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Productivity is how much a worker can produce in a shift, not how much of statutory dues is given. As I explained in my previous post, this is a fraction of a percentage of total cost. In terms of competitive, this hardly counts. PF on total wages does not stop collective bargaining. Nothing stops an employer from gicing benefits. It stops them from pretending additional wage is benefit. Actual benefit - canteen, bus services, etc are not counted as wages for PF. It's only when instead of giving a benefit, the employer breaks up wages into segments that pretend to be benefits (travel allowance, food allowance, attendance allowance) this runs I to trouble.
The other argument you make, there is a cap. The cap is 12% of ₹15000. That has not changed. If a person earns ₹100,000 that does not mean employer pays ₹12000 per month as additional PF.

From India, Mumbai
Dear Banerjee,
Considering total wages is idealistic situation but think of those categories of employers who do not have inclination of contributing to PF as discussed earlier. Virtually they do not want to pay minimum wages standards when they do not want to contribute as per existing law even. Can workmen expect from them that they will be ready to bear additional burden. So before before looking for higher targets or while looking for higher targets, the stringent measures of implementation of scheme should be thought of, discussed and debated upon. The focus should be transparency and crystallization of rights under the Act which an ordinary workman can identify instead of leaving everything to be determined through litigation.

From India, New Delhi
I think the move to PF on total wages is intended to ring fence those who have been avoiding PF contributions by manipulating wage structures. Same with minimum wages. Now with the new regulations, PF wil be monitoring total wages and can identity those paying less than min wages. Ofcourse it is up to local. Labor officials to use the data so collected. To my mind, whether the employer "wants to bear the burden" is immaterial. They will be forced to.

About the rest, I would also prefer if all rights were crystallised and litigation minimised. However lawyers have a tendency to find loophole in even the most clear meanings, so I think that is most idealistic....

I would request all of you to post suggestions on the site on what parts of the act can be further modified to ensure better complaince and to make the act more clear. They are not brudging on wage definition so don't bother with that. The industry has been trying for over 18 months to prevent that change, including paying huge amount to ministry since the Allahabad HC decision and the subsequent PF circular was out on hold.

So please focus your suggestions on the other parts that need to be strengthened, modified, clarified. Our suggestions will definitely be considered by the current ministry as they are actually dynamic


From India, Mumbai
Dear All
The Govt could propose the amendment fixing a salary ceiling of Rs 6500/- for PF contribution of both employer and employees. In other words any employee whose salary is upto Rs 15000/- will be covered under the Act - but employer's contribution could be restricted upto Rs 6500/- per month. This will not only restrict huge burden to many employers but will also be a big relief even to many employees whose take home pay will be suddenly reduced because of huge revision in salary ceiling. The present option of voluntary contribution can be retained for the willing employees to contribute more.This could continue for few more years. This suggestion will be almost like Bonus (eligibility Rs 10000/- but payment of Bonus restricted to Rs 3500/-). I invite comments / suggestion from seniors on this proposal.
Regards
N Natraajhan, Sakthi Management Services (HP : + 91 94835 17402 ; e-mail : )

From India, Bangalore
1. Sir(s), I fully agree with the views of Sh.Saswata Banerjee in this thread as above indicating that the terms "basic wages" are being grossly misused by the vested interests. The Government should plug this loophole in the EPF & MP Act, 1952 by redefining the term "wages" so that the total wages are considered while paying the contribution under EPF & MP Act, 1952. I recollect some years back ESIC had issued a circular indicating that the "conveyance allowance" will not be considered as "wages". The net result of this circular was that it was grossly misused and the employers used to book the salary/wages by indicating huge amount as "conveyance allowance". The result was the said circular was later on reversed and withdrawn by ESIC. The provisions of EPF & MP Act, 1952 so far as the same were till the years 1989 (I am not sure about exact date), when there was provision of qualifying service of 90 days for an employee were also grossly misused. The employee(s) was kept out of membership of EPF by changing his name well before he completed the qualifying service of 90 days. The result was the Paliament abolished the so called provision of qualifying period by amendment in the said Act and the result is that as soon as the employee is engaged in a unit where said Act is applicable, he becomes entitled for EPF membership. However, if the amount of contribution becomes higher by deducting from total "wages" as per proposed revised definition of "wages" then the Government should definitely, in my opinion, reduce the rates of employers' and employees' contribution in the said Act.

