Dear All,
The minimum wage for a skilled worker in Delhi is Rs. 622 per day. A worker works for 13 days in a month, and the company pays wages of Rs. 900 per day, but it is divided into different parts like Basic (550) + HRA (150) + Other Allowances (200) = 900. Only PF is deducted, which is 550*12% = 66. Is this calculation correct? Please guide me.
Thank you.
From India, Delhi
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The minimum wage for a skilled worker in Delhi is Rs. 622 per day. A worker works for 13 days in a month, and the company pays wages of Rs. 900 per day, but it is divided into different parts like Basic (550) + HRA (150) + Other Allowances (200) = 900. Only PF is deducted, which is 550*12% = 66. Is this calculation correct? Please guide me.
Thank you.
From India, Delhi
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PF is payable only on Basic pay as 'basic wages' under the EPF Act excludes DA,HRA,OT allowance, bonus or any other similar allowances. MOHAN KUMAR mohan.kumar551@gmail.com
From India, Bangalore
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7From India, Bangalore
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Dear Prabhat, As rightly commented by Mohan Kumar, PF will be deducted only on basic. But, Basic should be minimum Basic+DA prescribed under state minimum wages Act.
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Dear Mr. Singh,
If you are paying only the minimum wages as prescribed under the Minimum Wages Notification, you have to pay EPF contribution on MW. However, if you are paying more than the minimum wages, you must split the minimum wages by adding other components. Therefore, you are liable to pay EPF contribution on the basic amount, i.e., Rs 550 per day.
From India, New Delhi
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If you are paying only the minimum wages as prescribed under the Minimum Wages Notification, you have to pay EPF contribution on MW. However, if you are paying more than the minimum wages, you must split the minimum wages by adding other components. Therefore, you are liable to pay EPF contribution on the basic amount, i.e., Rs 550 per day.
From India, New Delhi
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Dear Srinath Sir,
If the minimum payable wage per day is less than the per day wage, how will we calculate EPF? In that case, will EPF be calculated by taking MW as the base, or something else? Please guide with an example.
From India, Pilkhuwa
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If the minimum payable wage per day is less than the per day wage, how will we calculate EPF? In that case, will EPF be calculated by taking MW as the base, or something else? Please guide with an example.
From India, Pilkhuwa
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PF Should be deducted @12% on the actual wages earned by the Employee.Wages means Basic+DA+VDA
From India, New Delhi
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From India, New Delhi
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Manoj Kumar is Saying PF deduction = 12% of Basic only Sainath Sai Ram is saying PF deduction = 12% of Basic+DA+VDA What the great confusion is being created
From India, Jaipur
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From India, Jaipur
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Dear HR Professional,
Please note that Employee share of EPF Contribution is at 12%. EPF Wages include Basic, DA, and VDA. EPF Contribution is payable on EPF Wages only and not on other components. Please update your knowledge in statutory matters before commenting. For your information, I am a qualified and experienced HR Professional with a proven track record.
From India, New Delhi
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Please note that Employee share of EPF Contribution is at 12%. EPF Wages include Basic, DA, and VDA. EPF Contribution is payable on EPF Wages only and not on other components. Please update your knowledge in statutory matters before commenting. For your information, I am a qualified and experienced HR Professional with a proven track record.
From India, New Delhi
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Understanding PF Qualifying Wages
We have a lot of HR professionals, but not all may interpret the law professionally. That is why we, as HR professionals, have sometimes misused the PF qualifying wages to mean just basic salary and dearness allowances. Certainly, PF is payable on basic wages and dearness allowances (whether Fixed DA or Variable DA), but what constitutes BASIC wages is clearly defined. It is the total wages earned by an employee as per the employment contract, excluding HRA, overtime payment, bonus, etc. This means PF is payable on the total emoluments minus HRA. Basic wage is not the same as the basic wage determined by the employer or HR professionals like us based on our wisdom or company customs, which may be very low since most of the contributions will be based on that basic wage.
Returning to the discussion, I would argue that the EPFO authorities cannot demand that the employer pay contributions on the entire Delhi Minimum wages just because the notional wages amount, if calculated monthly, would exceed Rs 15,000. For instance, Rs 622 for 26 days would total Rs 16,172, and there is no way the EPFO can demand contributions on Rs 16,172; however, they can demand it on Rs 15,000 for an existing member. For a new worker, the EPFO cannot demand any contribution because they could be an excluded employee if their wages upon joining the establishment exceed Rs 15,000. Hence, the question of paying contributions on Rs 900 per day would not arise.
Impact of 'Other Allowances' on PF Calculations
Regarding "other allowances" in the salary breakup, I would also mention that this poses a significant risk for the employer. Any allowance paid to all employees in general will be considered part of statutory wages for all purposes, including calculating gratuity. When determining the PF qualifying salary, any amount necessary to make the salary equal to Rs 15,000 can be taken from "other allowances" since the other component, i.e., HRA, is not considered part of basic wages according to the definition of wages under the EPF & MP Act.
Regards, Madhu.T.K
From India, Kannur
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We have a lot of HR professionals, but not all may interpret the law professionally. That is why we, as HR professionals, have sometimes misused the PF qualifying wages to mean just basic salary and dearness allowances. Certainly, PF is payable on basic wages and dearness allowances (whether Fixed DA or Variable DA), but what constitutes BASIC wages is clearly defined. It is the total wages earned by an employee as per the employment contract, excluding HRA, overtime payment, bonus, etc. This means PF is payable on the total emoluments minus HRA. Basic wage is not the same as the basic wage determined by the employer or HR professionals like us based on our wisdom or company customs, which may be very low since most of the contributions will be based on that basic wage.
Returning to the discussion, I would argue that the EPFO authorities cannot demand that the employer pay contributions on the entire Delhi Minimum wages just because the notional wages amount, if calculated monthly, would exceed Rs 15,000. For instance, Rs 622 for 26 days would total Rs 16,172, and there is no way the EPFO can demand contributions on Rs 16,172; however, they can demand it on Rs 15,000 for an existing member. For a new worker, the EPFO cannot demand any contribution because they could be an excluded employee if their wages upon joining the establishment exceed Rs 15,000. Hence, the question of paying contributions on Rs 900 per day would not arise.
Impact of 'Other Allowances' on PF Calculations
Regarding "other allowances" in the salary breakup, I would also mention that this poses a significant risk for the employer. Any allowance paid to all employees in general will be considered part of statutory wages for all purposes, including calculating gratuity. When determining the PF qualifying salary, any amount necessary to make the salary equal to Rs 15,000 can be taken from "other allowances" since the other component, i.e., HRA, is not considered part of basic wages according to the definition of wages under the EPF & MP Act.
Regards, Madhu.T.K
From India, Kannur
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EPF-Circular-da ted-23-May-2011 -Splitting-of-M inimum-Wages-fo r-the-Purpose-o f-PF-Contributi on-Not.pdf