For Information: Article published in The Times of India:
Government to review EPF circular on salary, allowances
All can breathe easy with the government reviewing a circular issued by the Employees' Provident Fund Organization (EPFO) that had asked employers to deduct the subscription from the gross salary, including allowances, a move that would have reduced the take-home salary of over 5 crore workers.
A senior Labour Ministry official said there was a "rethink" on the circular that was issued on November 30, although a final decision is yet to be taken.
The official added that the circular did not actually change the rules and had not clarified which allowances needed to be included in the calculation of basic wage. The circular was meant to ensure that employers did not shirk their responsibility, the official added.
Officials said the circular was largely meant to protect employees earning below Rs 6,500 per month (for whom EPF is mandatory). In such instances, there have been cases where employers have split up the basic wage into various allowances, so as to reduce their contribution to the EPF.
It is not mandatory for those earning above Rs 6,500 per month to opt for the EPF, but once employees opt for EPF, there is no opting out of it until the amount is withdrawn in full. Many employers expressed reservations after TOI first reported it on Tuesday as the circular would impact their wage bills. Typically, high-salaried employees in the private sector do not opt for EPF.
Employees have to contribute 12% of their basic wage towards PF, and the amount is matched by their employers. The issue of employers shrinking the size of the basic wage and inflating allowances to reduce their PF burden has long plagued the EPFO.
Both employers and trade unions objected after TOI first reported it on Tuesday. "We have sent a letter to the Labour Ministry objecting to certain provisions in the circular," D L Sachdev, AITUC national secretary and trade union representative in the Central Board of Trustees of the EPFO, said. The consent of the CBT was not taken before issuing the circular, Sachdev added.
Besides, in a note, consulting firm PricewaterhouseCoopers pointed to conflicting judgments on the subject. "Recently, the Madhya Pradesh High Court ruled that allowances that are given universally, necessarily, and ordinarily to all employees form part of the basic salary. The judgment has been challenged in the Supreme Court and the matter is yet to be decided. The decision of the SC would perhaps provide a direction on the matter but until then, this circular is a wake-up call for the employers to review their position in relation to the compensation structure," it said.
From India, Coimbatore
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7Government to review EPF circular on salary, allowances
All can breathe easy with the government reviewing a circular issued by the Employees' Provident Fund Organization (EPFO) that had asked employers to deduct the subscription from the gross salary, including allowances, a move that would have reduced the take-home salary of over 5 crore workers.
A senior Labour Ministry official said there was a "rethink" on the circular that was issued on November 30, although a final decision is yet to be taken.
The official added that the circular did not actually change the rules and had not clarified which allowances needed to be included in the calculation of basic wage. The circular was meant to ensure that employers did not shirk their responsibility, the official added.
Officials said the circular was largely meant to protect employees earning below Rs 6,500 per month (for whom EPF is mandatory). In such instances, there have been cases where employers have split up the basic wage into various allowances, so as to reduce their contribution to the EPF.
It is not mandatory for those earning above Rs 6,500 per month to opt for the EPF, but once employees opt for EPF, there is no opting out of it until the amount is withdrawn in full. Many employers expressed reservations after TOI first reported it on Tuesday as the circular would impact their wage bills. Typically, high-salaried employees in the private sector do not opt for EPF.
Employees have to contribute 12% of their basic wage towards PF, and the amount is matched by their employers. The issue of employers shrinking the size of the basic wage and inflating allowances to reduce their PF burden has long plagued the EPFO.
Both employers and trade unions objected after TOI first reported it on Tuesday. "We have sent a letter to the Labour Ministry objecting to certain provisions in the circular," D L Sachdev, AITUC national secretary and trade union representative in the Central Board of Trustees of the EPFO, said. The consent of the CBT was not taken before issuing the circular, Sachdev added.
Besides, in a note, consulting firm PricewaterhouseCoopers pointed to conflicting judgments on the subject. "Recently, the Madhya Pradesh High Court ruled that allowances that are given universally, necessarily, and ordinarily to all employees form part of the basic salary. The judgment has been challenged in the Supreme Court and the matter is yet to be decided. The decision of the SC would perhaps provide a direction on the matter but until then, this circular is a wake-up call for the employers to review their position in relation to the compensation structure," it said.
From India, Coimbatore
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Dear All,
I would like to share that this article is not relevant. The writer himself seems confused. The main issue is that currently, we have a ceiling of Rs. 6500/- basic per month, but the minimum wage is Rs. 5044/- per month for 26 days. There is a need to increase the basic limit of PF from 6500/- to at least Rs. 9000/-. Similarly, ESIC medical services are subpar; they need to improve the services or stop taking contributions.
Thank you.
Parvez
9374149908
From India, Ahmadabad
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I would like to share that this article is not relevant. The writer himself seems confused. The main issue is that currently, we have a ceiling of Rs. 6500/- basic per month, but the minimum wage is Rs. 5044/- per month for 26 days. There is a need to increase the basic limit of PF from 6500/- to at least Rs. 9000/-. Similarly, ESIC medical services are subpar; they need to improve the services or stop taking contributions.
Thank you.
Parvez
9374149908
From India, Ahmadabad
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Dear All,
Please find below the latest (Today's) news article on the subject:
NEW DELHI: Business chamber Ficci has opposed the proposed changes to the definition of 'basic wages' under the Employees' Provident Fund & Miscellaneous Provisions Act (EPF and MP Act) 1952.
The government had introduced a triple test - 'Ordinarily, Necessarily, and Uniformly' - to define basic wages for provident fund deduction through a circular issued in November last year but had later stayed its implementation.
Ficci warned that the proposal will have 'huge financial implications both for industry and government and may even be counterproductive to the EPFO, as organizations extending coverage to employees receiving salaries above 6,500 may choose to opt out, depriving the employees of coverage under a globally renowned social security scheme.'
Under the current rules, an organized sector worker is not required to mandatorily join the provident fund scheme of the EPFO if his basic salary exceeds 6,500 a month.
"Most employees today join an organization above this statutory limit, and they are voluntarily covered by the industry," the industry chamber said in a statement. It has argued that PF deduction should be on the full amount of 'minimum wages' where such wages are being paid under the Minimum Wages Act, 1948. "For employees who are on a higher salary bracket and receiving allowances as incentives to promote business, the PF contribution should be restricted to basic salary," it said.
From India, Mumbai
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Please find below the latest (Today's) news article on the subject:
NEW DELHI: Business chamber Ficci has opposed the proposed changes to the definition of 'basic wages' under the Employees' Provident Fund & Miscellaneous Provisions Act (EPF and MP Act) 1952.
The government had introduced a triple test - 'Ordinarily, Necessarily, and Uniformly' - to define basic wages for provident fund deduction through a circular issued in November last year but had later stayed its implementation.
Ficci warned that the proposal will have 'huge financial implications both for industry and government and may even be counterproductive to the EPFO, as organizations extending coverage to employees receiving salaries above 6,500 may choose to opt out, depriving the employees of coverage under a globally renowned social security scheme.'
Under the current rules, an organized sector worker is not required to mandatorily join the provident fund scheme of the EPFO if his basic salary exceeds 6,500 a month.
"Most employees today join an organization above this statutory limit, and they are voluntarily covered by the industry," the industry chamber said in a statement. It has argued that PF deduction should be on the full amount of 'minimum wages' where such wages are being paid under the Minimum Wages Act, 1948. "For employees who are on a higher salary bracket and receiving allowances as incentives to promote business, the PF contribution should be restricted to basic salary," it said.
From India, Mumbai
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