Dear friends,
There is no act stipulating what should be the basic pay and what the other allowances should be, except in the case of minimum wages and wage revisions notified by the central government and state governments category-wise/industry-wise from time to time. However, this doesn't mean the basic pay should be greater than or less than other allowances. For example, if you study the pattern followed by pay commissions (central and state), banks, etc., FDA/VDA used to be more than double the basic pay. This phenomenon undergoes changes as and when FDA/VDA is merged/absorbed into basic pay during wage settlement agreements, raising it, and VDA is linked to the price index published periodically for further revision, either quarterly or half-yearly.
Now, the Supreme Court in its judgment dated 28.2.19, attached in the previous posts, clearly defined how various allowances should be reckoned for the purposes of recovery towards EPF. This judgment has settled all doubts regarding whether or not certain allowances should be included or excluded for EPF calculations. The impact of the judgment obviously adds to the financial outgo of employers, and employees' EPF accounts get a boost, resulting in some having a lighter take-home pay. I don't think the judgment could be disputed, sidetracked, or ignored in any way. The financial strain on employers, however big or small, notwithstanding, the judgment is a welcome measure as it has settled all disputes and interpretations, providing the long-awaited clarity.
---
I have corrected the spelling, grammar, and punctuation errors in the text while maintaining the original meaning and tone. I have also ensured proper paragraph formatting with a single line break between paragraphs.
From India, Bangalore
Acknowledge(0)
Amend(0)
1158There is no act stipulating what should be the basic pay and what the other allowances should be, except in the case of minimum wages and wage revisions notified by the central government and state governments category-wise/industry-wise from time to time. However, this doesn't mean the basic pay should be greater than or less than other allowances. For example, if you study the pattern followed by pay commissions (central and state), banks, etc., FDA/VDA used to be more than double the basic pay. This phenomenon undergoes changes as and when FDA/VDA is merged/absorbed into basic pay during wage settlement agreements, raising it, and VDA is linked to the price index published periodically for further revision, either quarterly or half-yearly.
Now, the Supreme Court in its judgment dated 28.2.19, attached in the previous posts, clearly defined how various allowances should be reckoned for the purposes of recovery towards EPF. This judgment has settled all doubts regarding whether or not certain allowances should be included or excluded for EPF calculations. The impact of the judgment obviously adds to the financial outgo of employers, and employees' EPF accounts get a boost, resulting in some having a lighter take-home pay. I don't think the judgment could be disputed, sidetracked, or ignored in any way. The financial strain on employers, however big or small, notwithstanding, the judgment is a welcome measure as it has settled all disputes and interpretations, providing the long-awaited clarity.
---
I have corrected the spelling, grammar, and punctuation errors in the text while maintaining the original meaning and tone. I have also ensured proper paragraph formatting with a single line break between paragraphs.
From India, Bangalore
Acknowledge(0)Amend(0)
Dear Sirs,
Recently, the Cement Wage Board has been settled between CMA and trade unions before the Chief Labour Commissioner in New Delhi, which is effective from 1.4.2018. Arrears and two service weightage increments are currently under preparation. However, the plant-level union has submitted a letter demanding the management to pay differential holiday wages and differential leave encashment from 1.4.2018. Is the demand justified, and is the employer required to pay this? Please clarify.
Aman/Kadapa
From India
Acknowledge(0)Amend(0)
Recently, the Cement Wage Board has been settled between CMA and trade unions before the Chief Labour Commissioner in New Delhi, which is effective from 1.4.2018. Arrears and two service weightage increments are currently under preparation. However, the plant-level union has submitted a letter demanding the management to pay differential holiday wages and differential leave encashment from 1.4.2018. Is the demand justified, and is the employer required to pay this? Please clarify.
Aman/Kadapa
From India
Acknowledge(0)Amend(0)
Dear Aman,
It's clearly understood that when a wage settlement is reached 'with retrospective effect' and received authentication by authorities, it's without doubt that all relevant past emoluments will be impacted, such as OT/holiday wages, leave encashment, EPF, bonus, etc., which were paid at pre-revised wages for the period from 1.4.18 till date. Accordingly, differences have to be re-worked and disbursed. This can be avoided only if the parties to the agreement specifically agree to forego arrears, meaning 'effective from the prospective date' only. The demand of the union deserves on merit to arrears, and employers have to rework the same and disburse.
