Partner - Risk Management
Harsh Kumar Mehta
Consultant In Labour Laws/hr
[email protected]
Head - Outsourcing
Sr. Manager -hr
Legal And Hr Advisor
[email protected]
Consultant In Legal Matters
Human Resources Manager

Cite.Co is a repository of information and resources created by industry seniors and experts sharing their real world insights. Join Network
EPFO has invited suggestions on proposed amendments to PF Act by 30th December 2014: <link updated to site home>

From India, Malappuram
Dear Mr Agrawal
Thanks a lot for the timely information about the proposed amendment in the EPF. Most of the employers already burdened with the increased ceiling in PF will be further affected by the proposal to pay PF contribution for the salary upto Rs 15000/- per month. Moreover the present exemption to the apprentices will also be removed. Employers should represent to the Govt to be reasonable and cautious, because the employees whose take home pay had already been reduced will also be affected. Further, the responsibilities of the PF authorities will also become very high compared to the new coverage of establishments, compliance in the covered establishments and settlement of more claims. We should strongly request the Govt to postpone the proposal for few more years.
N Nataraajhan, Sakthi Management Services (HP : + 91 94835 17402 ; e-mail : )

From India, Bangalore
The changes were expected.
The question is whether they can get it passed by the Rajya Sabha. I think this will take at least a couple of years to come into effect. Modi does not control the rajya sabha and the opposition parties will oppose this bill.

From India, Mumbai
You have spent a lot of time analysing whether wages should be basic or gross.
I think there is no 2 options here.
The concept of Basic Wages has been thoroughly misused by the private sector. They manipulate the wage structures constantly to lower PF burden and the workers are the losers. People with 30-35000 a month are shown with basic of 5000 per month. The government has no option but to get the defination to all inclusive gross wages.
In addition, i think since this is for savings of the workers and their pension, its better to have it on the gross wages. That way the worker has more money when he retires. Which is important in the medium and long run, irrespective of how much crocodile tears the industry sheds in the short run.

From India, Mumbai
Mr. Banerjee,

The private sector thrives on the productivity of its workforce. Every effort should therefore be made to make higher productivity attractive. You accuse employers of 'manipulating' their wage structure. Such manipulation would occur only in cases where the employer unilaterally and arbitrarily fixes his wages for his employees.

But, the problem with the EPF Act wage definition as we see it is that it would leave no room for even legitimate collective bargaining between employers and employees through their unions to arrive at an agreed and acceptable wage structure between the parties, because of the high fixed statutory liability on contributions. This would only eventually dissuade even a generous employer from extending any further benefit to his workers.

Insofar as pension is concerned, the pensionable salary is to be taken only at Rs.15,000/- in any case, whatever might be the earnings of the employees. So, what exactly is the prejudice caused ?. Somebody earning Rs.1,00,000/- a month should not be dependent on his employer for doling out his social security benefit without any cap or ceiling!

The Government may score brownie points by including and treating every payment as wages, but is it a sustainable idea in the long run is the question to be answered.

Pradeep Sukumar.

From India, Coimbatore
Two suggestions are made pl. Firstly, definition of basic wages is proposed in the Bill to be substituted by wages. This term is very wide and implicitly as per contract will include HRA, DA, bonus etc. as according to the proposed definition, wages means all remuneration paid or payable. On contrary employer may even contract out to minimize the wages for purposes of PF. On the one hand it may raise contributions limit largely and in some cases employer may contract with employee to limit scope of wages to reduce his part of contributions. Under Coal Mines Provident Fund Scheme, the term basic wages exclude HRA,DA, food concession, overtime, bonus, commission, presents, or donations. Thus there is need to specify the term wages for the purposes of the Act. Further, the term basic wages used in Act as under section 8A should be substituted by wages as term “basic wages” is proposed to be omitted.

Secondly, there are cases where employer issues only vouchers for salary to avoid his contribution to PF. In view of certain decisions of HC as cited in Law Commission of India reports an employer shall be deemed to be liable to pay arrears from the date when employee is eligible under the Act irrespective whether he recovers the dues under the Act.

From India, New Delhi
Mr Banerjee

Your comments about the private sector is totally wrong. There are strong and multiple trade unions in the private sector who have fought over several decades and entered into many tripartite agreements. The proposal will be a very big blow to many veteran trade union leaders who have negotiated and signed many long term settlements providing for several allowances which are not considered for PF and the same has also been specifically agreed in such agreements. Therefore the proposed amendment suddenly proposing all allowances for PF contribution will be against the collective bargaining and will create lot of confusion and litigation unnecessarily. The proposed amendment will not only be a huge burden on the employers, many workers of late like more money on hand to meet the increased family expenditure than to save more for their future.The present enhanced limit may be retained for few more years without any further amendment.

The PF authorities should concentrate more on the compliance - coverage of new establishments & more employees, payment of contribution by the employers on time instead of allowing accumulation. The PF department should also propose to restrict the administrative charges beyond Rs 6500 /=.

Moreover the present exemption allowed to the apprentices (both Act apprentices and under the Company's Standing orders) need not be disturbed, because the Govt of India has also recently announced subsidy to the employers to encourage more training opportunities for the trade apprentices.


N Nataraajhan, Sakthi Management Services (HP:+ 91 94835 17402 ; e-mail:[email protected])

From India, Bangalore
Dear All,
The more worrisome points apart from the inclusion of other components in the definition of wage is the exclusion of exemption given to apprentices & trainees engaged by the employer as per the provisions of the certified standing order. In one side govt. is saying that more focus on manufacturing and developing more skilled workforce, this exclusion restrict the employer to provide apprenticeship opportunities to freshers as now stipend also will be come under EPF purview.
I strongly feel that the benefits to the apprentices/ trainees to be continued....

From India, Coimbatore
Yes, even in private sector with large unions, employers try to structure salary to avoid PF. Unions whose claim to fame is negotiating non PF allowances is doing more long term harm to employees. The so called buden on employers is short term and short sighted. What difference does it actually make ? Most industries material accounts for 80-85% of cost. Overheads accounts for 15% and consumables also takes a lot. What is left for salary is not more than 5%. Impact of increased PF cost will be a fraction of a percentage. It actually makes no difference beyond the pettiness of lower level officers who feel comoany will reward them for it.

From India, Mumbai
Dear all,

The need of the hour is to be specific as regards components of wages instead of keeping it vague on account of variable factors such as bonus, productivity linked incentives etc which may fall within the purview of wages. If it is vague then chances of litigation on settling what are wages of an employee will complicate the issue. Secondly, one should not ignore the queries raised time and again on this site that employer pays only on voucher and does not contribute to PF. I have suggested earlier the requirement of an explicit provision to tackle these evasions. The Bill should also focus on tightening the loopholes of such sorts and empowering the machinery of EPF at lower rungs to enforce implementation of EPF scheme promptly on getting complaints even anonymously but with adequate prima facie proofs. A number of queries on this site showed fears of victimization if the new employee tries to seek PF contribution. Let us not stop introduction of Bill only because of dispute on scope of wages but these important issues need to be highlighted and suitable provisions be incorporated in the Bill.

From India, New Delhi

This discussion thread is closed. If you want to continue this discussion or have a follow up question, please post it on the network.
Add the url of this thread if you want to cite this discussion.

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2020 Cite.Co™