Employees' Provident Fund contributions for the subscribers. Are we to formulate the basic salary as 70% of the gross salary? So far, we are not able to provide correct authentication. Is it verbal, or is there any written government order or circular available? Please post your comments and suggestions. Thank you.
From India, Chennai
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From India, Chennai
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There is no 70% or 80% base for contribution of PF, but PF should be contributed on 100% of the salary. Here, salary means the amount of remuneration agreed with the employee in return for the services/labour that he puts. Obviously, any incentive that is earned as a result of satisfying certain conditions, like achieving certain sales/production figures, goals, etc., or overtime wages, which are also amounts earned on satisfying a condition of working beyond a certain fixed period per day or week, are outside the purview of wages for paying PF.
Though the EPF & MP Act excludes HRA from wages, the same applies only to such allowances that are paid to those who reside in rented houses as part of their employment.
You may have different components in your salary, like Basic, Dearness allowance, HRA, Special allowance, traveling allowance, etc. A very simple test to decide which of these components of salary will qualify for PF contribution is to see on which component you will deduct Loss Of Pay if an employee remains absent without pay. Certainly, it is not the basic alone or Basic and DA alone that are not paid when an employee is on leave without pay, but the entire component is not paid. As such, the total salary is the salary that qualifies for PF contribution. HRA, if paid separately to those who stay in rented houses, will obviously be paid in full even if he is on leave. Therefore, only such HRA will be excluded from the salary.
If the total salary exceeds Rs 15000, naturally, the employer can restrict the PF qualifying salary to Rs 15000.
From India, Kannur
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4766Though the EPF & MP Act excludes HRA from wages, the same applies only to such allowances that are paid to those who reside in rented houses as part of their employment.
You may have different components in your salary, like Basic, Dearness allowance, HRA, Special allowance, traveling allowance, etc. A very simple test to decide which of these components of salary will qualify for PF contribution is to see on which component you will deduct Loss Of Pay if an employee remains absent without pay. Certainly, it is not the basic alone or Basic and DA alone that are not paid when an employee is on leave without pay, but the entire component is not paid. As such, the total salary is the salary that qualifies for PF contribution. HRA, if paid separately to those who stay in rented houses, will obviously be paid in full even if he is on leave. Therefore, only such HRA will be excluded from the salary.
If the total salary exceeds Rs 15000, naturally, the employer can restrict the PF qualifying salary to Rs 15000.
From India, Kannur
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Hello Mr. Ravi, One of the EOs during the inspection did say so that basic salary has to be fixed at 70% and above. This was some time in 2012-13, I do not remember correctly.
From India, Chennai
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From India, Chennai
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There were such directions during that period. This was due to the reluctance of employers to pay PF on salary components other than Basic. At that time, there was no clarification by the Apex Court as well. Now, since there is a clear definition of wages provided by the Supreme Court, everything is clear.
From India, Kannur
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From India, Kannur
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Dear Madhu.T.K sir, you explain very simple and clear, you give the super example for LOP. Share things like this for growing us...
From India, Madurai
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From India, Madurai
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As mentioned by Madhu sir, EPF should be paid on the actual salary earned. This would also include allowances that are paid to all employees generally, regularly, and mandatorily. Please refer to the court order passed recently.
From India, Vadodara
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From India, Vadodara
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Hi All, If some one has the PDF of the court order, plz share.
From India, Mohali
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From India, Mohali
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Dear Mr. D. Ravi,
There is recent amendment on Code on Wages dated 8th August, 2019 which read definition of wages as under: (copy attached for reference)
• Definition of wage simplified. If payments made by the employer to the employee, exceeds 50% of the all wages (basic pay, DA, retaining allowance) the excess
shall added to the wages. (Section 2(y).
Prior to the Hon'ble Supreme Court Judgement dated 28.02.2019, there was no specific provision in the EPF&MP Act, 1952, what should be the % of Basic wages on gross salary and not even till 7th August, 2019. (SC Judgement copy attached)
Regards,
Suresh
From India, Thane
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There is recent amendment on Code on Wages dated 8th August, 2019 which read definition of wages as under: (copy attached for reference)
• Definition of wage simplified. If payments made by the employer to the employee, exceeds 50% of the all wages (basic pay, DA, retaining allowance) the excess
shall added to the wages. (Section 2(y).
Prior to the Hon'ble Supreme Court Judgement dated 28.02.2019, there was no specific provision in the EPF&MP Act, 1952, what should be the % of Basic wages on gross salary and not even till 7th August, 2019. (SC Judgement copy attached)
Regards,
Suresh
From India, Thane
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EPF ON LINE REGN. USER MANUAL.pdf