Query on epf contribution

The contribution which shall be paid by the employer to the Fund shall eight and one-third per cent of the basic wages dearness allowances and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a contractor) and the employees' contribution shall be equal to the contribution payable by the employer in respect of him and may if any employee so desires and if the Scheme makes provision therefore be an amount not exceeding eight and one-third per cent of his basic wages dearness allowances and retaining allowance (if any) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section;

Provided that in its application to any establishment or class of establishments which the Central Government after making such inquiry as it deems fit may by notification in the Official Gazette specify this section shall be subject to the modification that for the words "eight and one-third per cent" at both the places where they occur the words "ten per cent" shall be substituted : 

Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee the Scheme may provide for the rounding off of such fraction to the nearest rupee half of a rupee or quarter to a rupee.

Explanation 1 : For the purposes of this section dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee.

Explanation 2 : For the purposes of this section retaining allowance means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working for retaining his services.

If split of  the wages under various heads is only a subterfuge to reduce 
the PF contribution then the 7A authority has jurisdiction to probe into 
the reality of the fact and if he finds that his split is only a subterfuge 
then he can determine the PF dues after clubbing all these heads of wages 
as basic wages or can mandate what should be the basic wages out of the 
total salary / wages. paid to the employees. 

You may please refer :

Supreme Court in the case of SHREE CHANGDEO SUGAR MILLS AND 
ANR. v. UNION OF INDIA AND ANR., 2001 (1) LLJ Pg. 698

Thanks,
Manindra Singh

If split of  the wages under various heads is only a subterfuge to reduce 
the PF contribution then the 7A authority has jurisdiction to probe into 
the reality of the fact and if he finds that his split is only a subterfuge 
then he can determine the PF dues after clubbing all these heads of wages 
as basic wages or can mandate what should be the basic wages out of the 
total salary / wages. paid to the employees. 

You may please refer :

Supreme Court in the case of SHREE CHANGDEO SUGAR MILLS AND 
ANR. v. UNION OF INDIA AND ANR., 2001 (1) LLJ Pg. 698

Thanks,
Manindra Singh