P.f. circular dt 30.11.2012
shailesh pandey
(Querist) 14 December 2012
This query is : Resolved
As per p.f. commissioner's circular dt. 30.11.2012 regarding allowances which is to be treated as basic salary & p.f. deduction will be made on it.as some of our employee's basic wages are less than 6500/- and they are paid allowances as HRA,Food allowances, conveyance, attendance allowance, leave enmeshment,production incentive (fix@400/-)& other allowance .what to do ? from which date it is applicable ? from December wages should we club allowances up to 6500/- including basic salary & start to deduct p.f.
also kindly advice which one is excluded from p.f.
regards
shailesh
Raj Kumar Makkad
(Expert) 14 December 2012
A recent circular issued by the Employees Provident Fund Organisation - which comes under the ministry of labour and employment - will reduce the take home pay of salaried employees. As per this circular, various allowances paid to employees will have to be added back to the basic salary and provident fund contributions computed against this higher value. This, in turn, will mean a lower take home pay.
The circular dated November 30, 2012, was issued after internal review meetings held in late November and has been forwarded to Employee Provident Fund offices across India.
Historically, most companies have been computing provident fund (PF) contributions (at 12% each by the employer and employee) against basic salary and dearness allowance only. However, the definition of basic wages has been a contentious issue, with PF authorities claiming that companies split the basic wages into various allowances to reduce the quantum of PF contributions.
Raj Kumar Makkad
(Expert) 14 December 2012
The circular deals with this "splitting up" practice adopted by employers. It states that basic wages will include all allowances which are "ordinarily, necessarily and uniformly" paid to the employees. Thus, various allowances such as conveyance, educational allowance, medical allowance, etc., will have to be taken into consideration while computing the PF contribution.
Raj Kumar Makkad
(Expert) 14 December 2012
Last year, the Madras high court and the Madhya Pradesh high court in two separate cases had held that various allowances paid by the employer to its employees under different heads such as conveyance, education, food concession, medical, special holidays, night shift incentives, city compensatory allowance, etc., qualified as basic wages under section 2(b) of the PF Act and needed to be included while computing the PF contribution.
Based on these judgements, PF officials carried out audits on India Inc and raised demands to recover the differential PF contributions. Later, pending dismissal of the writ petitions filed by these companies, the audits were held in abeyance.
Following this circular, the PF officials may once again, commence audits of Indian companies to ascertain whether the PF contribution has been rightly computed and deposited,
Raj Kumar Makkad
(Expert) 15 December 2012
How can we say that the querist is aware of the reply?
Sudhir Kumar, Advocate
(Expert) 21 December 2012
only one clause of the ciruclar is agaisnt the employer that is clubbing of wages.
PF commissioner is not competentto change th definition of wages laid down in Act
Guest
(Expert) 21 December 2012
The said circular of 30.11.2012 has already been held in abeyance vide another circular, dated 18.12.2012 of the EPFO till further orders. So, any change need not be carried out for the present.
Raj Kumar Makkad
(Expert) 21 December 2012
EPFO has stayed the operation of the circular till the finalization from GOI so no query increases thereon.
