Dear Madhu T K,
Can you please explain Maratwada Gramin Bank case judgement in this regard, I am having the same doubt.
https://www.lawyersclubindia.com/judiciary/marathwada-gramin-bank-karamchari-sanghatana-vs-management-of-marathwada-gramin-bank-2011-employer-cannot-be-compelled-to-pay-provident-fund-beyond-the-statutory-provisions-of-labour-law-5373.asp
Regards
Sheena Philip
From India, Coimbatore
Can you please explain Maratwada Gramin Bank case judgement in this regard, I am having the same doubt.
https://www.lawyersclubindia.com/judiciary/marathwada-gramin-bank-karamchari-sanghatana-vs-management-of-marathwada-gramin-bank-2011-employer-cannot-be-compelled-to-pay-provident-fund-beyond-the-statutory-provisions-of-labour-law-5373.asp
Regards
Sheena Philip
From India, Coimbatore
@Sheena Philip, I believe I have explained the matter very clearly in the preceding discussions. In Maratwada case, the Supreme Court has said that the EPFO has no right to demand any contribution on any wages above Rs 6500( this can be read as Rs 15000 in the present context) and when the salary which qualifies to PF is Rs 15000, the LOP days should be proportionately deducted from that qualifying wages, ie, Rs 15000 and not on the actual wages because the actual wage is nowhere in the picture but only PF wages is there in the picture. For every day lost without wages, there should be a loss of contribution. That is why I am repeatedly saying that contributions for non contributory days should be deducted from Rs 15000.
From India, Kannur
4238From India, Kannur
Dear Madhu T K,
Below was the Ans given in https://www.epfindia.gov.in/site_en/FAQ.php - Monthly Pay. for calculating contributions to be paid under the Act ?
Q.384 Monthly Pay. for calculating contributions to be paid under the Act ?
Ans : The contribution shall be calculated on the basis of monthly pay containing the following
Components actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly basis :
Basic Wages
Dearness allowance (all cash payment by whatever name called paid to an employee on account of a rise in the cost of living) Retaining allowance
Cash value of any food concession
In that it is given Components acually Drawn.
Drawn Basic + DA can vary from month to month due to LOP. i.e. Drawn Basic + DA can go below Rs. 15000 due to LOP for Emp who was drawing more than Rs.15000 in the ealier months in such case we will be calculating on the drawn on the actually drawn Basic + DA salary.
Eg: Based on FAQ found in https://www.epfindia.gov.in/site_en/FAQ.php
Basic + DA = Rs.17000
No of days worked = 24 Days
LOP = 6 Days
Drawn Basic + DA = Rs.13600
Employer PF Contribution = Rs.13600 x 12% = Rs.1632
But as per your Explanation PF Contribution should be Rs.15000/30*24 x 12% = Rs.1440. This is beneficial for the Employer. Can you pls provide any refernce supporting your workings. It would be more helpful.
Thanks & Regards
Sheena Philip
From India, Coimbatore
Below was the Ans given in https://www.epfindia.gov.in/site_en/FAQ.php - Monthly Pay. for calculating contributions to be paid under the Act ?
Q.384 Monthly Pay. for calculating contributions to be paid under the Act ?
Ans : The contribution shall be calculated on the basis of monthly pay containing the following
Components actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly basis :
Basic Wages
Dearness allowance (all cash payment by whatever name called paid to an employee on account of a rise in the cost of living) Retaining allowance
Cash value of any food concession
In that it is given Components acually Drawn.
Drawn Basic + DA can vary from month to month due to LOP. i.e. Drawn Basic + DA can go below Rs. 15000 due to LOP for Emp who was drawing more than Rs.15000 in the ealier months in such case we will be calculating on the drawn on the actually drawn Basic + DA salary.
Eg: Based on FAQ found in https://www.epfindia.gov.in/site_en/FAQ.php
Basic + DA = Rs.17000
No of days worked = 24 Days
LOP = 6 Days
Drawn Basic + DA = Rs.13600
Employer PF Contribution = Rs.13600 x 12% = Rs.1632
But as per your Explanation PF Contribution should be Rs.15000/30*24 x 12% = Rs.1440. This is beneficial for the Employer. Can you pls provide any refernce supporting your workings. It would be more helpful.
Thanks & Regards
Sheena Philip
From India, Coimbatore
As per the FAQ it is true. But what about Pension salary? On which amount pension shall be calculated? For 24 days you cannot have Rs 13600 as Pension qualifying salary but it should be Rs 12000 only. And suppose the actual salary is much higher, say Rs 60000 and the employee takes a few days leave and still the PF salary would be within Rs 15000 and is it right that the employer should contribute the same amount as his contribution?
If you follow the FAQs, please follow it. I don't know the clerical side of preparing ECR etc and I don't know if the system will reject if you put Rs 13600 under EPF salary and Rs 12000 as EPS salary.
When PF is capped on Rs 15000, ideally, it should be salary for all purposes of EPF & MP Act which includes PF, Pension and EDLI. Then EPFO has nothing to do with what is the gross salary of the employee, let it be Rs 15001 or two lakhs rupees, the EPFO should not have anything to do with it.
From India, Kannur
If you follow the FAQs, please follow it. I don't know the clerical side of preparing ECR etc and I don't know if the system will reject if you put Rs 13600 under EPF salary and Rs 12000 as EPS salary.
When PF is capped on Rs 15000, ideally, it should be salary for all purposes of EPF & MP Act which includes PF, Pension and EDLI. Then EPFO has nothing to do with what is the gross salary of the employee, let it be Rs 15001 or two lakhs rupees, the EPFO should not have anything to do with it.
From India, Kannur
Dear Madhu.T.K,
For both EPS and EPF we will be showing Rs.13600 only, most of the Employers are calculating in this way only.
What you were conveying was logical and beneficial for employer but not beneficial for employee.
If we can get any source to support this logic, we can follow this working (i.e take Rs.12000 as PF Wage as per the above eg.)
Please share if you come across any source supporting this logic. it would be helpful to change the old practice.
Regards,
Sheena Philip
From India, Coimbatore
For both EPS and EPF we will be showing Rs.13600 only, most of the Employers are calculating in this way only.
What you were conveying was logical and beneficial for employer but not beneficial for employee.
If we can get any source to support this logic, we can follow this working (i.e take Rs.12000 as PF Wage as per the above eg.)
Please share if you come across any source supporting this logic. it would be helpful to change the old practice.
Regards,
Sheena Philip
From India, Coimbatore
The only logic is that an employee who has been on leave without pay should not get a single rupee benefit from the employer more than what an employee who has worked for the entire month should get.
let us take another example, that, the gross salary (or Basic and DA part only) is Rs 1,20000. His PF contributing salary is Rs 15000. This employee has worked just for 4 days in a month. naturally, his salary for that month would be Rs 16000. Should the employer contribute Rs 1800 towards PF? Shouldn't it be unfair that he contributes the same amount as he does for an employee whose salary is Rs 15000 but has worked for the entire 30 days?
Now coming to the number of days in the ECR, is it 4 days or 30 days that you will put for this employee? When there are 26 days' NCPs, how can you show Rs 15000 as Pensionable salary? Obviously, in respect of this employee the pensional service will be more even though he has worked for very very lesser number of days. Is this right?
It is okay that if the contribution is on actual salary you can show the actual salary (Rs 16000 in this example or Rs 13600 in your previous example) under the PF. Still you cannot put Rs 15000 as Pension salary because the pension salary for 4 days cannot be Rs 15000 but Rs 2000. Then only the non contributory days would get established in his service. If the pension is based on pensionable service and if the pensionable service is based on days worked, you cannot have Rs 15000 as salary in respect of an employee whose salary is higher and even after the deduction for being absent his salary exceeds Rs 15000.
The similar kind of working is adopted in calculating bonus payable in respect fo employee whose bonus qualifying salary is more than Rs 7000. In such cases we calculate bonus assuming that the salary is Rs 7000 or the notified minimum wages whichever is higher, right? In such case, the LOPs shall be deducted from 7000 or the notified wages. The Act has permitted such proportionate deduction also. By this an employee who has taken leave without pay would be getting lesser amount of bonus than an employee who has not taken any leave without pay even if the gross salary of the former is higher than the latter. This can also be illustrated with an example.
The bonus qualifying salary of two employees, A and B, are the same, ie, Rs 12000. (being the statutory minimum wages). Their actual Basic and DA part of salary is Rs 20000. Since they come under the "7000 or minimum wages fixed brackets of the bonus qualifying salary, we can take Rs 12000 and their base for calculation of Bonus. Supposing that the company is declaring a bonus of 8.33%. Then the annual bonus to someone whose monthly salary is Rs 12000 would be roughly Rs 12000. Suppose that A has had 10 days' leave without pay during the financial year ( for which bonus is being calculated). Then the bonus should be calculated on an earning calculated on the basis of a salary after deducting the LOP proportionately from the base amount. That is if 12000 is the monthly salary, it would be Rs 1,44000 for the year. The daily average of 12000 is equal to Rs 400. if the salary were Rs 12000 the employee would have subjected to a deduction of Rs 400 each if he had taken leave without pay. Then for 10 days it would be Rs 4000. Then the annual Bonus qualifying salary would be Rs 1,40000 and the bonus @ 8.33% would be Rs 11,662 whereas for B who has not taken any LOP it would be Rs 12000.
From India, Kannur
let us take another example, that, the gross salary (or Basic and DA part only) is Rs 1,20000. His PF contributing salary is Rs 15000. This employee has worked just for 4 days in a month. naturally, his salary for that month would be Rs 16000. Should the employer contribute Rs 1800 towards PF? Shouldn't it be unfair that he contributes the same amount as he does for an employee whose salary is Rs 15000 but has worked for the entire 30 days?
Now coming to the number of days in the ECR, is it 4 days or 30 days that you will put for this employee? When there are 26 days' NCPs, how can you show Rs 15000 as Pensionable salary? Obviously, in respect of this employee the pensional service will be more even though he has worked for very very lesser number of days. Is this right?
It is okay that if the contribution is on actual salary you can show the actual salary (Rs 16000 in this example or Rs 13600 in your previous example) under the PF. Still you cannot put Rs 15000 as Pension salary because the pension salary for 4 days cannot be Rs 15000 but Rs 2000. Then only the non contributory days would get established in his service. If the pension is based on pensionable service and if the pensionable service is based on days worked, you cannot have Rs 15000 as salary in respect of an employee whose salary is higher and even after the deduction for being absent his salary exceeds Rs 15000.
The similar kind of working is adopted in calculating bonus payable in respect fo employee whose bonus qualifying salary is more than Rs 7000. In such cases we calculate bonus assuming that the salary is Rs 7000 or the notified minimum wages whichever is higher, right? In such case, the LOPs shall be deducted from 7000 or the notified wages. The Act has permitted such proportionate deduction also. By this an employee who has taken leave without pay would be getting lesser amount of bonus than an employee who has not taken any leave without pay even if the gross salary of the former is higher than the latter. This can also be illustrated with an example.
The bonus qualifying salary of two employees, A and B, are the same, ie, Rs 12000. (being the statutory minimum wages). Their actual Basic and DA part of salary is Rs 20000. Since they come under the "7000 or minimum wages fixed brackets of the bonus qualifying salary, we can take Rs 12000 and their base for calculation of Bonus. Supposing that the company is declaring a bonus of 8.33%. Then the annual bonus to someone whose monthly salary is Rs 12000 would be roughly Rs 12000. Suppose that A has had 10 days' leave without pay during the financial year ( for which bonus is being calculated). Then the bonus should be calculated on an earning calculated on the basis of a salary after deducting the LOP proportionately from the base amount. That is if 12000 is the monthly salary, it would be Rs 1,44000 for the year. The daily average of 12000 is equal to Rs 400. if the salary were Rs 12000 the employee would have subjected to a deduction of Rs 400 each if he had taken leave without pay. Then for 10 days it would be Rs 4000. Then the annual Bonus qualifying salary would be Rs 1,40000 and the bonus @ 8.33% would be Rs 11,662 whereas for B who has not taken any LOP it would be Rs 12000.
From India, Kannur
I clearly Understand what you are saying,
Only need the source that clearly supports this working to implement it. Any kind of clarification or communication of EPF India or any judgements in this regard, Since EPF Act and scheme is silent in this Regard.
NCP is not mentioned for Higher wages employees when their PF wages Drawn that month is above Rs.15000. NCP is mentioned only when PF Wages drawn that month is below Rs.15000, that too calculated as explained by S K Bandyopadhyay in ealier replies in this thread since PF cap is considered on actual drawn wages, this is what most of the Employers following.
Regards
Sheena Philip
From India, Coimbatore
Only need the source that clearly supports this working to implement it. Any kind of clarification or communication of EPF India or any judgements in this regard, Since EPF Act and scheme is silent in this Regard.
NCP is not mentioned for Higher wages employees when their PF wages Drawn that month is above Rs.15000. NCP is mentioned only when PF Wages drawn that month is below Rs.15000, that too calculated as explained by S K Bandyopadhyay in ealier replies in this thread since PF cap is considered on actual drawn wages, this is what most of the Employers following.
Regards
Sheena Philip
From India, Coimbatore
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