Human Resource-professional
Hr-manager, Trainer, Writer
Satish Kumar Bhargava
Social Security, Training, Vigilance &
Manager - Hr & Ir
Hr Executive
Officer-hr In Ind-swift Group
Junior Executive Hr
+8 Others

Thread Started by #hrkarthik78

Dear All
I had faced 7A Enquiry in my earlier organization. The main focus was upon salary structure. Enforcement Officer reported that our Basic was very low and allowances were more. Hence he added all allowances excluding current Basic and HRA and restricted to Rs.6500 and arrived dues for 25.61%. He suggested us to change the salary structure, We revised our salary structure like 60% Basic, 30% HRA 10% other allowance. Even then PF Commissioner and Enforcement Officer suggested to increase the Basic from 60% to 80%, rest 20% shall be other allowance.
My question is IS THERE ANY RULE MENTIONED IN EPF Act that Basic Wages should be 50% or 60% or 80% ? Please confirm me on immediate basis, since iam going to implement new structure in my new company.
My id is ,
Thanks in Advance
With Regards
23rd July 2012 From India, Madras
Dear Mr. Karthik,
There is no such rule.
Since from your posting I cannot make out the kind of organisation of yours.
You simply need to ensure that the basic is not less than the minimum wages.
If the inspector ask for something ask them to show where it is written.
23rd July 2012 From India, Mumbai
The P.F Act does not prescribe any minimum limit for basic and allowances and it is entirely employer's discretion as to how to structure the salary of it's employees.
HR & Labour Law Advsior
23rd July 2012 From India, Mumbai
Dear Karthick,
There is no minimum wages structure only for PF, you have to comply with the minimum wages applicable to your establishment as per the Minimum wages Act. When you comply with the Act this question does not arise.
24th July 2012 From India, Coimbatore
We need to ensure that the basic & the DA is as per minimum wages notified by the respective state govts every year for each industry. The rest is left to the employer to structure the salaries.
24th July 2012 From India, Bangalore
in Punjab the minimum basic has fixed by the govt. w.e.f. 17.02.2012, the govt has given a notification that "the minimum rates of wages shall be the basic rates of wages". it means that there is no any rule to keep the basic 60%/50% of salary. this is your own decision but should be or above minimum wage.
24th July 2012 From India, Chandigarh
If you are paying the salary above the the minimum wages, then it is not illegal if you are not paying the Basic Salary and D.A. / special allowance as per the minimum wages. This is held in the judgement of the Honourable Supreme Court in the case of Airfreight Ltd. v/s. State of Karnataka. Kindly refer the below link.
Airfreight Ltd. vs State Of Karnataka & Ors. on 4 August, 1999
Kuldeep Singh
24th July 2012 From India, Vijayawada
Dear All,
There is no any rules stating that you should calculate PF in basic or allowances, Pf should be calculated on gross excluding HRA and washing allowance up to my knowledge.
If i am wrong please update me on the same.
Ajay Krishnan
Junior Executive
24th July 2012 From India, Chandigarh
Basic Salary should not be less than the minimum wages notified by t5he government . If basis is more than minimum wages then Management are free to fix Basis salary and Allowance. However it should be applied equally for all employees.
25th July 2012 From India, Delhi
As I am a fresher Can you pls explain from what amount the PF has to be calculated. Explain in detail about the Salary structure and % of ESI, PF, DA Etc.
25th July 2012 From India, Madras
Dear All
Please be informed that the MINIMUM WAGES(MW) and Basic Wages are two different concepts and are relevant for different purposes. The MW or Min Basic wages as per some of the State Governments are different from the Basic Wages as defined under the EPF & MP Act 1952. The EO (PF) has exceeded in his authority to have suggested any change in the Wages Structure. The EPF Act has not prescribed any wages Structure as such. Basic Wages is a term to calculate other allowances like HRA, DA, Transport All, PF ESI etc etc, where as MW is inclusive of all except DA. There is a specific exclusion of DA, HRA from Basic Wages, whereas the MW takes care of them.
25th July 2012 From India, Jaipur
All the member have given you a border suggestion which is absolutely correct so stick to that and if they ask to increase then please ask them to show you the written circular. ........... so do the needful.
25th July 2012 From India, Calcutta
Dear Sirs
It is general phenomena that EPF contribution should be paid on minimum wages declared by Labour department from time to time. The EPF Appellate Tribunal categorically held that the allowances forming part of minimum wages can be split for the purpose of EPF contribution. As such the EPF authorities have no power to hold whether minimum wages should be taken into consideration while payment of EPF contribution. Hence minimum wages can be split for the purpose of payment of EPF contribution.
For Instance: Minimum wage for Attender is Rs 6000/-. At present the EPF authorities are insisting on us to pay EPF contribution on Rs.6000/- as this the minimum wage. But as per EPF Appellate Tribunal judgement, Rs.6000/- can be divided in to different components such as 60% Basic 40% remaining allowances. In such case EPF contribution can be paid only on 60% of Rs.6000/- i.e, 3600/-.
25th July 2012 From India, Guntur
Dear All,

