Hi all, Recently I got to learn from this cite that the EPF deductions can not be on any basic pay that is below the minimum wages. I have also read the orders of the High Court and the EPF Deptt. in this regard. In my Industry, there are few employees falling under this category. My Top Management is of the view that we can merge any other allowance of the employee Salary to increase his Basic Salary, without actually effecting any increase in his salary. My own view is that once we have fixed any allowance we cannot decrease the same, hence we should increase a bit of their salary to correct the things. Please guide me in this matter.
From India, Mumbai
Dear Amarjeet,
The EPF deduction could be on basic salary less then minimum wages while the total take home salary should be more than minimum wages including the other allowance.
You are also correct that you may not decrease the allowances but you may increase it to correct/to implement a new fitments.

From India, Pune
It seems your management is not ready pay basic equivalent to minimum wages.
You have an option without making any modification in allowances, just pay EPF contribution on Rs.6500(ceiling as per EPFAct) i.e Rs 780, on employer and employee side both.

From India, Pune
Dear Ramanuj,
Have you gone through the directions of the EPF Deptt. I am attaching the same for your ready reference. Please go through the same and then answer my query. If you have already read it then kindly tell me that do you still stick with your answer. I need some more replies and guidance. Thanks and regards.

From India, Mumbai

Attached Files
File Type: pdf EPF Circular on Splitting of Min Wages Dt 23.05.11.pdf (684.1 KB, 2864 views)

Dear Kprasoon,
Its not that my company is not willing to pay the basic equivalent to minimum wages. Infact we are paying more than that. The only question is that can we raise basic by decreasing/merging any other allowance in basic or we have to increase the basic without touching any allowance. By doing this we are going to raise the pocket of the employee twice in two months because only last month we have given them the annual increments.
As far as your suggestion regarding the deposit Rs-780 on the ceiling of Rs-6500, in that case, without touching the allowances, I would prefer to deposit the EPF on the minimum wages and not on the maximum ceiling . Kindly understand my question and then apply. Regards
Amarjeet Singh

From India, Mumbai
Yes you can decrease or merge allowances. Allowances are company policy dependent and there is no statutory guidelines to have certain allowances in payslip. Anyways you are not decreasing the basic or gross salary, so there is no violation of any law as such.
From India, Pune
your views appear correct in this instance. the easiest way for your company to change this without incurring major additional costs is to outsource the people to an agency like Manpasand Manpower. this way whatever changes you want to make in th structure can easily be done without you reducing allowances while they are on your pay roll.
Kabir Luthra

From United States, Los Angeles
Dear AmarJeet,

we have also faced the same issue in company for the Minimum wages not only for Karnataka but for all locations across India.

i agree with other comments that you can add up other allowance to B+DA component as the other components are only tax savings/ exemption componets.

But Please understand one thing if you increase the B+DA then automatically employees take home will be reduced as we calculate the PF Ee & Er contribution on the same.

So as a part of market/ statutory correction you can always communicate/convince your management with the concern of your finance team (Might be CFO or any senior person in change in finance) to understand the feasibility of financial status of the company for the better understanding and proposal for the management.

I have done the same comparison study with the existing pay/CTC structure and new pay/ CTC structure according to the Minimum wages among the group of companies and proposed the same for difference to be invested from the management as a part of statutory correction.

The management will definitely be happy to learn the same and also to avoid the trouble from the statutory bodies.

I was successful in implementing the same among the group of companies.

Hope you can also do the same and wish you good luck for this assignment.

For any clarification get in touch with me


Deepak S

From India, Bangalore
Can someone kindly provide me the recent Order ofPunjab & Haryana High Court on splitting of minimum Wages. Regards Satya
From India, Gurgaon
If I pay a salary of Rs. 7000/- PM to my new employees who are not existing members of EPF and have opted in writing to not to get the PF Deducted from their salary. Can I design a pay structure keeping the basic above Rs. 6500/-PM which is statutory limit for deduction of PF.
Kindly comment with relevant laws / rulings

From India, Gurgaon

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