Dear Shubha,
This circular has no impact on the ceiling limit of Basic Wages, i.e., 6500; hence, it will remain the same at 6500. It is applicable to all types of industries and companies, except for Sick industries, where it remains at 650 (10% of 6500).
Regards,
Pushkar Bisht
From India, Delhi
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33This circular has no impact on the ceiling limit of Basic Wages, i.e., 6500; hence, it will remain the same at 6500. It is applicable to all types of industries and companies, except for Sick industries, where it remains at 650 (10% of 6500).
Regards,
Pushkar Bisht
From India, Delhi
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Whose company is deducting and contributing PF amount more than 6500? What will be the rule for this? If they now decide to cap the deduction at 6500, could this go against Section 12 of the PF Act, which states that an employer cannot reduce wages?
Please share your views.
Regards,
Mukund
From India, Delhi
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Please share your views.
Regards,
Mukund
From India, Delhi
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Dear Mukund,
Deducting PF on actual wages, i.e., for cases above 6500, is under no obligation as it is voluntary, and there is no violation of the law if any employer at any time reduces the contribution back to 6500, which is the minimum PF liabilities for the employer to deduct and remit the contribution. There will be no objection under Section 12 of the PF Act because the PF liabilities of an employer are being maintained as given in Para 26A of the PF scheme.
Regards,
Pushkar Bisht
From India, Delhi
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Deducting PF on actual wages, i.e., for cases above 6500, is under no obligation as it is voluntary, and there is no violation of the law if any employer at any time reduces the contribution back to 6500, which is the minimum PF liabilities for the employer to deduct and remit the contribution. There will be no objection under Section 12 of the PF Act because the PF liabilities of an employer are being maintained as given in Para 26A of the PF scheme.
Regards,
Pushkar Bisht
From India, Delhi
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Dear Pushkar,
In Section 26A, it is clarified that the employee and employer can contribute PF based on ₹6500 (based on some clause). It is not mentioned that the employer can reduce the basic of PF.
In Section 29, it is clarified that the rate of contribution in PF (based on Basic wages, the entire basic), the employee can increase the rate of contribution, but the employer is not forced to increase the rate (12% or 10%). The limitation of basic wages may be reduced at any time, but it is never mentioned.
Please consider if a reduction is possible in the middle of employment, then all companies in India that are paying PF contributions of more than ₹6500 can make decisions. This could be considered malpractice and create difficult relations between employees and employers. The PF Office aims for more contributions in PF and will never allow this type of malpractice.
It is clearly stated in Section 26B that in case of any doubt, the Regional PF Commissioner will have the final say. Hence, we should seek the opinion of the regional commissioner.
I also want to clarify that the decision of the Supreme Court or any apex court is not final. It is subject to review or reconsideration. If anyone is waiting for a decision from the honorable court, it will only happen if the Apex Court issues a stay order to the EPFO. The Apex Court makes decisions based on existing laws.
The guidelines of EPFO dated 30-11-12 only clarify the law (it is not a new law) because some individuals provide incorrect explanations, leading to many allowances for lower basic wages. The PF Office remains silent as there have been no amendments to the law.
If anyone has doubts or views, they should be shared.
Regards,
Mukund
From India, Delhi
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In Section 26A, it is clarified that the employee and employer can contribute PF based on ₹6500 (based on some clause). It is not mentioned that the employer can reduce the basic of PF.
In Section 29, it is clarified that the rate of contribution in PF (based on Basic wages, the entire basic), the employee can increase the rate of contribution, but the employer is not forced to increase the rate (12% or 10%). The limitation of basic wages may be reduced at any time, but it is never mentioned.
Please consider if a reduction is possible in the middle of employment, then all companies in India that are paying PF contributions of more than ₹6500 can make decisions. This could be considered malpractice and create difficult relations between employees and employers. The PF Office aims for more contributions in PF and will never allow this type of malpractice.
It is clearly stated in Section 26B that in case of any doubt, the Regional PF Commissioner will have the final say. Hence, we should seek the opinion of the regional commissioner.
I also want to clarify that the decision of the Supreme Court or any apex court is not final. It is subject to review or reconsideration. If anyone is waiting for a decision from the honorable court, it will only happen if the Apex Court issues a stay order to the EPFO. The Apex Court makes decisions based on existing laws.
The guidelines of EPFO dated 30-11-12 only clarify the law (it is not a new law) because some individuals provide incorrect explanations, leading to many allowances for lower basic wages. The PF Office remains silent as there have been no amendments to the law.
