The new Wages Code, which consolidates four labour laws, has brought about several changes in the way wages are defined and calculated. This has implications for the calculation of EPF wages as well.
The core issue here is the change in the definition of wages under the new code. Previously, various allowances were excluded from the definition of wages, but now, more components are included in the wage definition. This affects the calculation of EPF contributions, which are based on the wages of the employee.
Legally, under the new Wages Code, the definition of wages includes basic pay, dearness allowance, and retaining allowance. If the combined sum of other components like conveyance allowance, house rent allowance, overtime allowance, commission, etc., exceeds 50% of the total remuneration, the amount exceeding 50% will be considered as wages. This has a direct impact on the calculation of EPF wages.
Here's a step-by-step action plan:
1. Review the wage structure of your employees and identify the components that are now included in the definition of wages as per the new code.
2. Recalculate the EPF wages based on the new definition. Remember to include the amount exceeding 50% of total remuneration if the sum of the excluded components exceeds 50%.
3. Update your payroll processes and systems to reflect this change.
4. Communicate the changes to your employees and explain how it impacts their EPF contributions and take-home pay.
Additional tips: Be aware that this change may result in higher EPF contributions for both the employer and the employee. Also, ensure that you comply with all other provisions of the new Wages Code and the EPF Act. Avoid non-compliance as it can lead to penalties.
From India, Gurugram
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135The core issue here is the change in the definition of wages under the new code. Previously, various allowances were excluded from the definition of wages, but now, more components are included in the wage definition. This affects the calculation of EPF contributions, which are based on the wages of the employee.
Legally, under the new Wages Code, the definition of wages includes basic pay, dearness allowance, and retaining allowance. If the combined sum of other components like conveyance allowance, house rent allowance, overtime allowance, commission, etc., exceeds 50% of the total remuneration, the amount exceeding 50% will be considered as wages. This has a direct impact on the calculation of EPF wages.
Here's a step-by-step action plan:
1. Review the wage structure of your employees and identify the components that are now included in the definition of wages as per the new code.
2. Recalculate the EPF wages based on the new definition. Remember to include the amount exceeding 50% of total remuneration if the sum of the excluded components exceeds 50%.
3. Update your payroll processes and systems to reflect this change.
4. Communicate the changes to your employees and explain how it impacts their EPF contributions and take-home pay.
Additional tips: Be aware that this change may result in higher EPF contributions for both the employer and the employee. Also, ensure that you comply with all other provisions of the new Wages Code and the EPF Act. Avoid non-compliance as it can lead to penalties.
From India, Gurugram
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Code on wages (TN) rules 2022.pdf