Cost to company includes gross pay plus employer contributions and benefits, not just take-home pay. Deductions must be authorised by law or agreement.
Traps
Do not equate minimum wage with fair wage. Do not calculate PF on gross pay if the statute uses basic plus DA. Do not treat CTC as take-home salary. Unlawful deductions and unpaid overtime are compliance risks.