M.P. High Court's judgement's about PF, its impact and way out

Sharad.Patil Started The Discussion:

Dear Sirs,

What is the impact of M.P. High Court's recent judgment whcih laid down the principle for treatment of certain allowances like conveyance, special allowance etc as component of “Basic Wages” for the purpose of Provident Fund liabilities if the same are being paid uniformly, necessarily and ordinarily to all employees. The same may be utilized as per merits of the case.

Whats is the possible way out as it will hike up the company's wage budget.

Pls advise.


sethupathy -  Member Since: Jun 2007
Dear Sharad,

You can add the recent Madras High Court ruling (elsewhere I have posted it in this forum) on these type of allowances also.

In near future, there will be only two to three components in the salary structures like Basic and DA, HRA, and some allowances like Washing Allowance etc.,

Nowadays,as all the salaries are fixed in CTC., the change in components will not affect much. Modifications with in the salary will be made without altering the CTC.

For earning over 15000,these ruling will not made any significant impact in salary structures.

Let us wait for some more comments from our members...

Excellent HR Services,

rajeshbknair -  Member Since: Sep 2010
Regarding the Judgements of highcourts of MP and Madras and the Circular dated 23rd May 2011 — Is it going to have any retrospective implications?

Sharad.Patil -  Member Since: Aug 2010
Dear Sethupathy Sir,

If we say that person earning over 15k, these ruling will not make any significant effect.

In that case suppose person is earning Rs. 60,000/- per month which includes basic Rs. 20,000/- and other component like HRA Special Allow, Med. Allow etc.

In case employer's contribution is Rs. 2734/- now will be hiked to TWO TIMES beacuse of inclusion of other component (Spl allo etc) for PF applicability. The overall wage budget of the company is hiked.

Pls advise.


sethupathy -  Member Since: Jun 2007
Dear Sharad, As per Statutory norms you have to contribute only for 6500. S.Sethupathy, Erode

Sharad.Patil -  Member Since: Aug 2010
Sir, My say was that in case company is contrubuting 12% on basic even if basic is higher that 6500/- (mostly in all the big companies ) then impact will be there on budget. Thanks


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