On 23.05.2011 the RPFC issues a circular that minimum wages can not be splitted for the purpose of PF contribution. The same was challenged by different companies in concerned High Courts. The Hon’ble High Courts of the states has different in opinion for the same, hence it was challenge to Supreme Court. Meanwhile the same circular was abeyance by the PF office till the decision of hon’ble Supreme Court.

Now the Hon’ble Supreme Court need to decide the same.

Pl also refer following order

It may be recollected that in a Review Petition by Surya Roshni Limited vs. Employees’ Provident Fund and Another, 2012 LLR 42, Division Bench of Madhya Pradesh High Court has held that Section 2(b) and 6 of the Employees’ Provident Funds & Miscellaneous Provisions Act define basic wages and HRA, overtime allowance, bonus, commission or any other similar allowance are not covered in the definition of basic wages but when special allowance, dearness allowance, conveyance allowance and other allowances are paid universally to all the employees, they would be treated as part and parcel of basic wages.

A special leave petition to appeal, as filed, came up for hearing on 13.7.2012, in which the following order was passed :




I.A. NOS.4-5 in

Petition(s) for Special Leave to Appeal (Civil) No(s).8781-8782/2012

(From the judgment and order dated 24-3-2011 in WPC No.1891/2011 and dated 22-11-2011 in RP No.117/2011 of the High Court of M.P. at Gwalior)

SURYA ROSHNI LTD. Petitioner(s)


EMP. PROVIDENT FUND & ANR. Respondent(s)


Date: 13-7-2012 These I.As were mentioned today




For Petitioner(s) : Mr. Rohit Arya, Sr. Adv., Mr. Gagan Gupta, Adv., Mr. Harvinder Singh, Adv., Mr. Sunil Singh Parihar, Adv., Mr. Nitin Gaur, Adv.

For Respondent(s) : Ms. Liz Mathew

Upon being mentioned the Court made the following


Considering the facts and circumstances of the case we are inclined to direct the petitioner to deposit 60% of the mount demanded, after getting credit to the amount already paid, within a period of two weeks. On the above facts, we are inclined to grant stay of the High Court judgment.

The I.A. are ,accordingly, disposed of

Narendra Prasad

Court Master Renukar Sadana

Court Master

If the court decides issues in favor of PF authorities then it will have long repercussion in definition of salary/wages as stated in Bonus, Gratuity, workmen compensation probably. Because these regulations are too social security benefits.
25th July 2012 From India, Mumbai
Dear Mr.Karthik,
Refer to your query on PF,there is no specific structure for salary under EPF Act-1952 Rules.According to Sec 2 (a) and Sec 6 (b) PF Contribution is payable on Basic, D.A or any other retaining allowance paid to employees.As concern the meaning for Wages specified in various labour enactments and also verdict of the Supreme Court if the components of the Salary/Wages paid to all employees are in equal manner then only we will consider other allowances as a part of salary. Break up of salary is purely is the discretion of the Company.The contributions are payable on Minimum Wages that are basic wages and DA according to category of employment as per schedule in the Notification under Minimum Wages Act applicable to your organisation according to your state prescribed, you can modify the structure of wages and remit the contributions and also comply the same for 7 A enquiry.
P.V.Rama Rao

