Your in-hand salary is likely to come down significantly if the Employee Provident Fund Office (EPFO) goes ahead with its proposal to redefine the salary component used for the calculation of provident fund contribution.
In its circular issued on 30 November, EPFO said, "All such allowances which are ordinarily, necessarily, and uniformly paid to the employees are to be treated as part of the basic wages." This necessarily means that conveyance, transport, and special allowance would also be included in the salary component used for the calculation of EPF contribution, effectively reducing your take-home salary. The EPFO later put the guidelines on hold.
However, recent reports, citing sources, say that the Government will go ahead and notify the norms.
At present, 12 percent of your basic salary is deducted for contributions towards the EPF account. Your employer is also required to make a matching contribution. The employer's contribution in most cases is included in the cost-to-company (CTC) or the gross salary of the employee.
An employee's salary is divided into various components, the major ones being the basic, conveyance, housing rent allowance (HRA), and special allowance. Besides, the salary could also include overtime and performance incentives in the form of bonuses and commissions.
Bonuses, HRAs, overtime, presents from the employer, commissions, or any other similar allowances have been specifically excluded from the definition of basic wages.
But if the new guidelines come into effect, all such allowances would be included under basic wages, thereby increasing your provident fund contribution.
For any further clarification, feel free to write or discuss.
Regards,
GAUTAM KAR - 09331148166
Find me at,
http://www.facebook.com/GAUTAMBKAR
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From India, Kolkata
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68In its circular issued on 30 November, EPFO said, "All such allowances which are ordinarily, necessarily, and uniformly paid to the employees are to be treated as part of the basic wages." This necessarily means that conveyance, transport, and special allowance would also be included in the salary component used for the calculation of EPF contribution, effectively reducing your take-home salary. The EPFO later put the guidelines on hold.
However, recent reports, citing sources, say that the Government will go ahead and notify the norms.
At present, 12 percent of your basic salary is deducted for contributions towards the EPF account. Your employer is also required to make a matching contribution. The employer's contribution in most cases is included in the cost-to-company (CTC) or the gross salary of the employee.
An employee's salary is divided into various components, the major ones being the basic, conveyance, housing rent allowance (HRA), and special allowance. Besides, the salary could also include overtime and performance incentives in the form of bonuses and commissions.
Bonuses, HRAs, overtime, presents from the employer, commissions, or any other similar allowances have been specifically excluded from the definition of basic wages.
But if the new guidelines come into effect, all such allowances would be included under basic wages, thereby increasing your provident fund contribution.
For any further clarification, feel free to write or discuss.
Regards,
GAUTAM KAR - 09331148166
Find me at,
http://www.facebook.com/GAUTAMBKAR
https://twitter.com/GAUTAMKAR4U
From India, Kolkata
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Good analysis by Mr. Gautam Kar.
Still the fingers are crossed. Let’s watch the development. Perhaps some "via media" solution may emerge. The claim that the burden on employees will increase is not absolutely true. Since nowadays be it workmen or executives employer count burden of each rupee- direct or indirect as salary (CTC). All they may do is restructuring of wage/salary.
Of course from employee end it’s a constraint, since each individual is unique and each ones' needs are different based on his age, phase of life and philosophy of Life. The person who is in need of money now will have to adjust with reduced take home.
Normally for executive cadre 40% of their CTC constitute of the Basic component. The present deduction of 24% (as employers' contribution is also accounted in CTC) ON 40% of CTC will shift to 24% of 100%.
Apart it may have Macro level impact on nation’s economy as less amount of money will be transacted.
Let’s monitor closely- and keep on sharing views.
Regards
Shailesh Parikh
Vadodara, Gujarat
99 98 97 10 65
From India, Mumbai
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Still the fingers are crossed. Let’s watch the development. Perhaps some "via media" solution may emerge. The claim that the burden on employees will increase is not absolutely true. Since nowadays be it workmen or executives employer count burden of each rupee- direct or indirect as salary (CTC). All they may do is restructuring of wage/salary.
Of course from employee end it’s a constraint, since each individual is unique and each ones' needs are different based on his age, phase of life and philosophy of Life. The person who is in need of money now will have to adjust with reduced take home.
Normally for executive cadre 40% of their CTC constitute of the Basic component. The present deduction of 24% (as employers' contribution is also accounted in CTC) ON 40% of CTC will shift to 24% of 100%.
Apart it may have Macro level impact on nation’s economy as less amount of money will be transacted.
Let’s monitor closely- and keep on sharing views.
Regards
Shailesh Parikh
Vadodara, Gujarat
99 98 97 10 65
From India, Mumbai
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Industry body Ficci on Tuesday opposed any move to club allowances with the basic wages for PF deductions, stating that besides increasing the financial burden on both it and the government, it will "dampen" investment sentiments.
"The proposal to renotify the definition of 'basic wages' under the Employees Provident Fund & Miscellaneous Provisions Act 1952 has huge financial implications for both the industry and the government," the industry body said in a statement.