If anyone has doubts or views, they should be shared.
Regards,
Mukund
From India, Delhi
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Dear Mukund,
I would like you to see my point once again in what I have written:
In my post, I have not mentioned the reduction in Basic Wages. I have only mentioned about the minimum contribution, voluntary contribution, and the sections and laws which you have shared are absolutely correct, and I stand by it. The malpractice in reducing back to mandated contribution of PF is being mentioned in your post. I think we will have to see and find any case law where such a scenario is highlighted or raised. I would be grateful if you could share any such cases.
Please share, as the law itself has no section for such cases, and it is just like an open-ended law.
Regards,
Pushkar Bisht
From India, Delhi
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I would like you to see my point once again in what I have written:
In my post, I have not mentioned the reduction in Basic Wages. I have only mentioned about the minimum contribution, voluntary contribution, and the sections and laws which you have shared are absolutely correct, and I stand by it. The malpractice in reducing back to mandated contribution of PF is being mentioned in your post. I think we will have to see and find any case law where such a scenario is highlighted or raised. I would be grateful if you could share any such cases.
Please share, as the law itself has no section for such cases, and it is just like an open-ended law.
Regards,
Pushkar Bisht
From India, Delhi
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Mr. Mukund,
Para 26-A and para 29 deal with different aspects of contribution. Para 26-A deals with the quantum of wages on which an employer is not obliged under the P.F Act to contribute, and Para 29 deals with the rate of contribution on which an employer is not obliged under the P.F Act to contribute. An employee can opt for higher contributions in two ways: 1) by contributing on wages higher than Rs. 6500/- p.m and 2) by increasing the rate of contribution beyond 12%.
Even though an employee contributes more than Rs. 6500/- p.m voluntarily, Para 26-A states that the employer is not obliged to contribute on more than Rs. 6500/- p.m. Similarly, if an employee seeks to contribute at a rate higher than 12% of basic+DA, Para 29 specifies that the employer is not under obligation to contribute more than 12%.
What Sec. 12 prohibits is that the employer cannot reduce the wages of an employee to decrease his liability for payment of contribution. Accordingly, the employer cannot alter the salary structure of the employee by reducing his basic pay or DA, etc., to lessen his liability for payment of contribution. An employer need not resort to this when he is not obligated to contribute on more than Rs. 6500/- p.m or more than 12% thereafter.
Now, the Madhya Pradesh High Court in Surya Roshni's case held that other allowances except HRA, bonus, or O.T. form part of the basic wages and thus qualify for P.F. contribution. It appears that the decision in this case has been appealed against in the Supreme Court. It needs to be confirmed, along with any developments there, to have a clear legal position.
From India, Mumbai
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Para 26-A and para 29 deal with different aspects of contribution. Para 26-A deals with the quantum of wages on which an employer is not obliged under the P.F Act to contribute, and Para 29 deals with the rate of contribution on which an employer is not obliged under the P.F Act to contribute. An employee can opt for higher contributions in two ways: 1) by contributing on wages higher than Rs. 6500/- p.m and 2) by increasing the rate of contribution beyond 12%.
Even though an employee contributes more than Rs. 6500/- p.m voluntarily, Para 26-A states that the employer is not obliged to contribute on more than Rs. 6500/- p.m. Similarly, if an employee seeks to contribute at a rate higher than 12% of basic+DA, Para 29 specifies that the employer is not under obligation to contribute more than 12%.
What Sec. 12 prohibits is that the employer cannot reduce the wages of an employee to decrease his liability for payment of contribution. Accordingly, the employer cannot alter the salary structure of the employee by reducing his basic pay or DA, etc., to lessen his liability for payment of contribution. An employer need not resort to this when he is not obligated to contribute on more than Rs. 6500/- p.m or more than 12% thereafter.
Now, the Madhya Pradesh High Court in Surya Roshni's case held that other allowances except HRA, bonus, or O.T. form part of the basic wages and thus qualify for P.F. contribution. It appears that the decision in this case has been appealed against in the Supreme Court. It needs to be confirmed, along with any developments there, to have a clear legal position.
From India, Mumbai
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There was a newspaper report today that the said circular of EPFO, under discussion in this thread, has been kept in abeyance. If that is so, it will be really deplorable. The said circular was pro-employee insofar as it tried to put an end to the malpractice of some employers to reduce their PF contribution. With a view to keep the employer's contribution as low as possible, some of them were making the basic pay very low and increasing other allowances that do not come under the definition of salary/pay for the purpose of EPF contribution. By this way, they could satisfy the employees that they are not getting lower wages in total. At the same time, they were restricting their contribution to the EPF very low. This, in fact, was reducing the savings of the employees in the EPF, which would otherwise have helped them in difficult times.
