PF Deductions Below 15000 - CiteHR
Madhu.T.K
Industrial Relations And Labour Laws
Mgsuresh
Hr Executive

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Dear All,

We are into restaurant industry in kerala.We have an employee strength of 248 and employees below 15000 are given pf,esi benefits.We have a split up of salary under various heads like Basic,DA,Washing Allowance,and Special allowance.Since ours is a restaurant industry we provide accommodation,food for employees as per minimum wages act we fixed the basic salary.Take the case of utility boy who draws a salary of 8000,his Basic would be 3200,DA-3500,washing allowance -500,Special allo-800.We paid the pf as like (3200+3500) and employee share of (6600*12%=804) and employer share(6600*13.61%=898).

PF enforcement officers are insisting to pay for entire amount ie 8000 or else 20% deduction on Basic+DA as HRA (8000-804=7196),so that employee share becomes Rs.864(12%) and employer share becomes 979(13.61%).Since we are providing accommodation to employees we cant claim HRA under salary head.So the cost even rises to Rs.960(12%) and Rs.1089(13%).

Do any order exist as per PF act when raised the ceiling limit from 6600 to 15000 saying only HRA can be deducted,or is these any existing orders relating to PF saying only Basic+DA only be considered for PF deductions.

It is being heard that there is an order from Finance Ministry saying Basic+DA is to be deducted.

Please help in this regard

Suresh
9645202333
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The definition of basic salary in the PF Act remains the same but there is a proposal to amend it. With the amendment all allowances which are paid to employees in general except HRA will become part of PF qualifying salary.

As per the Employees Provident Fund and Misc. Provisions Act (section 6) PF is payable on Basic wages, dearness allowances and retaining allowance (if paid). The words basic wages given in this section is misunderstood by confining it to the basic wages as per the company's pay structure. But it has a wider meaning as given in section 2(b) of the Act. According to section 2(b) basic wages means all emoluments which are earned by an employee with the exclusion of the following:

1. cash value of the food concession

2. DA, HRA, overtime payments, commission, bonus or similar payments

3. any presents made by the employer

Of these DA is taken separately as a component of PF qualifying salary under section 6 of the Act and all other allowances expect HRA and OT wages will form part of basic salary.

In a pay structure like the one given by Suresh, there is another problem and that is with regard to special allowances. In various court verdicts, [R Ramanathan Chettiar Jewellers, Madurai vs. Regional PF Commissioner, Madurai – 1988 (ii) LLJ 045, Associated Cement Company Ltd. and Ors. v. R.M. Gandhi, Regional Provident Fund Commissioner, Gujarat(1995-III-LLJ(Suppl.)-368, Bridges and Roofs (India) Ltd Vs. Union of India [1963 (2) LLJ 490], the courts including Supreme court (in Bridges & Roofs' case) have ruled that if (special) allowance is paid commonly to all employees, that will be treated as part of basic salary and if it is paid only to some employees considering the nature of their duties or purely out of management's own interests or pleasure, then it should not be considered as part of wages for PF contribution. I don't think that the management will pay something with pleasure to utility boys so that this special allowance can be excluded from contribution.

The matter of bifurcation of salary, though with various courts including the Apex Court, may be decided in favour of PF authorities only because of the reason that this is a social security legislation benefiting the employees. Therefore, my advice is to pay it on the gross salary.

Madhu.T.K
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