Pay More For PF, Take Home Lower Salary Every Month (Times Of India Dated 11th December, 2012) - CiteHR
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According to this notification we can understood they want to club the allowances paid to the employee "necessarily,ordinarily and uniformly" which includes the allowances like medical/conveyance because most of the industries will pay these allowances as common to all employees but other allowances will differ in quantum. Another point is the maximum limit of EPF is Rs. 6500/- and this circular is quiet on the maximum limit of EPF wages. So even though all the allowances are clubbed together the employer's liability is up to Rs. 6500/- only. This circular may affect the employers who employs the International workers because presently the International worker's contribution is calculated on basic salary not on the allowances but now it will be calculated on the entire amount payable to them. This circular may be issued only to prevent the employers who is quoting the low basic and high allowances. the headline of the news paper expressed diffrently and also they have given a worked example for higher rate of wages. The EPF contribution paid for the wages/salary which is more than Rs. 6500/- is a voluntary contribution only. So the impact of circular is nothing to do with the EPF contribution. This is my view.
In addition to michle view i want to focus on the subject of the circular which especially focus on pending cases u/s 7A of EPF & MP act. In point 12 of the circular the term quoted "Basic -wages" which ws defined under payment of wages act.As far as allowances are concern it is strange for me also that how TOI & various new paper quoted that All other alowances except HRA should be the part of basic wage and EPF deduction will be on the whole instead of Basic+da+retaining allow.+food conc.As we all know earlier split of minimum wage is prohibited by EPFO and directives was also issued that basic should not be less than the minimum wages of the state as revised by the state government time to time. I earlier also stated that Hon'ble Supreme court granted stayed on SLP Surya Roshni Vs RPFC gwalior. And CPFC has no jurisdiction over Hon'ble Supreme court. As far as this circular is concern this is only the directive to the EPFO officials for speedy disposal of 7A cases who are pending from so many years.If anybody is found guilty of splitting of minimum wages under various component then the laiblity of EPF should be on whole instead of basic but mind it split of minimumwages is prohibited.I also must advice to the learned journalist first they come through the Payment of wages act, Payment of minimum wages act, EPF & MP act. Then differntiate the wages, minimum wages, component of basic wages then report the same to the news paper rather to create such misunderstanding. Last but not least this circular is meant for sppedy disposal of 7A cases.

Thanks & Regards,


Sumit Kumar Saxena

+91-9899669071, 0120-4131277

Dear All
One of the member has uploaded paper cutting dated 13-12-2012 which states that there is no change in PF calculation heads as for now till further order. Please see the attached pdf file
Vivek Sang.

Dear Vivek Sang, This seems to give better clarity on the topic. Thanks for sharing the info. Just to correct the date of issue is 14th December, 2012 Friday. You can correct that. Thanks!!
Dear All, How can I believe on matter of status quo on the based of newspaper. If , it is true why not Labour Ministry publish notice or order ? How many agree with this ? Regards Mukund
Dear All,

This entire week was panic not only to HR commodity but to all working community. I will say that the TOI has created this panic by publishing the article on front page giving broad headline “Save more in PF, take home lower salary every month” and that too without studying all the aspects of EPF&MP Act 1952. The article is misleading with examples which created panic amongst all.

In our CiteHr there are many postings in different threads on this topic. Many viewer viewed the postings. I appreciate the posting by the members but very few discussions I found to be really meaningful.

By this time many experts have given their opinion on this subject. Shri. B.C. Prabhakar, President- Karnataka Employers’ Association who came out with Circular to its members. The said circular is posted in our CiteHr by Shri. Sasidharan Kollery, which is available to us. Shri. Vivek Sang who has posted clipping of Hindu dated 13.12.2012 which says maintain status quo on the circular- as said by Union Labour and Employment Minister.

With this, the matter is now clear to all. But still I wish to give some points. This points I wish to give in every thread which I came across on this topic. This may be repeated but helpful in easy understanding.

The Circular in this context is an internal circular giving guidelines to its officers for quasi-judicial proceedings under section 7A. The Sr. 12 in this circular on splitting of wages is an explanation or clarification on the definition of Basic wages which is bit confusing one and probably half way attempt by the officer who signed it on his last day of retirement.

There is no mention in this circular as regards to Paragraph 2(f) and or Paragraph 26A. This means both the Paragraphs are unchanged.

There is no change in Paragraph 2(f) and or Paragraph 26A. EPFO can not make change in this Paragraphs. Any amendment in law can not be done by such kind of internal circular. No one has any right to do it.

The said paragraphs are given below for ready reference:

Paragraph 2(f) of the EPF scheme defines an excluded employee as an employee whose pay at the time he is otherwise entitled to become a member of the Fund, exceeds Rs. 6,500/- per month. The explanation to the paragraph defines the pay to include basic wages with D.A, Retainers allowance if any and cash value of food concession admissible thereon.

Paragraph 26A which contains the provisions with regard to retention of PF membership stipulates that where a monthly pay of a member exceeds Rs.6500/- per month the contribution payable by him and in respect of such employee by the employer, shall be limited to the amounts payable on a monthly pay of Rs.6500/- including D.A, Retention Allowance if any and cash value of food concession.

The question of whether the allowances should be taken into account for the purpose of PF contribution is still pending adjudication before the Supreme Court.

According to me the inclusion of all allowances for the purpose of EPF contribution will not affect much to majority. It will affect to those who are paying basic less than minimum wage rate.

Hope, now there remain no doubts in the mind of any body.

Thank and regards.

Keshav Korgaonkar

The point explained by Mr Korgaonkar is very clear. In spite of hue and cry, it wont affect the people, since most of them are above and above Rs. 6500-/ but it only affecting the workers whose wages "less than minimum wage". Employers are exploiting this category people and to that extent duping the government. Your explanation is very very clear.
Dear Friends, the circular for kept abeyance the decision circular of 30/11/2012. it will be help to you. Gautam Patel

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Hon. Minister was unkind towards the EPF subscribers. It was very simple to stop the operation. But not clarified what is stopped what is not stopped. As result, the amassing by Employers continue and meekly the worker is supposed bear the brunt. Is it the intention of the Minister to loose government earning and beat the common man on that account. What kind of government and rulers we have? This kind of open support to the employers is nothing but high-handedness.
Dear All,

Please find below todays news article on the subject:

NEW DELHI: Business chamber Ficci has opposed the proposed changes to the definition of 'basic wages' under the Employees Provident Fund & Miscellaneous Provisions Act (EPF and MP Act) 1952.

The government had introduction a triple test - 'Ordinarily, Necessarily and Uniformly' - to define basic wages for provident fund deduction through a circular issued in November last year, but had later stayed its implementation.

Ficci warned that the proposal will have 'huge financial implications both for industry and government and may even be counterproductive to the EPFO, as organisations who are extending coverage to employees receiving salaries above 6,500 may choose to opt out, depriving the employees coverage under a globally renowned social security scheme'.

Under the current rules, an organised sector worker is not required to mandatorily join the provident fund scheme of the EPFO if his basic salary exceeds 6,500 a month.

"Most of the employees today join an organisation above this statutory limit and they are voluntarily covered by the industry," the industry chamber said in a statement. It has argued that PF deduction should be on the full amount of 'minimum wages' where such wages are being paid under the Minimum Wages Act, 1948. "For employees who are on a higher salary bracket and receiving allowances as incentives to promote business, the PF contribution should be restricted to basic salary," it said.

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