From India, Madras
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From India, Madras
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Yes, there seems to be an announcement by Hon'ble Union Minister Mallikarjun that this circular is kept in abeyance.
Now, let's not pass on our judgment on what is right or wrong. It is the law that has to take its course. If an Act is enacted in the parliament with some benefits to employees in mind, if an amendment is required, it is up to them to decide to change or insert some clauses, if any.
No one can take the law into their hands. Indian policies have their own loopholes, and employers/employees take that route without disturbing the same. This means they are right as per the law, and discussions, deliberations, and arguments (at different forums) go on and on. When you look at the employees, yes, they need to save more money to take care of their security in their old age. When you look at the employer, there seem to be huge expenses involved. But certainly not at the cost of each other.
It is basically a question of interpretation of the law by legal experts and turning the issue in their favor. We need to wait and watch. There are already a couple of cases pending at the Supreme Court. There are almost a dozen cases pending in the Madras High Court, likely to be shifted to the Supreme Court for its decision.
Therefore, sending an internal circular by EPFO and them, in turn, sending another circular to the stakeholders, etc. are not required at this point in time. Ultimately, one needs to be clear as to what system an employer has to follow. We need to have patience until then. Unless the pressure gets mounted either by the EPFO or by employers, I do not think any decision will come through in the near future from the Hon'ble Supreme Court too.
V. Balaji
From India, Madras
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Now, let's not pass on our judgment on what is right or wrong. It is the law that has to take its course. If an Act is enacted in the parliament with some benefits to employees in mind, if an amendment is required, it is up to them to decide to change or insert some clauses, if any.
No one can take the law into their hands. Indian policies have their own loopholes, and employers/employees take that route without disturbing the same. This means they are right as per the law, and discussions, deliberations, and arguments (at different forums) go on and on. When you look at the employees, yes, they need to save more money to take care of their security in their old age. When you look at the employer, there seem to be huge expenses involved. But certainly not at the cost of each other.
It is basically a question of interpretation of the law by legal experts and turning the issue in their favor. We need to wait and watch. There are already a couple of cases pending at the Supreme Court. There are almost a dozen cases pending in the Madras High Court, likely to be shifted to the Supreme Court for its decision.
Therefore, sending an internal circular by EPFO and them, in turn, sending another circular to the stakeholders, etc. are not required at this point in time. Ultimately, one needs to be clear as to what system an employer has to follow. We need to have patience until then. Unless the pressure gets mounted either by the EPFO or by employers, I do not think any decision will come through in the near future from the Hon'ble Supreme Court too.
V. Balaji
From India, Madras
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Please find the latest circular.
Latest Updation: Circular withheld by Labour Minister.
PROVIDENT FUND CIRCULAR KEPT IN ABEYANCE: LABOUR MINISTER
Union Labour and Employment Minister Mallikarjun Kharge on December 13, 2012, stated that the Circular dated November 30, 2012, regarding Guidelines for Quasi-judicial proceedings under section 7A of the EPF & MP Act, 1952 issued by the EPFO, on the inclusion of certain allowances, etc., for calculating Provident Fund contributions, is to be kept in abeyance. Therefore, the status quo will continue.
Editor
LABOUR LAW REPORTER
A-43, Lajpat Nagar-2, New Delhi - 110 024.
Ph. 011-29830000, 29840000
E-mail:
Website: Labour Law Reporter
Labour Law Reporter always keeps you ahead of others.
Eswar
From India, Chennai
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Latest Updation: Circular withheld by Labour Minister.
PROVIDENT FUND CIRCULAR KEPT IN ABEYANCE: LABOUR MINISTER
Union Labour and Employment Minister Mallikarjun Kharge on December 13, 2012, stated that the Circular dated November 30, 2012, regarding Guidelines for Quasi-judicial proceedings under section 7A of the EPF & MP Act, 1952 issued by the EPFO, on the inclusion of certain allowances, etc., for calculating Provident Fund contributions, is to be kept in abeyance. Therefore, the status quo will continue.
Editor
LABOUR LAW REPORTER
A-43, Lajpat Nagar-2, New Delhi - 110 024.
Ph. 011-29830000, 29840000
E-mail:
Website: Labour Law Reporter
Labour Law Reporter always keeps you ahead of others.
Eswar
From India, Chennai
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf