Private Consultant On Labour Laws
Educator, Management Consultant & Trainer
Retired H R Professional
Willington Jebaraj P
Member since August, 2011
24th October 2016 From India, Mumbai
Mostly companies adopt this practice to reduce the burden of remitting the lump sum PF contributions. But it is not a fair practice. There is a circular form EPFO which states "splitting of minimum wages for the purpose of PF contribution is not permissible".
If you split the minimum wages into different sub heads, obviously you are subtracting some amount from Basic and DA part, thus by doing so you are depriving your workers from getting benefits of EPF.
Hence my sincere advise is to don't split minimum wages.
Request professionals to throw some light on this topic
24th October 2016 From India, Hyderabad
Punjab & Haryana High Court vide order dated 20.7.2011 (coppy attached) has permitted splitting of minimum wages for PF. Similarly, EPFA Tribunal vide order dated 30.11.2015 (copy attached) has permitted splitting. However, it is understood that the matter is pending before Supreme Court for final decision.
24th October 2016 From India, Malappuram
#AnonymousCan any one give a clarity whether minimum wages can be slipted into different allowances so that the contractor pay very less contribution to PF remittances.
Ex. Suppose Minimum Wage = Rs.325/Day
Total Wage for 26 days = Rs.8450/Month
Basic(@35% of Gross) =2958, HRA(@30% of basic)= 887, Other Allowanses=4605
So, he pays PF for Rs.2958 which is Rs.253.
25th October 2016 From India, Bengaluru
if the employee is of permanent nature with the establishment then HRA can be allowed as allowance from MW
but in case of casual employments, gross consolidated wages is minimum wages, and can not be split
in gross Basic + HRA = Mimimum Wages, anything paid over it may be taken in other allowances,
but in no case the EPF Wages can be below 50% of gross wages (subject to ceiling of 15000/- if maintained)
25th October 2016
State Govt. is appropriate Government to monitor, regulate and control Min. wages.Barring a few, all state Govts. have notified a fixed amount ie per day/ month amount , as wages payable. Like in UP an unskilled labour is to be paid MW @ Rs. 277.47 per day basis. In this situation, if you choose to bifurcate in your way, that will have multiple implications not only it is against and violation of Min. wages Act but also it is legally objectionable from other provisions and dues such as PF, and BONUS amount will be less paid.Same way where Basic and DA are two components of MW, few state govts are taking - always similar situations will arise. Apex court rulings will never guarantee to save one on its own verdicts decided earlier and it would be prudent and more logical if we opt not to bifurcate MW notified.One more factor we must keep in mind that Labour Laws are social beneficial piece of legislation , so always labour welfare will be base factor in adjudicationg and regulating such issues. Any short payment of wages has ten times penalty that should also be understood.So, lets agree not to play with notified rates as MW.
Labour Law Advisor
25th October 2016 From India, Delhi
MIINIIMUM WAGES CAN BE SPLIIT IINTO ALLOWANCES,, HENCE,,
EPF CONTRIIBUTIION NOT ON MINIMUM WAGES
An appeal was filed by the appellant, before the EPF Appellate Tribunal, against the order dated 14.12.2012, passed by the EPF Authority, under Section 7A of the Act, taking into consideration of the minimum wages under the Minimum Wages Act. The EPF Appellate Tribunal observed that the employer has bifurcated the minimum wages into different heads like basic wages, house rent allowance, conveyance allowance, special allowance, skill allowance etc. the employer has been paying EPF contribution only the basic wages as provided under the EPF Act excluding allowance. The headquarters office of the EPFO, vide circular dated 23.05.2011 has stated to ensure that the PF contribution shall be remitted on not less than minimum wages. Accordingly, the EPF Authority initiated proceedings under Section 7A of the Act, taking into consideration of the minimum wages under the Minimum Wages Act and directed the employer to pay the contribution so determined. The EPF Appellate Tribunal opined that minimum wages has not been defined under the EPF Act. Only basic wages is defined under the Act. The EPF Authority has no power to hold whether minimum wages amount to basic wages or not. While interpreting a provision of any Act, the Court only has to interpret the law and cannot legislate it. If a provision of law is misused and subjected to abuse of process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary. There is no compulsion to hold that the definition of ‘minimum wages’ under the Minimum Wages Act. Employer is liable to deduct PF contribution on basic wages as defined under Section 2(b) read alongwith Section 6 of the EPF Act and not on minimum wages as per Minimum Wages Act. Hence, impugned order is set aside. Appeal not allowed.
pls refer :-
M/s. Chalet Hotel Pvt Ltd Vs. RPFC, Thane, ATA No.17(9) 2013, decided on 21.07.2014
M/s. A.K. Manpower Services Vs. RPFC, Mumbai ATA No.606(9), 2011, decided on 27.07.2011
M/s Delight Services Vs. RPFC, Indore, ATA NO. 743(8)2010, decided on 26.11.2015
Thanks & Regards
HR & Labour Law Advisor
25th October 2016 From India, Agra
Please go for split up ONLY if your company is either facing financial crisis or For Long practice of splitting Minimum Wages into various Components.
As the details given clearly gives the reader his assessment and it will be termed as done to subterfuge which will go against and DELIGHT services or P&H High Court order will not help as each one is UNIQUE before the Authority under 7 A of THE E P F ACT
Splitting Minimum Wages is perfectly ok as per SUPREME COURT decision in respect of AIR FREIGHT CARGO Bengaluru vs The Government of Karnataka and others
25th October 2016 From India, Chennai
I have a querry regarding this
if we see PF is deducted on Basic Plus DA, and Minimum wages is also BASIC and DA( which is revised every 6 month oir so) correct me if I am wrong. Then why are the employers breaking/ bifurcating Basic. isn't bifurcating basic violated MInimum wages Act?. Since they are not paying the Minimum wages (i.e. if we calculated bifurcated basic PLUS DA( HRA and other component not included it will be less then what is declared by the Government} AND only just to pay less PF, for the employees who work for the employers benefit is not practicably correct.
Please correct me if I am wrong.
26th October 2016 From India, Gurgaon
No law can be consider by way of personal opinion i know govt has inserted such act. Just to provide the benefit to employee however the act. Such as EPF doesn,t defined the definition of minimum wages. Minimum
Wages is not basic plus DA as per the definition of minimum wages u/s 2(h) minimum wages means all remuneration inclusive HRA hence minimum wages may be devide in certain allowances make sure any employee should not get the wages/salary inclusive all allowance less then minimum wages. Now with regard to your query for EPF contribution minimum wages can be bifurcate into some certain allowance because minimum wages is not defined in EPF act. Contribution shall be mede as per sec 2(b) of EPF act. Not on minimum wages further supreme court has also premitted bifurcation in the case of air freight cargo.
also EPF tribunal has permitted the bifurcation in some case given in my above post therefore No doubt minimum wages can be bifurcate for EPF contribution.
Thanks & Regards
HR & Labour Law Advisor
26th October 2016 From India, Agra
I have already clarified in my earlier mail that an employer is not allowed to split the minimum wage fixed by the state governments to deprive the workers of the social security benefits available to them under various Acts viz ESI, PF etc. Any such splitting of minimum wages will be illegal & wrong where the contribution of ESI, PF etc is reduced,
Member since August, 2011
26th October 2016 From India, Mumbai