"The move is ill-conceived, and if brought into force, will dampen business and investment sentiments," it said.
"This may even be counterproductive to the Employees' Provident Fund Organisation (EPFO) as organizations that are extending coverage to employees receiving salaries above Rs 6,500 may choose to opt out, depriving employees of coverage under a globally renowned social security scheme," Ficci said.
According to the provisions of the EPF scheme 1952, every employer has to contribute 12 percent of the basic pay and dearness allowance towards the PF deposits of workers every month. Thus, with an increase in basic wages, the employers' liability would increase.
Out of the employers' 12 percent contribution, 8.33 percent is deposited into workers' Employees' Pension Scheme 1995 accounts.
The Central Government also contributes 1.16 percent of the basic wages of workers toward their pension account.
Therefore, the decision would also result in a higher contribution by the central government towards workers' pension accounts.
Currently, there are over 50 million subscribers to the scheme. EPFO has a corpus of over Rs 5 lakh crores in EPF and EPS schemes.
As per the notification issued by the EPFO on November 30 last year, all allowances that are 'Ordinarily, Necessarily, and Uniformly' paid to workers were to be clubbed with basic wages for the purpose of PF deductions.
However, the notification was put on hold later on. EPFO had constituted a committee to deliberate on the issue. The panel had reportedly suggested allowing the clubbing of wages with minor changes in the provisions to the Labour Ministry.
The final decision to notify the clubbing of wages has not been taken so far by the ministry.
Regards,
GAUTAM KAR - 09331148166
Find me at,
http://www.facebook.com/GAUTAMBKAR
https://twitter.com/GAUTAMKAR4U
From India, Kolkata
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"The proposal to renotify the definition of 'basic wages' under the Employees Provident Fund & Miscellaneous Provisions Act 1952 has huge financial implications for both the industry and the government," the industry body said in a statement.
"The move is ill-conceived, and if brought into force, will dampen business and investment sentiments," it said.
"This may even be counterproductive to the Employees' Provident Fund Organisation (EPFO) as organizations that are extending coverage to employees receiving salaries above Rs 6,500 may choose to opt out, depriving employees of coverage under a globally renowned social security scheme," Ficci said.
According to the provisions of the EPF scheme 1952, every employer has to contribute 12 percent of the basic pay and dearness allowance towards the PF deposits of workers every month. Thus, with an increase in basic wages, the employers' liability would increase.
Out of the employers' 12 percent contribution, 8.33 percent is deposited into workers' Employees' Pension Scheme 1995 accounts.
The Central Government also contributes 1.16 percent of the basic wages of workers toward their pension account.
Therefore, the decision would also result in a higher contribution by the central government towards workers' pension accounts.
Currently, there are over 50 million subscribers to the scheme. EPFO has a corpus of over Rs 5 lakh crores in EPF and EPS schemes.
As per the notification issued by the EPFO on November 30 last year, all allowances that are 'Ordinarily, Necessarily, and Uniformly' paid to workers were to be clubbed with basic wages for the purpose of PF deductions.
However, the notification was put on hold later on. EPFO had constituted a committee to deliberate on the issue. The panel had reportedly suggested allowing the clubbing of wages with minor changes in the provisions to the Labour Ministry.
The final decision to notify the clubbing of wages has not been taken so far by the ministry.
Regards,
GAUTAM KAR - 09331148166
Find me at,
http://www.facebook.com/GAUTAMBKAR
https://twitter.com/GAUTAMKAR4U
From India, Kolkata
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Hi, good morning to all.
I am confused about an employee who left on 5 June from the previous company, and the exit date is the same. However, he joined the new company on 3 June, and the appointment letter is dated the same. Is there any issue with the PF account? Please advise me.
Thank you.
From India, Chennai
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I am confused about an employee who left on 5 June from the previous company, and the exit date is the same. However, he joined the new company on 3 June, and the appointment letter is dated the same. Is there any issue with the PF account? Please advise me.
Thank you.
From India, Chennai
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Dear sir,
I am an HR assistant manager. I have recently started using a new portal for ESIC, although we already had an ESIC portal in place. By mistake, I have paid the ESIC challan for the same employee in both portals. The payment was made in error on the old ESIC portal, whereas I intended to make the payment on the new ESIC portal.
I am now seeking guidance on how to recover the amount of Rs. 69,000 that was mistakenly paid.
Thank you for your assistance in this matter.
From India, Patna
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I am an HR assistant manager. I have recently started using a new portal for ESIC, although we already had an ESIC portal in place. By mistake, I have paid the ESIC challan for the same employee in both portals. The payment was made in error on the old ESIC portal, whereas I intended to make the payment on the new ESIC portal.
I am now seeking guidance on how to recover the amount of Rs. 69,000 that was mistakenly paid.
Thank you for your assistance in this matter.
From India, Patna
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Revised online process for issue of PF code from 1.12.2015.pdf