Dear Seniors Whether Minimum wages is covered for the PF contribution. Regards askforsatya
From India, Hyderabad
14From India, Hyderabad
Hi,
By Minimum Wage, I suppose you mean the Statutory Minimum Wage (SMW) for a given schedule of industry for a given region, as provided under The Minimum Wages Act 1936. It is the Basic Wage PLUS the Dearness Allowance component that forms the basis for computing Provident Fund Contribution.
Now, SMW has essentially two components viz: Minimum Rate of Wage and a Special Allowance. The concerned law does NOT stipulate payment of any other allowances. It is a popular misconception that these two are indeed the Basic Wage and Dearness Allowance. There is no law that defines these terms or requires payment of structured wages.
It is true that the Dearness Allowance (where paid) is a variable component of the total wage and being linked to cost of living index for the region it fluctuates in tune with the movement of the Cost of Living Index. The same is applicable to the Special Allowance also, but it fluctuates every six months.
The Minimum Wages Act merely requires that whatever the structure of wages paid by an employer, the total of elements (permissible in the definition of wage-Sec. 2-h) of the act may never be less than the total of Minimum Rate of Wage and Special Allowance.
Kindly study the act and practices in industry before you make decisions as, developing own structure has an advantage of keeping the (Basic +DA) component reasonably low to save on burden of PF contributions.
Whatever the structure the (Basic Wage+DA) component of wage upto Rs. 6500/- p.m. (presently) has to be the basis for Provident Fund contributions. There are additional provisions re. PF that you must know, but I'll explain when you desire or when appropriate.
Clear?
Regards
samvedan
June 20, 2006
From India, Pune
By Minimum Wage, I suppose you mean the Statutory Minimum Wage (SMW) for a given schedule of industry for a given region, as provided under The Minimum Wages Act 1936. It is the Basic Wage PLUS the Dearness Allowance component that forms the basis for computing Provident Fund Contribution.
Now, SMW has essentially two components viz: Minimum Rate of Wage and a Special Allowance. The concerned law does NOT stipulate payment of any other allowances. It is a popular misconception that these two are indeed the Basic Wage and Dearness Allowance. There is no law that defines these terms or requires payment of structured wages.
It is true that the Dearness Allowance (where paid) is a variable component of the total wage and being linked to cost of living index for the region it fluctuates in tune with the movement of the Cost of Living Index. The same is applicable to the Special Allowance also, but it fluctuates every six months.
The Minimum Wages Act merely requires that whatever the structure of wages paid by an employer, the total of elements (permissible in the definition of wage-Sec. 2-h) of the act may never be less than the total of Minimum Rate of Wage and Special Allowance.
Kindly study the act and practices in industry before you make decisions as, developing own structure has an advantage of keeping the (Basic +DA) component reasonably low to save on burden of PF contributions.
Whatever the structure the (Basic Wage+DA) component of wage upto Rs. 6500/- p.m. (presently) has to be the basis for Provident Fund contributions. There are additional provisions re. PF that you must know, but I'll explain when you desire or when appropriate.
Clear?
Regards
samvedan
June 20, 2006
From India, Pune
Dear Satya, Minimum Wages as per the Act which comes out twice every year is covered by PF. In West Bengal the whole amount is taken in PF calculation. Regrads, SC
From India, Thane
From India, Thane
Dear Samavedan
Minimum wages act applicable for EPF to the extend of Basic wages
supreme court judgment in the matter of Air freight Ltd Vs state of Karnataka it was held that the package of salary payable to the employee is the minimum wages irrespective of basic and D.A. etc..
kindly give us comments
From India, Hyderabad
Minimum wages act applicable for EPF to the extend of Basic wages
supreme court judgment in the matter of Air freight Ltd Vs state of Karnataka it was held that the package of salary payable to the employee is the minimum wages irrespective of basic and D.A. etc..
kindly give us comments
From India, Hyderabad
Hi,
Minimum Wages Act is a normative legislation whereas the Employees Provident Fund and (Misc Prvisions) Act is an establishment legislation.
I'll explain.
Under the Minimum Wages Act the appropriate government decides minimum wages payable to various skills in different industries in different parts of the state. It has, like I said earlier two components. These are "Minimum Rate of Wage or MRW" and "Special Allowance or SA". The MRW is NOT Basic Wage UNLESS the employer says so and the SA is NOT Dearness Allowance UNLESS the employer says so. The law enforcement agencies, somehow force and coax the employers to treat the MRW as Basic Wage and the SA as the Dearnes Allowance. This is wholly wrong. And this is what was put to test in the said matter you have rightly cited.
