Dear Members,
As you are well aware about the huge MW hike in Delhi, subsequent court verdict and revised MW issued by the Delhi Govt wef 01st Oct'2018. I deal with huge manpower cost all over India (through various sub-contracts and outsourced agencies). The Third Party provide the services on basis of fixed Service Charge on the monthly actual CTC. Delhi Region Projects have huge manpower cost (due to the revision). Before I put my query I would like to share the step by step points:-
1 The Delhi Govt has declared notification for interim MW Revision wef 03.03.2017 with huge hike of 37%.
2 The revision has been challenged by many Associations and Hon’ble HC put “STAY” on the revision in respect of the members of the Associations. The Associations submitted that the Advisory Committee has not followed the proper process and it is contravention of principles of Natural Justice. But the Delhi Govt implemented the rates for the establishments who are working in associations with the various divisions of Delhi Govt.
3 The rate (revised vide notification dated 03rd Mar’2017) has been quashed by the Hon’ble HC vide order dated 04th Aug’18 and than previous rate become applicable.
4 The HC decision declared on 04th Aug. 2018, meanwhile the Delhi Govt Labour Office has issued two more notifications (being implemented wef 01.04.17 and 01.04.18).
5 After the HC verdict many establishments / employers switched the wages which were applicable prior to 03rd Mar’2017, even ignored the notifications of 01.04.17 and 01.04.18.
6 Though the Delhi Govt has put the case in Supreme Court which is under hearing and final decision is awaited.
7 Meanwhile to make it more clear the Labour Off., Delhi Govt has issued another MW notification wherein the impact of “Interim Rate Revision Notification of 03rd Mar’17” has been removed. They considered the rates which were applicable prior to 03.03.2017 and added the impact of two notifications (being implemented wef 01.04.17, and 01.04.18, .
Now my main concern is whether we can reduce the Basic Wages for PF, ESI and Bonus calculation. Coz we have been paying the Basic as per MW Act Notification. Now the Appropriate Govt itself has issued revised MW Notification with reduced Basic wages. As per Payment Of Wages Act, we can’t reduce employee salary, but can we reduce the Basic wages? So that statutory cost can be reduced.
I need expert opinion and advice on the matter, pls help me.
From India, Delhi
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238As you are well aware about the huge MW hike in Delhi, subsequent court verdict and revised MW issued by the Delhi Govt wef 01st Oct'2018. I deal with huge manpower cost all over India (through various sub-contracts and outsourced agencies). The Third Party provide the services on basis of fixed Service Charge on the monthly actual CTC. Delhi Region Projects have huge manpower cost (due to the revision). Before I put my query I would like to share the step by step points:-
1 The Delhi Govt has declared notification for interim MW Revision wef 03.03.2017 with huge hike of 37%.
2 The revision has been challenged by many Associations and Hon’ble HC put “STAY” on the revision in respect of the members of the Associations. The Associations submitted that the Advisory Committee has not followed the proper process and it is contravention of principles of Natural Justice. But the Delhi Govt implemented the rates for the establishments who are working in associations with the various divisions of Delhi Govt.
3 The rate (revised vide notification dated 03rd Mar’2017) has been quashed by the Hon’ble HC vide order dated 04th Aug’18 and than previous rate become applicable.
4 The HC decision declared on 04th Aug. 2018, meanwhile the Delhi Govt Labour Office has issued two more notifications (being implemented wef 01.04.17 and 01.04.18).
5 After the HC verdict many establishments / employers switched the wages which were applicable prior to 03rd Mar’2017, even ignored the notifications of 01.04.17 and 01.04.18.
6 Though the Delhi Govt has put the case in Supreme Court which is under hearing and final decision is awaited.
7 Meanwhile to make it more clear the Labour Off., Delhi Govt has issued another MW notification wherein the impact of “Interim Rate Revision Notification of 03rd Mar’17” has been removed. They considered the rates which were applicable prior to 03.03.2017 and added the impact of two notifications (being implemented wef 01.04.17, and 01.04.18, .
Now my main concern is whether we can reduce the Basic Wages for PF, ESI and Bonus calculation. Coz we have been paying the Basic as per MW Act Notification. Now the Appropriate Govt itself has issued revised MW Notification with reduced Basic wages. As per Payment Of Wages Act, we can’t reduce employee salary, but can we reduce the Basic wages? So that statutory cost can be reduced.
I need expert opinion and advice on the matter, pls help me.
From India, Delhi
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Ideally, if HC has stayed, then you can certainly reduce the payment as per the previous Basic + DA rate. However, if HC agrees to the same rate again, then you may have to pay all dues with arrears and penalties specified in particular acts.
From India, Pune
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From India, Pune
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It is not only the basic wages but the entire salary that is changed or reduced due to the quashing of the government notification. In such a scenario, you can also reduce the salary, including the basic salary. When you have been revising the salary, whenever there is an increase, you have every right to reduce it when there is a decrease. The intention of Section 12 of the EPF & MP Act is to restrict the act of employers reducing their burden of payment of contributions. Moreover, this situation applies to all establishments, and as such, there is nothing wrong with reducing the salary and thereby reducing the contributions.
From India, Kannur
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From India, Kannur
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Hi Mr. Madhu,
We are not going to reduce anybody's wages because it has been around 1.5 years since the wages increased. Everyone has made their budget based on the higher wages. Any reduction will create an unrest situation among the workers. Moreover, in most cases, we pay more than the minimum wage in the form of allowances.
However, basic wages directly lead to other costs as well. Therefore, in order to optimize costs, I wanted to inquire about the above so that we can save to some extent on statutory costs.
To safeguard ourselves and our subcontractors, can we submit a letter (through the various subcontractors) to the PF Office stating, "Keeping in view the latest notification, the basic wages for PF have been revised as per the Minimum Wage Act"? Or can we implement the revised basic wages on our own without notifying the relevant authorities?
In case of any disputes in the future, what documents can we produce in our favor?
Thank you.
From India, Delhi
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We are not going to reduce anybody's wages because it has been around 1.5 years since the wages increased. Everyone has made their budget based on the higher wages. Any reduction will create an unrest situation among the workers. Moreover, in most cases, we pay more than the minimum wage in the form of allowances.
However, basic wages directly lead to other costs as well. Therefore, in order to optimize costs, I wanted to inquire about the above so that we can save to some extent on statutory costs.
To safeguard ourselves and our subcontractors, can we submit a letter (through the various subcontractors) to the PF Office stating, "Keeping in view the latest notification, the basic wages for PF have been revised as per the Minimum Wage Act"? Or can we implement the revised basic wages on our own without notifying the relevant authorities?
In case of any disputes in the future, what documents can we produce in our favor?
Thank you.
From India, Delhi
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You need not inform the PF authorities about the same because the PF authorities anyway do not have any right to say that you should contribute on the minimum wages or to enforce payment of statutory salary. Though they can demand payment of contribution on gross salary (except HRA), they have no right to say that you are paying less than minimum wages. There are a lot of employments which are not scheduled employments under Minimum Wages Act. Can the PF authorities notify wages for these employments? No.
Now, if there is an employee to whom you are paying only, say, Rs 5000 which is below minimum wages, but you are deducting PF on that 5000, then the PF cannot demand that you should first increase his salary to 10000 or 15000 and then contribute PF on that higher amount. As far as PF authorities are concerned, they can only see whether you are contributing it on the basic salary, which is the total salary as per the definition. If you are paying contribution on the total salary, then PF has no say.
From India, Kannur
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Now, if there is an employee to whom you are paying only, say, Rs 5000 which is below minimum wages, but you are deducting PF on that 5000, then the PF cannot demand that you should first increase his salary to 10000 or 15000 and then contribute PF on that higher amount. As far as PF authorities are concerned, they can only see whether you are contributing it on the basic salary, which is the total salary as per the definition. If you are paying contribution on the total salary, then PF has no say.
From India, Kannur
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What is the impact of the recent SC judgment on PF deduction and contribution on payment of minimum wage, bonus and gratuity
From India
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From India
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The subject of discussion is not on the recent Supreme Court verdict on PF qualifying salary. There are lots of discussions on this in different threads. Therefore, you are requested to follow any of such threads, one of which is available in the following link.
- [Supreme Court Judgement Special Other Allowances](https://www.citehr.com/609535-supreme-court-judgement-special-other-allowances.html)
- [PF Calculation Per New Guidelines Supreme Court](https://www.citehr.com/610705-pf-calculation-per-new-guidelines-supreme-court.html)
- [Provident Fund Qualifying Salary and More](https://madhu-t-k.blogspot.com/2019/03/provident-fund-qualifying-salary-and_6.html)
From India, Kannur
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- [Supreme Court Judgement Special Other Allowances](https://www.citehr.com/609535-supreme-court-judgement-special-other-allowances.html)
- [PF Calculation Per New Guidelines Supreme Court](https://www.citehr.com/610705-pf-calculation-per-new-guidelines-supreme-court.html)
- [Provident Fund Qualifying Salary and More](https://madhu-t-k.blogspot.com/2019/03/provident-fund-qualifying-salary-and_6.html)
From India, Kannur
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