Pan Singh Dangwal
Educator, Management Consultant & Trainer
Hr Personnel Manager
Working As Sr. Hr Executive
PRIME SPONSOR - FACTOHR - Payroll Software with GPS Enabled Attendance, Travel, Performance Management, HRMS. Explore Features
Cite.Co is a repository of information created by your industry peers and experienced seniors sharing their experience and insights.
Join Us and help by adding your inputs. Contributions From Other Members Follow Below...
Join Us and help by adding your inputs. Contributions From Other Members Follow Below...
In India there is no mention in labour laws as you write 60/40 of Gross salary to choose ratio of Basic salary and allowance .Secondly, both the examples pertains to payment methods as cited by you are legally correct hence can not be disputed as employers and employees are free to agree on terms of the payments as they feel so. Actually, what has been done in former cited example is a methodology adopted to save salary income from Tax, and cash ie take home money will be less that can be converted as earned salary. HRA and Conveyance exp.is allowed to a limit under Income tax from deduction . In your second citation,normally freshers do insist to have maximum earning in cash at hands. When employee does not want to contribute to PF in order to meet his family's expenditure at this point of time, so it could be a legally right strategy since PF upto a limit of Rs. 15000/ month is cover-able and little more than pf limit could only allow this to happen.
Mr RDS Yadav has rightly explained you the basis of Salary Breakup. I would just like to add, the basic salary should not be less than the Minimum Wages as specified in the applicable Minimum Wages Notification. The employer is free to make breakup over and above the minimum wages.
However, in case of PF, if the employee was earlier member of EPF, than the employer can’t stop PF Contribution only by paying more than 15 K. The employee can be excluded only if the very initial wages is more than the Wage Ceiling in the Act. You can take consultant’s service agst the objection raised by PF Authorities. Coz this will required thorough study of PF Wages, members and other components.
Your employer may not be aware, but by increasing the Basic Wages he is attracting other cost towards Bonus, Gratuity, Leave Encashment, Retrenchment Benefits etc. So I would sugges first make proper costing under different compliances accordingly implement the salary structure.
Hope you will find it as per requirement, fellow members can put more light on the issue.
PF officials are nobody to decide company's remuneration policy and employees entitlement. Your company salary structure and policy should be on legal grounds. If it meets requirement and still PF officials forcing anything against practice, then you need to object . But take your salary structure vetted first, hope its fair and legally correct.If any objections in this respect has been reported any time specifically, please write to me for a suitable reply to them.
I would like to draw your attention to the order of the Hon’ble Presiding Officer EPF Appellate Tribunal, New Delhi in the matter of Delight Services V/s. RPFC, Indore (Order ATA no. 743 (8) 10 Dated 30.11.2015)
The judgment of the Hon’ble Punjab and Haryana High Court in the matter of Asst P.F. Commissioner, Gurgaon against M/s. G4S Security Services (India) Ltd., 2011 LLR 316 P&H HC which is upheld by the Division Bench, L.P.A. No. 1139/2011 (O&M) on 20th July’2011, 2011 LLR 943 as well as Hon’ble Delhi High Court in the matter of Group 4 Securitas Guarding Ltd. Vs. EPF Appellate Tribunal and others , WP (C) 4408 of 2000, decided on 20.09.2011, wherein they have cleared the Definition of the “Basic Wages” as defined under section 2(b) read along with section 6 of the Act,1952.
In view of the above, definition of Basic wages is out of the purview of PF Authorities. (Copy of judgement attached herewith)
Hon'ble Presiding Officer Appellate Tribunal, New Delhi.
EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL
ATA No. 743 (8) 2010 Dated 30/11/15
Delight Services ......... ..:·.Appellant
RPFC, lndore· : . : ..· ..... . Respondent
Sh S.K.Gupta, Advocate for the Appellant
Sh. Shivnath Mehanta, Advocate for the Respondent
By the present appeal filed by appellant under section 7-l
of the Employees' Provident Fund & Miscellaneous Provision Act,
1952 ( here-in-after referred to as "the Act"). appellant seeks
quashing of order dated 24.09.2010 passed on 29.09.2010 by
respondent.under Section 7 A of the Act.
2. The brief facts as emerging from the appeal are that the
appellant is a contractor engaged in the work of supplying labours to
various industries. The provisions of EPF & MP Act, are applicable
on the appellant establishment and is registered at Code No.
MP/ 17836 and it has been assiduously depositing the contribution
of its employees. Respondent served the appellant with a notice
observing that the salary /wages shown is negligible even lesser
in comparison to the minimum basic wages as notified under the
Minimum Wages and· further observed that PF contribution on the
wages less than minimum ·wages is not justifiable and defeats the
very purpose of the social welfare legislation aimed for providing old
ages social security in the name of PF and Pension to the poor
workers. Contribution has been assessed in tune of Rs. 1,37,599/-
on the basis of minimum ·wages of semi skilled employee. Appellant
provides labours to hospital and nursing homes, call centres which
were nol subjected to Minimum Wages Act at all. The provisions of
the Minimum Wages Act have not been made applicable to these
class of establishments, hence this appeal.
3. Shri S. K. Gupta, Counsel for appellant contended that the impugned order was passed without application of mind in a highly laconic manner as a matter of routine.
4. Counsel for appellant further contended that appellant establishment is depositing PF contribution according to law and respondent with malafide intention inflicted a notice to the appellant establishment, directing the appellant establishment to change policy regarding payment of salary lo employees according to minimum basic wages. Whereas respondent was not supposed to direct the appellant establishment to change the policy of salary of employees of appellant establishment.
5. Counsel for appellant further contended that as per law appellant establishment is liable to deduct PF contribution on the basis of basic wages as defined under Section 2(b) of the Act, read with Section 6 of the Act but respondent without considering written objections and written representations, passed impugned order against the principles of natural justice. Respondent was having no power under the Act to direct any employer that how and in what manner employee is to be paid.In support of his argument counsel for appellant cited a case law titled Assistant PF
Commissioner Vs. G4S Security Services (India) Limited 2011 LLR 316 P&H HC .
6. Per contra Learned counsel for the respondent contended that the EPF Act is meant to provide social and financial security to the downtrodden section of the society at the time of their retirement, death during service, medical treatment, etc. The EPF Act is social welfare legislation which cannot be done away without and strict adherence to its provisions is mandatory. Under this Act, the employer is duty bound to pay the minimum wages to every employee and thereafter employer is also duty bound to pay the Provident Fund contributions on time.
7. Counsel for appellant further contended that a notice was served upon to appellant establishment for making contribution under section 7 A of the Act and as appellant establishment was found paying the PF contribution on the wages lesser than the minimum wages prescribed for employees under the category of semi-skilled and appellant evaded amount of Rs. 5,37,072/- so
respondent was having no option but to assess amount of Rs. l,37,599/- under Section 7A of the Act. There is no illegality in the order of respondent, hence appeal filed may appellant may be dismissed.
8. I have given my thought full consideration to the submissions made by learned counsels for the parties and have also perused the material on record.
9. The primary contention on behalf of the appellant is that respondent 1 is not empowered to direct the appellant establishment to pay minimum wages to its employees and further to pay PF contribution on the basis of minimum wages.
10. Admittedly, there is no dispute .regarding applicability of the provisions of the Act to appellant establishment and that PF Code
No. MP/ 17836 allotted lo the appellant establishment.
11. As Per Section 6 of the Act, employer is supposed to contribute/pay in the Fund on the basis of the basic wages, dearness allowance and' retaining allowances for the time being payable to each of the employees.
12 As per case of appellant, appellant is depositing PF contribution _as per law, i.e. on the basis of basic wages, dearness allowance and retaining allowances.
13. In case in hand, controversy is with regard to basic wages 'Basic Wages' has also been defined in Section 2(b) of the Act which is reproduced here :-
14. Section 2(b) «basic wages" means all emoluments which are earned by an employee while on duty [on leave or on holidays with wages in either case/ in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include-
(i) the cash value of any food concession;
(ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a risen the cost of
living), house rent allowance, overtime allowance, bonus commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) any present made by the employer;
Section 2(b) of the Act does not prescribed how much amount shall be considered as basic wages. So now this is to be seen by this Tribunal whether respondent is empowered to direct the appellant establishment to pay minimum wages to the employees. During course of argument, no provision of the Act cited by counsel for respondent which could reveals that 'Commissioner' is empowered to direct the employer to pay
minimum wages to the employee.
15. Bifurcation of wages below minimum wages or basic wages and DA etc. are the issues, completely out of the purview of PF authorities. PF authorities has no jurisdiction to ensure the compliance of Minimum Wages Act or to issue any direction in this regard: Wages are to be determined is a decision. between employee and employer and further authority appointed under the Minimum Wages Act is only empowered to raise issue regarding minimum Wages, to be given to the employee.
16. Being quasi judicial authority respondent has statutory power to direct the appellant establishment to deduct PF contribution on the basis of Section 6 of the Act only.
17. Keeping in view all the circumstances, this Tribunal reached at a considered opinion that order dated 24.09.2010 passed by respondent under Section 7 A of the Act is illegal, hence set aside. Copy of the order be sent to parties. File be consigned to record room after due compliance.