Government committee clears the controversial EPFO circular

A review committee set up by the government has cleared the EPFO circular which proposed clubbing of all allowances with basic, for deduction of Provident Fund.

The circular was an effort to check the practice of splitting of wages by employers to reduce their provident fund obligations. However it was put on hold following reports which criticised the move of the retirement fund body. The government later constituted a committee to look into the matter.

The tripartite panel set up by the Labour Ministry has endorsed the controversial EPFO circular issued On November 30, 2012clubbing of all allowances with basic pay for deduction of provident fund and redefined the process of assessment and inquiry for companies defaulting on PF contributions.

The review committee, constituted to look into the details of clubbing of allowances with basic pay for PF deductions, has supported the idea for enhancing the social security benefit under the EPF scheme run by the Employees’ Provident Fund Organisation (EPFO). As per a senior official of the Employee Provident Fund Organisation (EPFO), the circular has been revived and been sent to the Labour Ministry for further approvals.

The committee’s suggestion would be vetted by the Labour Ministry and would be put before the EPFO’s apex decision making body the Central Board of Trustees (CBT) for taking final call on it

Source : People Matters - Strategic Human Resource Management, Leadership & Management, HR Magazine India

From India, Pune

Hello to all,
Thanks for sharing an important information regarding latest developments in CPF Contribution. I would like to request to kindly provide the said at my e-mail . I will feel highly obliged.
( J.S.Walia)

From India, Chandigarh
Janak Soni

Thanks for update. However, can you please explain the effect of implementation of circular ? Clubbing of allowances with Basic for deduction of Provident Fund needs to be reviewed in its practical terms. Two questions arise :
1. Employee earning up to Rs.6500/- per month will be eligible to become PF Member. After implementation of circular in question, will this eligibility limit continue to be considered on Basic Wages or on Basic with allowances?
2. It seems that PF authority desires Deduction of PF contribution on Minimum wages. Though total wages of employee with allowances are equal to minimum wages, his basic wages would naturally be lower than the minimum wage limit. So, if Basic is lower than Minimum wages, PF will be deducted on Minimum Wages. Is this the right interpretation of Circular ?
Can you please share views ? Thanks again,
Janak Soni

From India, Surat

lets wait for the next circular by the EPFO. right now the november circular is on hold.
From India, Pune

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