As far as i comprehend your post, PF Ceiling limit and limiting basic pay are two separate points. Basic pay is limited to 40% or a max of 50% of total CTC; this gives an advantage to employees while claiming HRA exemptions; and also raising their PF contribution above the ceiling limit. PF deductions whether to be done on ceiling limit or actual basic pay is mostly mutual between the organizations n employees. Though an organization ends up paying more admin charges on PF if the PF deduction is made on actual basic than the ceiling limit.
For employees earning a gross of 15,000 or less, the general practice is to adjust the basic pay as per the Minimum Wages applicable.
Hope this helps.
21st November 2018 From India, Delhi
Thanks for taking time to reply.
Let me put my query afresh.
Pf authorities and some of the PF consultants are of the view that basic pay should not be less than 50% of the Gross salary. Is it true even if basic salary is more than 15000 Is there anything official about it. Any official communication from PF department in this regard ? If my gross salary is Rs. 60 000, and basic is 18,000, Can pf authority question my employer on this(basic less than 50% of Gross) ? or they will not question the employer as my basic is more than the basic PF ceiling(15000), though less than 50% of Gross ?
Secondly as per the circular, I have already attached employer can limit his contribution to PF ceiling salary which is Rs. 15000. Does this mean that if my basic salary is Rs. 18,000( Gross 60,000), I can contribute on full basic i.e. 12% of 18 000 and my employer can limit his contribution on Rs. 15000 only ?
If yes, then what is the rational of equivalent contribution by the employer? I think this is only when both employee`s and employer`s contribution is limited to 12% Rs. 15000.
24th November 2018 From India, New Delhi
1. PF authorities have laid no guidelines on the % of basic pay vis a vis total compensation. They have defined the ceiling limit for PF contributions. Though Basic pay not only determines PF contributions however also HRA exemptions, Leave Encashment, Gratuity etc. So a lower basic pay reduces the CTC, tax exemptions and other benefits of an employee. As per my experience, PF authority will not question if your contribution is on ceiling limit or higher than it; however will question for sure if your PF contribution is decreased from actual basic to ceiling limit in a particular FY.
2. The circular you mentioned is missing. Both employee and employer have to contribute their share of PF on the same basic wage. In case an employee wants to contribute more, can opt for Voluntary PF.
Hope it helps.
26th November 2018 From India, Delhi
Rightly said by Mr Chhabra, the PF authorities have nothing to do with Basic Wages. But as per my practical experience the PF Officials (Enforcement Officer) forces that PF contribution should be deposited as per the MW Act of the appropriate govt.). The Basic wages should not be less than the MW Act.
But if we check the Wages definition under the Act, it says contribution should be paid on gross salary (except HRA). In general we have accepted the PF Wages as Basic Wages of the CTC.
Now come to your second point what should be the PF Wages in case the Basic (being 50% or so) Wages is more than 15k. I would like to say the employer can restrict the PF wage ceiling on Rs. 15000 (for both shares). However, if the employee want to contribute at a higher rate than he can opt for VPF (as already explained by Mr Chhabra).
Pls find attached an article wherein some important court judgement referred and the author has explained his view in general language (Refer to Page 4). Though merely the article canít be treated as valid document for framing any rule, but if you able to drag out the court judgement that can produced as legal doc.
Hope the above will serve the purpose.
27th November 2018 From India, Delhi
But is it fair that for a gross salary of Rs.1 Lac, the basic salary is 15k in the salary structure.
In the above case if we keep basic 50K (donot want to reduce other related benefits like Gratuity, leave salary) but restrict PF contribution on Rs.15K, can we do so.
I am of the opinion that we should inform the dealing agent at rpfc in advance in writing, if we do so.
4th December 2018 From India, New Delhi
There could be two scenario:-
1 Minimum Compliance as laid down in the Act/Law.
2 There is no bar for maximum employee welfare. That all depends upon establishemtn strategic approach towards employee welfare, profitability, budget etc.
What I suggested is acceptable as per law, if you want to deduct and deposit PF on higher salary than you can do it. Moreover, in the CTC concept, the employer PF also included in CTC. So you can deduct PF on higher wages as well.
I think we donít need to inform to RPFC in advance. In case any member join on Basic Wages more than 15k and donít want to make PF deduction, than we need to fill some form and needed employee consent for non PF Deduction.
Senior member can throw more light on the matter.
4th December 2018 From India, Delhi
EPFO has given the option to deduct PF at actual basic or ceiling limit if actual basic is higher than the ceiling limit. Thus yes one can have an actual basic pay of Rs. 50,000 but can be contributing to pf at the rate of ceiling limit.
There is no need to inform the epfo unless you are decreasing the pf contribution from actual basic to ceiling limit; but not in the case of vice versa.
4th December 2018 From India, Delhi
Attached please find the Supreme Court judgment on Basic wages for PF Contribution on 28 Feb 19. How can we define the basic wages for calculations of PF ? What is limit of HRA in connection with basic wages ? What is your opinion on supreme court judgement?
9th March 2019 From India, Pune
There is no act stipulating what should be the Basic pay and @ the other allowances should be, except in the case of Minimum wages & wage revisions notified by the central govt & state govts. category wise/industry wise from time to time. However this doesn't mean the basic pay should be < or > other allowances. For e.g. if you study the pattern followed by pay commissions (central & state), banks etc. FDA/VDA used to be more than double of basic. This phenomena undergoes changes as and when FDA/VDA merged/absorbed in basic pay while wage settlement agreements are signed, raising it and VDA is linked to the price index published from time to time for further revision either quarterly or half yearly.
Now, the SC in its' judgment dt.28.2.19 attached in the previous posts, clearly defined as to how various allowances should be reckoned for the purposes of recovery towards EPF. This judgment has settled all doubts reg.whether or not certain allowances should be included or excluded for EPF calculations. The impact of the judgment obviously add to financial outgo of employers and employees' EPF a/c get a boost and in some take home pay would be lighter. I don't think anyway the judgment could be disputed or side tracked or ignored. The financial strain on employers howsoever big or small notwithstanding, the judgment is a welcome measure as it has settled all disputes and interpretations, that much clarity long awaited.
9th March 2019 From India, Bangalore
Recently Cement Wage Board has been settled between CMA and Trade unions before the Chief Labour Commissioner, New Delhi which is effective from 1.4.2018. Arrears and two service weightage increments are under preparation. While this is so, the plant level union submitted a letter demanding the management to pay differential Holiday wages, differential leave encashment from 1.4.2018. Is the demand is justified and employer is required to pay this. Please clarify. Aman/Kadapa
14th March 2019 From India
It's clearly understood that when a wage settlement is reached 'with retrospective effect' and received authentication by authorities it's without doubt all relevant past emoluments, will be impacted such as, OT/holiday wages, leave encashment, EPF, bonus etc which were paid at pre-revised wages for the period from 1.4.18 till date. Accordingly differences have to be re-worked and disbursed. This can be avoided only if the parties to agreement specifically agree to forego arrears meaning 'effective from the prospective date' only. The demand of the union deserves on merit to arrears and employers have to rework the same & disburse.
14th March 2019 From India, Bangalore
Commission as a salary component is considered for those in marketing/sales & business devt. JD and those employees are always driven by targets. This commission, as a fixed sum at minimum used to be paid monthly in the salary and achievement in excess of bench marks rewarded as commission/bonus computed at certain formula is paid. The amount need not be fixed sums for everyone/every month, bound to vary based on policies.
For those involved in processing & production related jobs, are paid production incentives/incentive bonus. It's possible these employees become eligible for these payments either continuously month on month or intermittently.
3rd April 2019 From India, Bangalore