From India, Bangalore
Acknowledge(0)Amend(0)
It's clearly understood that when a wage settlement is reached 'with retrospective effect' and received authentication by authorities, it's without doubt that all relevant past emoluments will be impacted, such as OT/holiday wages, leave encashment, EPF, bonus, etc., which were paid at pre-revised wages for the period from 1.4.18 till date. Accordingly, differences have to be re-worked and disbursed. This can be avoided only if the parties to the agreement specifically agree to forego arrears, meaning 'effective from the prospective date' only. The demand of the union deserves on merit to arrears, and employers have to rework the same and disburse.
From India, Bangalore
Acknowledge(0)Amend(0)
Dear Sirs, Can we given HRA more than 40% or 50% of basic. Commission is a salary component when we can use this. Please reply Regards Sandeep
From India, Delhi
Acknowledge(0)Amend(0)
From India, Delhi
Acknowledge(0)Amend(0)
It is reasonable that HRA is limited to around 30% of the basic salary. This is again dependent on the amount of basic salary itself. One can easily justify HRA being considered even greater than 30% in a country where urbanization is fast catching up and the cost of living is constantly increasing. Not to mention cities like Delhi, Mumbai, Chennai, Kolkata, and others, where no amount of HRA would suffice. However, one should be aware of the implications of income tax on HRA received versus HR paid. HRA received over and above the exempted limits is subject to income tax as per the formula under the Income Tax Act.
Commission as a salary component is typically considered for those in marketing, sales, and business development roles. Job descriptions for these positions usually involve employees being driven by targets. This commission, often a fixed sum at a minimum, used to be paid monthly as part of the salary, with any achievement exceeding benchmarks rewarded as commission or bonus calculated based on a specific formula. The amount may not be fixed for everyone every month and is bound to vary based on company policies.
For employees involved in processing and production-related roles, they are often paid production incentives or incentive bonuses. It is possible for these employees to become eligible for these payments either continuously on a monthly basis or intermittently.
From India, Bangalore
Acknowledge(0)Amend(0)
Commission as a salary component is typically considered for those in marketing, sales, and business development roles. Job descriptions for these positions usually involve employees being driven by targets. This commission, often a fixed sum at a minimum, used to be paid monthly as part of the salary, with any achievement exceeding benchmarks rewarded as commission or bonus calculated based on a specific formula. The amount may not be fixed for everyone every month and is bound to vary based on company policies.
For employees involved in processing and production-related roles, they are often paid production incentives or incentive bonuses. It is possible for these employees to become eligible for these payments either continuously on a monthly basis or intermittently.
From India, Bangalore
Acknowledge(0)Amend(0)
Dear Team, i would like to know, whether Washing allowance can be taken into consideration while calculating PF.?
From India, Bengaluru
Acknowledge(0)Amend(0)
From India, Bengaluru
Acknowledge(0)Amend(0)
Good to know. All these above points are well taken. In my view - once you deduct the PF & ESI on a basic wages, it can’t be reduced later on just to reduce the PF contribution.
Acknowledge(0)Amend(0)
Acknowledge(0)Amend(0)
Yes, Chandan. Except when a reduction in salary results in a consequent reduction in PF & ESI, it may be possible if and when the incumbent's salary is decreased due to penal action awarded as a 'punishment' for any disciplinary action taken by the appropriate authority. However, no reduction is possible solely to lower PF & ESI contributions.
Hi Raghav,
Regarding the 'Washing Allowance' for PF calculation, please refer to the relevant issue in this link - https://taxguru.in/corporate-law/pf-...pt-hra-sc.html. A copy of the judgment is attached.
From India, Bangalore
Acknowledge(0)Amend(0)
Hi Raghav,
Regarding the 'Washing Allowance' for PF calculation, please refer to the relevant issue in this link - https://taxguru.in/corporate-law/pf-...pt-hra-sc.html. A copy of the judgment is attached.
From India, Bangalore
Acknowledge(0)Amend(0)Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.