In that case the issue was whether, despite the wage paid by the employer was higher than the Statutory Minimum Wage, whether any variable payment by way of SA or DA was mandatory to be paid. While answering the proposition in the negative, the Supreme Court clarified that if the wage structure adopted by the employer comprised components permitted by the definition of "wage" under the Minimum Wages Act and its total was greater than the Statutory Minimum Wage, it was perfectly in order.
Now let us understand the EPF. This act is applicable to any establishment stipulated under it (whether such an establishment paid Minimum Wage or NOT). This act further states that only the employees drawing Baisc Wage PLUS DA less than Rs. 6500/- p.m. were to be covered under the act. Kindly do NOT confuse yourself by the terms used in the Minimum Wages Act and this act.
The EPF act does NOT require an employer to adopt any mandatory structure of wages of components. Some employers may NOT use the components like Basic Wage and/or DA. They may only have a salary and a few other allowance. In such a case it is the "salary" that will attract PF. In another case, some employer may not have any break up of salary paid to employees at all. In such case the total salary will attract PF. Therefore it is advisable to have a break up of salary structure. If you keep the Basic Wage PLUS DA component to about 40% to 50% of the total wage, it will be considered reasonable. This way you may rationalize the wage structure and also save by paying PF contribution on just about 40% or 50% of the total wage.
Are you clear now? Coverage under PF has more facets that one must understand. I have not touched upon these as it is isn't necessary here!
Regards
samvedan
June 21, 2006
From India, Pune
Minimum Wages Act is a normative legislation whereas the Employees Provident Fund and (Misc Prvisions) Act is an establishment legislation.
I'll explain.
Under the Minimum Wages Act the appropriate government decides minimum wages payable to various skills in different industries in different parts of the state. It has, like I said earlier two components. These are "Minimum Rate of Wage or MRW" and "Special Allowance or SA". The MRW is NOT Basic Wage UNLESS the employer says so and the SA is NOT Dearness Allowance UNLESS the employer says so. The law enforcement agencies, somehow force and coax the employers to treat the MRW as Basic Wage and the SA as the Dearnes Allowance. This is wholly wrong. And this is what was put to test in the said matter you have rightly cited.
In that case the issue was whether, despite the wage paid by the employer was higher than the Statutory Minimum Wage, whether any variable payment by way of SA or DA was mandatory to be paid. While answering the proposition in the negative, the Supreme Court clarified that if the wage structure adopted by the employer comprised components permitted by the definition of "wage" under the Minimum Wages Act and its total was greater than the Statutory Minimum Wage, it was perfectly in order.
Now let us understand the EPF. This act is applicable to any establishment stipulated under it (whether such an establishment paid Minimum Wage or NOT). This act further states that only the employees drawing Baisc Wage PLUS DA less than Rs. 6500/- p.m. were to be covered under the act. Kindly do NOT confuse yourself by the terms used in the Minimum Wages Act and this act.
The EPF act does NOT require an employer to adopt any mandatory structure of wages of components. Some employers may NOT use the components like Basic Wage and/or DA. They may only have a salary and a few other allowance. In such a case it is the "salary" that will attract PF. In another case, some employer may not have any break up of salary paid to employees at all. In such case the total salary will attract PF. Therefore it is advisable to have a break up of salary structure. If you keep the Basic Wage PLUS DA component to about 40% to 50% of the total wage, it will be considered reasonable. This way you may rationalize the wage structure and also save by paying PF contribution on just about 40% or 50% of the total wage.
Are you clear now? Coverage under PF has more facets that one must understand. I have not touched upon these as it is isn't necessary here!
Regards
samvedan
June 21, 2006
From India, Pune
Hi Samvedan,
Wow..that was in depth:)
I have asked this question before but no answers:
How is a single linked DA calculated and how is a double linked DA calculated?What are the benefits of single linked DA.
Could u plesae explain with an example....thanks in advance:)
From India, Mumbai
Wow..that was in depth:)
I have asked this question before but no answers:
How is a single linked DA calculated and how is a double linked DA calculated?What are the benefits of single linked DA.
Could u plesae explain with an example....thanks in advance:)
From India, Mumbai
Hi,
DA as every one knows came into existence when the inflation and the cost of living rose so sharp (due to greater resources being spent for defence prodiction affecting adversely production and availability of goods and services for human consumption) that the rulers then had to evolve a "novel'(!) concept in installing a system of payment "related to the prevailing cost of living".
That is why DA is known to "neutralize the rising cost of living" for the employees (salary/wage earners).
This means that some part of your total wage/salary will be linked to the cost of living index (published by the government).
What started with best of intentions, has now reached alarming proportions. The method is simple and generally goes like this:
1) The parties select a particular series of cost of living index series and agree that the present wage is adequate at a particular index level, say 200.
2) Then the parties further agree that for every rise of "x" points in the index, the employees would get certain amount in addition to the wage. So over a period of time as the index keeps on rising, the employees keep on getting more and more money in their pay packets.
