The recent judgment passed on 28.02.2019 by the Hon’ble Supreme Court in the matter of Regional Provident Fund Commissioner Vs. Vivekananda Vidyamandir and other connected appeals considered the scope of ‘basic wages’ and allowances liable for PF contributions. The said judgment is published under the caption Surya Roshni Ltd.& Ors. vs. The State of Madhya Pradesh EPF RPFC and Ors. 2019 LLR 339 (SC).
Many messages are being circulating on social media with catchy and scary titles like “Supreme Court delivered a landmark and long awaited judgment …. PF is applicable on basic salary plus all allowances, unexpected judgment”.
To clarify the position of law, I have drafted an article, titled as
Interpretation of term ‘basic wages’ of EPF & MP Act, 1952 and Impact of recent judgment of Supreme Court delivered in Surya Roshni Ltd v. EPFO, 2019 LLR 339 (SC)
Copy of Article is attached.
From India, Ludhiana
10Many messages are being circulating on social media with catchy and scary titles like “Supreme Court delivered a landmark and long awaited judgment …. PF is applicable on basic salary plus all allowances, unexpected judgment”.
To clarify the position of law, I have drafted an article, titled as
Interpretation of term ‘basic wages’ of EPF & MP Act, 1952 and Impact of recent judgment of Supreme Court delivered in Surya Roshni Ltd v. EPFO, 2019 LLR 339 (SC)
Copy of Article is attached.
From India, Ludhiana
Dear Mr. Punit Gupta
Thanks for sharing detailed analysis.
Crux is don't get confused by title of "allowance", but consider the type of allowance. i.e. form where it flows, how it is linked, who all receive it and when and how does it is being paid?
Is it a universal (paid to all) flat (non variable from person to person), permanent, kind of regular (mandatory), ordinary and necessary component of wages?
If yes, it is part of standard wages hence it has to be considered as part of Basic wages.
The term Basic wages if analysed in detailed , implies that the wages which are standard, universal, necessary and ordinarily paid.
As rightly mentioned if the current Basic wage is exceeding Rs. 15,000/- and PF is already being deducted on this amount there is no further liability to include allowances even if applicable as per set precedence of the law through judgement on Bridge & roof and Manipal academy and again ratified in current judgement in six different appeals.
The larger implication could be in terms of contract labors, as large number of them are likely to be below the ceiling if Rs. 15,000/- and there could be more possibilities of subterfuge and camouflaging.
Principal Employers may requires to look into the matter to ensure contractors engaged by them do comply with the applicable principles with respect to interpretation of the term "Basic Wage" and do contribute/deduct the PF amount accordingly.
EPFO may come with some clarification or instructions in this regard as to address emerged anxiety and confusion among member employer.There is no need to make haste, but proceed with having due diligence and preoccupations considering all possible implications.
Shailesh Parikh
99 98 97 10 65
Vadodara
From India, Mumbai
Thanks for sharing detailed analysis.
Crux is don't get confused by title of "allowance", but consider the type of allowance. i.e. form where it flows, how it is linked, who all receive it and when and how does it is being paid?
Is it a universal (paid to all) flat (non variable from person to person), permanent, kind of regular (mandatory), ordinary and necessary component of wages?
If yes, it is part of standard wages hence it has to be considered as part of Basic wages.
The term Basic wages if analysed in detailed , implies that the wages which are standard, universal, necessary and ordinarily paid.
As rightly mentioned if the current Basic wage is exceeding Rs. 15,000/- and PF is already being deducted on this amount there is no further liability to include allowances even if applicable as per set precedence of the law through judgement on Bridge & roof and Manipal academy and again ratified in current judgement in six different appeals.
The larger implication could be in terms of contract labors, as large number of them are likely to be below the ceiling if Rs. 15,000/- and there could be more possibilities of subterfuge and camouflaging.
Principal Employers may requires to look into the matter to ensure contractors engaged by them do comply with the applicable principles with respect to interpretation of the term "Basic Wage" and do contribute/deduct the PF amount accordingly.
EPFO may come with some clarification or instructions in this regard as to address emerged anxiety and confusion among member employer.There is no need to make haste, but proceed with having due diligence and preoccupations considering all possible implications.
Shailesh Parikh
99 98 97 10 65
Vadodara
From India, Mumbai
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