2. Further in my opinion, for the legislature it is important that the laws so framed should not be such which may be either misused or mis-interpreted. The 2nd National Commission on Labour in its report in the year 2002 had also recommended for unification of labour laws in the words :6. 21 Existing set of labour laws should be broadly grouped into four or five groups of laws pertaining to (i) industrial relations, (ii) wages, (iii) social security, (iv) safety and (v) welfare and working conditions and so on. The Commission is of the view that the coverage as well as the definition of the term ‘worker’ should be the same in all groups of laws, subject to the stipulation that social security benefits must be available to all employees including administrative, managerial, supervisory and others excluded from the category of workmen and others not treated as workmen or excluded from the category of workmen."

3. The term 'wages" is different in many labour laws and for a common man it becomes difficult to understand as to what constitute" wages". If Government is trying to bring the definition of wages at par with other enactments as mentioned by seniors and experts in remarks in this thread, then in my opinion, the same should be welcomed.

4. It is further submitted for kind consideration of seniors that the present Government has also prepared a Bill titled: The Small Factories ( Regulation of Employment & Conditions of Service) Bill, 2014 and had called for comments from public. In the said proposed bill, the factories employing less than 40 persons are reported to be defined as small factories and will be out of purview of EPF & MP Act, 1952. Therefore, the proposed amendments in said EPF & MP Act, 1952 reducing the coverage to 10 or more persons will, in my opinion, be contradictory to the above proposed bill of the Small Factories (RE&CS) Bill, 2014. Only time will tell as to which of the proposed amendments will be finalised and passed by the Parliament.

From India, Noida
Is it your case that an employer need not remit PF contributions on a wage exceeding Rs.15,000/- under any circumstances, despite the change in the definition of ‘wages’ inclusive of all payments, as proposed in the amendment?. If so, do you claim that the EPFO will buy this proposition? In that case, the definition of wages should be something totally different from what is in force now and what has been proposed.

Secondly, your reasoning that wage cost is just a fraction of the cost of production, so as to justify a higher PF contribution by the employer is a highly specious argument. Perhaps that might be true in the case a few highly automated sectors of the industry where the number of workers employed is few, whereby the ratio of capital deployed to that of labour is very low. But in labour-intensive industries for instance, agro industrial enterprises like plantations, the wage and wage related costs goes upto more than 50% of the cost of production. These are among the sectors which contribute to the bulk of the PF subscribers. For such employers, every rupee in additional liability would count, especially if such liability could be avoided through negotiated settlements with the employees. It is where additional productivity on the part of the employees is taken as the yardstick for extending proportionately additional monetary benefit to workers who produce more. By agreement, it is legitimate to prescribe that such payments will not attract social security benefits. Please refer to the decision of the Madras High Court on this subject(RPFC Tamil Nadu Vs. WIPRO Ltd, 2009-II-LLN, 198).


From India, Coimbatore
Can anyone forward suggestion to the Secretary regarding the suggestion. Is the OFFICE MEMORANDUM forwarded to PF officials.
From India, Cochin
This site address regarding the query has already been forwarded to the secretary, labor thru email
From India, New Delhi
Let's start with the last point.

I have not seen that particular decision of the court, but it is a given doctrine that you can not contract away statutory dues or liabilities. So no, you can not make an agreement with employees that you will not pay PF on certain amount. You can (under the existing law) have certain part of your payroll in terms of allowance that is not covered in PF. That is the loophole now proposed to be removed.

I specifically mentioned in my post that I am talking of cost structure of manufacturing. plantation and service industries have a different cost structure. But at present, manufacturing is the largest contributor of PF, by far. Not plantations. The arguments made are spacious. Either because they lack understanding of the cost and impact on profitability / pricing, or because someone is deliberately ignoring reality to make a point.

Employer is not required by current law or the proposed law to pay PF for more than that on salary of ₹15000 per month. So for higher pay emoloyees, the impact as percentage of CTC is even lower. Further, employees change jobs, and join at higher and higher salaries (except in some traditional factores and those in low industrial area) and reach a cut off point after which they are outside the PF limits. This will be stopped once universal account number is propperly implemented. But till then, it also lowers the impact of PF on total cost, sales and margins


From India, Mumbai
Dear Pradeep, Have you received any reply from the Under Secretary for your letter. Rg, kamalakkannan.v
From India, Chennai

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