3) This is a single linked syatem of DA, as it is only linked to one factor-the index.
4) Clever Unions, by some superlative bargaining with their employers created an additional linkage i.e. to the baisc wage of each employee.
5) This system says that the compensation linked to the index will change as per the slabs of basic wage of the employees.
Let me explain. Consider two employees A and B, drawing basic wages of Rs. 100/- pm and Rs. 200/- pm. Assume that the compensation per slab of TEN points is Rs. 10/- pd above base slab of 200. Assume further that the current index level is 300.
Now, in the same month, the monthly DA payment to A an B in a single link system will be Rs. 100/- each
But if there was a double link system-linking DA payment both to the index and to the basic wage, then the scenarion would be, "Upto a basic wage of Rs. 100/- the compensation for rising costs will be @ Rs. 10/- per slab of TEN points as before and for higher basic wage, in excess of Rs. 100/- pm it would be Rs. 15/-pd
In such a situation, A will get DA of Rs. 100/- as above, but now B will get DA of Rs. 100/-PLUS Rs. 150/- (Total of Rs. 250/-) The Rs. 150 coming from the compensation rate of Rs. 15/- per slab rise of TEN points above index level of 200
See how one would benefit in a double link DA system (and how the employer will continue to suffer?)
Kindly do not look at the figures. They are used only to highlight the difference between the two systems. In reality things couldbe WORSE!
I hope your querry is answereed.
Regards
samvedan
November 24, 2006
From India, Pune
DA as every one knows came into existence when the inflation and the cost of living rose so sharp (due to greater resources being spent for defence prodiction affecting adversely production and availability of goods and services for human consumption) that the rulers then had to evolve a "novel'(!) concept in installing a system of payment "related to the prevailing cost of living".
That is why DA is known to "neutralize the rising cost of living" for the employees (salary/wage earners).
This means that some part of your total wage/salary will be linked to the cost of living index (published by the government).
What started with best of intentions, has now reached alarming proportions. The method is simple and generally goes like this:
1) The parties select a particular series of cost of living index series and agree that the present wage is adequate at a particular index level, say 200.
2) Then the parties further agree that for every rise of "x" points in the index, the employees would get certain amount in addition to the wage. So over a period of time as the index keeps on rising, the employees keep on getting more and more money in their pay packets.
3) This is a single linked syatem of DA, as it is only linked to one factor-the index.
4) Clever Unions, by some superlative bargaining with their employers created an additional linkage i.e. to the baisc wage of each employee.
5) This system says that the compensation linked to the index will change as per the slabs of basic wage of the employees.
Let me explain. Consider two employees A and B, drawing basic wages of Rs. 100/- pm and Rs. 200/- pm. Assume that the compensation per slab of TEN points is Rs. 10/- pd above base slab of 200. Assume further that the current index level is 300.
Now, in the same month, the monthly DA payment to A an B in a single link system will be Rs. 100/- each
But if there was a double link system-linking DA payment both to the index and to the basic wage, then the scenarion would be, "Upto a basic wage of Rs. 100/- the compensation for rising costs will be @ Rs. 10/- per slab of TEN points as before and for higher basic wage, in excess of Rs. 100/- pm it would be Rs. 15/-pd
In such a situation, A will get DA of Rs. 100/- as above, but now B will get DA of Rs. 100/-PLUS Rs. 150/- (Total of Rs. 250/-) The Rs. 150 coming from the compensation rate of Rs. 15/- per slab rise of TEN points above index level of 200
See how one would benefit in a double link DA system (and how the employer will continue to suffer?)
Kindly do not look at the figures. They are used only to highlight the difference between the two systems. In reality things couldbe WORSE!
I hope your querry is answereed.
Regards
samvedan
November 24, 2006
From India, Pune
Whether consequent to supreme court judgements on contract employees, is it right to say so long their is contract of employment and the employee knows about his eligibility like PF etc, can the department say that the basic componets should be minimum and equal to Minimum wage act. Here, certain officials taking the view that PF is a social security legislatiation and the employee should get maximum benefit. In my view the act does not provide any minimum Basic in PF, only the maximum of Rs,6500/- is fixed. In my view anything basic from 0-6500 covered under contract of employment is still within the preview of the act, unless the act is get amended like ESIC, what is basic componemtn minimum
gk
From India, Madras
gk
From India, Madras
If an employee is getting salary/wages more than the notified Minimum Wages, but employer is deducting EPF contribution less than notified Minimum Wages, is employer is bound to deduct the EPF on more than or equal to Minimum Wages.
M.G.Rabbani
From India, Surat
M.G.Rabbani
From India, Surat
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Delhi - Minimum Wages w.e.f. 01.10.2012 (1).pdf
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