Dear Swastik,
Thank you for the interest you have shown on this subject and all the efforts you have taken to drive the point that food allowance will not attract PF contribution.
No doubt it is the best solution to totally do away with this allowance if this was proving to be a headache and is disputable as to its nature to attract PF contribution due to misunderstandings and misinterpretations of the law.
But, I am more and more convinced now with your arguments - not just because it suits me - that food allowance will not attract PF contribution. So, I would like to take it forward to the extent possible to establish clearly that our views are correct and someone's misunderstanding of the law cannot be a good reason for expecting people to fall in line with their misinterpreted concept.
Your contributions to the subject are really excellent.
Thanks and regards,
Govardhan
From India, Madras
18Thank you for the interest you have shown on this subject and all the efforts you have taken to drive the point that food allowance will not attract PF contribution.
No doubt it is the best solution to totally do away with this allowance if this was proving to be a headache and is disputable as to its nature to attract PF contribution due to misunderstandings and misinterpretations of the law.
But, I am more and more convinced now with your arguments - not just because it suits me - that food allowance will not attract PF contribution. So, I would like to take it forward to the extent possible to establish clearly that our views are correct and someone's misunderstanding of the law cannot be a good reason for expecting people to fall in line with their misinterpreted concept.
Your contributions to the subject are really excellent.
Thanks and regards,
Govardhan
From India, Madras
Dear Aby, I do not know if I was clear in my question to you. My question was whether you pay PF contribution for the food allowance part (Rs.200)? Thanks, Govardhan
From India, Madras
From India, Madras
Thought the definition of Basic Wage is given under the Section 2(b) of the Act, the charging section is Section 6 of the Act. Which states that contribution should be on Basic + DA + Retaining allowance.
As per Explanation DA includes dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee.
So i think PF gets attracted in ur case.
Difference of opinion is solicited.
From India, Hyderabad
As per Explanation DA includes dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee.
So i think PF gets attracted in ur case.
Difference of opinion is solicited.
From India, Hyderabad
Dear Govardhan,
I wish to state that in the whole discussion we all missed including me forgot to touch upon one of the main point.
The point I am indicating is why is Cash Value of Food Concession included in PF calculation?
Well, the answer is that this Cash Value has similar effect as Dearness Allowance, both paid to compensate the employee against inflation and price escalation. Both are fixed and changed by the Government and/or Employer from time to time with respect to the change in price. Both of them are not changed in between unless compelled by extraordinary circumstances. Both components are linked to prices in the Market and not to the Salary Structure (may be linked to Rank or Position).
Let me explain with an example:
Say a Company decides to sale Rice @ Rs. 10 per Kilo for the month of September. The current market price is Rs. 15. Now, suppose the price rises to Rs. 18 from 10th of September and falls to Rs. 13 from 20th. Whatever may be the price the Company will have to sell rice at Rs. 10 only and the Cash Value will be calculated accordingly as you can see it can both rise and fall, similarly the PF liability of the Comapny will all rise and fall with the change in Market Price. This is similar to logic of Dearness Allowance rate.
Well you can ask what happens if the Price falls to Rs. 8, in that case the employees will buy from the market and the cash value will be zero for the period and the whole PF Liability will without this component. Hence, this cash value is a variable component like DA and varies with market price.
In case of DA, employees gain that extra amount.
Now, you can see that Food Allowance which you are talking off is quite different both in concept and nature.
Regards,
SC
From India, Thane
I wish to state that in the whole discussion we all missed including me forgot to touch upon one of the main point.
The point I am indicating is why is Cash Value of Food Concession included in PF calculation?
Well, the answer is that this Cash Value has similar effect as Dearness Allowance, both paid to compensate the employee against inflation and price escalation. Both are fixed and changed by the Government and/or Employer from time to time with respect to the change in price. Both of them are not changed in between unless compelled by extraordinary circumstances. Both components are linked to prices in the Market and not to the Salary Structure (may be linked to Rank or Position).
Let me explain with an example:
Say a Company decides to sale Rice @ Rs. 10 per Kilo for the month of September. The current market price is Rs. 15. Now, suppose the price rises to Rs. 18 from 10th of September and falls to Rs. 13 from 20th. Whatever may be the price the Company will have to sell rice at Rs. 10 only and the Cash Value will be calculated accordingly as you can see it can both rise and fall, similarly the PF liability of the Comapny will all rise and fall with the change in Market Price. This is similar to logic of Dearness Allowance rate.
Well you can ask what happens if the Price falls to Rs. 8, in that case the employees will buy from the market and the cash value will be zero for the period and the whole PF Liability will without this component. Hence, this cash value is a variable component like DA and varies with market price.
In case of DA, employees gain that extra amount.
Now, you can see that Food Allowance which you are talking off is quite different both in concept and nature.
Regards,
SC
From India, Thane
Dear Swastik,
You have only elaborated the underlying concept or the spirit with which the cash value of food concession has been included in the wage definition of the PF Act to attract contribution. And, you have again emphasized that Food Allowance cannot be equated to Cash Value of food concession as the allowance is NOT linked to 'increase' in cost of living like DA or any other such component. Thanks.
I have not come across organisations that pay PF contribution for the amount of subsidy that they give for canteen food, when the canteen is provided by the company and the subsidies are given may be or may not be on the basis of agreement with the union. What do such companies do in this regard? Do they pay PF on the subsidy part? Any ideas?
Govardhan
From India, Madras
You have only elaborated the underlying concept or the spirit with which the cash value of food concession has been included in the wage definition of the PF Act to attract contribution. And, you have again emphasized that Food Allowance cannot be equated to Cash Value of food concession as the allowance is NOT linked to 'increase' in cost of living like DA or any other such component. Thanks.
I have not come across organisations that pay PF contribution for the amount of subsidy that they give for canteen food, when the canteen is provided by the company and the subsidies are given may be or may not be on the basis of agreement with the union. What do such companies do in this regard? Do they pay PF on the subsidy part? Any ideas?
Govardhan
From India, Madras
Subsidy is a synonym for concession, rebate, discount, exemption and of the like. Avoid linking such words with food allowance or this shall attract PF.
Let me cite an example.
Say on considering the accounts of the canteen, diet rate turns out to be 12.31 paise. If diet is charged at the rate of Rs.10, the balance amount shall invite PF for the whole month, per diet consumed.
To balance this, proper care should be taken that other miscllaneous expenses are accordingly balanced to show that no discount as such is offered on food, even though practically the discount is being offered.
Remember the Canteen should be generally run on no profit no loss basis. Losses however if the result of any discounts provided shall entertain PF and profits shall enrage the Employees Dissatisfaction levels.
Let me cite an example.
Say on considering the accounts of the canteen, diet rate turns out to be 12.31 paise. If diet is charged at the rate of Rs.10, the balance amount shall invite PF for the whole month, per diet consumed.
To balance this, proper care should be taken that other miscllaneous expenses are accordingly balanced to show that no discount as such is offered on food, even though practically the discount is being offered.
Remember the Canteen should be generally run on no profit no loss basis. Losses however if the result of any discounts provided shall entertain PF and profits shall enrage the Employees Dissatisfaction levels.
Dear Aby,
What happens if the management-union agreement talks about subsidy precisely mentioning the subsidised price of food? Will that not be contradictory to the accounts showing no loss on account of subsidy? Unions may demand clear agreement to claim they have negotiated for more canteen subsidy? That will be a trap if the accounts are not reflecting the same?
Any ideas please?
Thanks,
Govardhan
From India, Madras
What happens if the management-union agreement talks about subsidy precisely mentioning the subsidised price of food? Will that not be contradictory to the accounts showing no loss on account of subsidy? Unions may demand clear agreement to claim they have negotiated for more canteen subsidy? That will be a trap if the accounts are not reflecting the same?
Any ideas please?
Thanks,
Govardhan
From India, Madras
Dear Govardhan,
Two things:
1) A statutory Canteen is usually a Cost Canteen whose Balance Sheet must be auidted separately by a Chartered Accountant. Now, if it is a Subsidised Canteen the proper Accounting Treatment must be given to the subsidary amount to get it audited as per law.
2) Now how the Subsidised amount is approportioned among employee or adjusted for PF calculation depends on the Company.
Regards,
SC
From India, Thane
Two things:
1) A statutory Canteen is usually a Cost Canteen whose Balance Sheet must be auidted separately by a Chartered Accountant. Now, if it is a Subsidised Canteen the proper Accounting Treatment must be given to the subsidary amount to get it audited as per law.
2) Now how the Subsidised amount is approportioned among employee or adjusted for PF calculation depends on the Company.
Regards,
SC
From India, Thane
Union is of the workers' and they are well aware how much discount they are getting and I don't feel they will have concerns with the accounts. Still they (UNION LEADERS) can misutilise to misguide the innocent workers and say that company is raising a fraud, my advise is maintain two type of accounts. The one showing the original discount for the UNION and other one for PF and Govt. Compliance done by the C.A.
What is your manpower strength?
How many worker UNIONs? Etc. Etc.
What is your manpower strength?
How many worker UNIONs? Etc. Etc.
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
Maharashtra Special allowance Notification July 14 to Dec 14.pdf
Food .doc