PF contribution- encashment of leave not to be included

PF contribution- encashment of leave not to be included - Where the wage is universally, necessarily and ordinarily paid to all across the board such emoluments are basic wages : Supreme Court By TIOL News Service NEW DELHI, MAR 17, 2008 : THE dispute is whether the amount received by encashing the earned leave is a part of "basic wage" under Section 2(b) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 requiring pro rata employer's contribution. Regional Provident Fund Commissioner held that the amount received on encashment of earned leave has to be reckoned for the purpose of Section 2(b) of the Act. Accordingly, demands were raised. Appeal was preferred before the Employees Provident Fund Appellate Tribunal which held that it is not a part of basic wages. However, it was observed that a different view was taken by the Bombay High Court and, therefore, the respondent in the appeals i.e. the Commissioner should take up the matter before the Karnataka High Court. Accordingly, Writ Petitions were filed before the Karnataka High Court which allowed the Writ Petitions and set aside the impugned orders. The present appellant preferred Writ Appeals before the Karnataka High Court which came to be dismissed by the common impugned judgment and so they are before the Supreme Court. The appellant submitted that the controversy was settled long back in 1963 in Bridge & Roof Co. ( India ) Ltd. v. Union of India. The basic principles as laid down in Bridge Roof's case on a combined reading of Sections 2(b) and 6 are as noted by the Supreme Court : (a) Where the wage is universally, necessarily and ordinarily paid to all across the board such emoluments are basic wages. (b) Where the payment is available to be specially paid to those who avail of the opportunity is not basic wages. By way of example it was held that overtime allowance, though it is generally in force in all concerns is not earned by all employees of a concern. It is also earned in accordance with the terms of the contract of employment but because it may not be earned by all employees of a concern, it is excluded from basic wages. (c) Conversely, any payment by way of a special incentive or work is not basic wages. In TI Cycles of India , Ambattur v. M.K. Gurumani and Ors. it was held that incentive wages paid in respect of extra work done is to be excluded from the basic wage as they have a direct nexus and linkage with the amount of extra output. It is to be noted that any amount of contribution cannot be based on different contingencies and uncertainties. The test is one of universality. In the case of encashment of leave the option may be available to all the employees but some may avail and some may not avail. That does not satisfy the test of universality. As observed in Daily Partap v. Regional Provident Fund Commissioner the test is uniform treatment or nexus underdependent on individual work.

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