25th July 2012 From India, Chennai
dear sir,
your question is right. some of the EO asked the company to fit basic 70% and HRA30% without having proper amendment or rules. some of the companies are paid balance contribution as subterfuge wage. finally we have given lot of judgements to prove that there is no proper rules to comply. finally they come down. now they are not pressed to fix as earlier i have mentioned. But it is necessary to fit the basic component as per minimum wages act. if you fails to do that you are liable to pay. there is no question whether you are fix the limit 6500/- for pf or not. you have to comply the minimum wages.
for HR & Legal support consultants pvt ltd
ganesh 9962603678
26th July 2012 From India, Madras
Thank You..Thank You... so much for all your feedback friends.. i prepared a new salary structure based upon all your feedback and presented to our management for approval.
I had given 2 options -
Option 1. - 40% Basic + DA (Rs.2238) (for Steel Fabrication company in T.N)+ 30%HRA+10% Conveyance Allowance
Option 2- 60% Basic (Clubbed DA with Basic)+30% HRA+10% Conveyance. I recommended the 2nd option.
Any opinions on this are welcome.
With Regards
26th July 2012 From India, Madras
Dear Member,
The EPF Officer is right. I heard from a PF-Commissioner that Basic has to be 70% on gross. Though this is not practically possible for all salary ranges, you may restrict this system for a salary upto 15000/- per month. There is no scrolling or flash notification at the EPFO site about this. You design CTC accordingly.
It is always better to apply this rule upto the ESI coverage salary limit. For remaining salary range, you apply what you have been following now in your company.
20th November 2012 From India, Madras
Dear Member,
The EPF Officer is right. I heard from a PF-Commissioner that Basic has to be 70% on gross. Though this is not practically possible for all salary ranges, you may restrict this system for a salary upto 15000/- per month. There is no scrolling or flash notification at the EPFO site about this. You design CTC accordingly.
It is always better to apply this rule upto the ESI coverage salary limit. For remaining salary range, you apply what you have been following now in your company. If the basic is too low then there is no need for contributing a small amount to PF. When he retires, his PF savings will be too little. Instead the employee can go for Recurring Deposit. Am I right....?
20th November 2012 From India, Madras
Dear Mr Karthik
The MW Act & EPF Act are not at all interconnected or interdependent on each other.For the calculation of PF Contribution Basic Wgaes only are relevant. To decide the Basic Wages the Employer only is competent & none else.Certifying standing orders also play an important role. The RPFC or the EO has no competence to direct the Employer to change the Salary Structure. Bridge & Roof, DCM (Vs RPFC) cases are relevant in this context. However the P&H High Court cases are also relevant to distinguish MW & Basic Wages. Wipro has perhaps the lengthiest list of Salary & Allowances constituents in the country.
21st November 2012 From India, Jaipur
Dear Member
1. There is no provision in PF to define a salary structure.
2. It is suggested that your basic salary should be equal to or more than the minimum wages and the allowances should be in proportion to Basic.
3. Having a proper salary structure would also ensure that Income Tax benefits, if any, will also be easy to claim.
Preetam Deshpande
21st November 2012 From India, Mumbai
Reply (Add What You Know) Start New Discussion

Cite.Co - is a repository of information created by your industry peers and experienced seniors. Register Here and help by adding your inputs to this topic/query page.
Prime Sponsor: TALENTEDGE - Certification Courses for career growth from top institutes like IIM / XLRI direct to device (online digital learning)

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2019 Cite.Co™