Epf deduction after supreme court ruling - allowance are basic, da, hra, conveyance, medical, child, and special allowance - CiteHR
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No comments if you wish to get out of ESI and EPF. Yes, you can get out of these social security schemes if you do not do any business. If you do any business and that also with the help of employees, they should be given whatever benefits are available to them. You should understand that these are very minimum amounts and taking these from them is unethical and against moral law. Again,if you give a good salary, certainly, you need not have to give ESI or PF. They will manage their medical insurance and old age living. Therefore, fix their salary at Rs 21001 to start with and avoid paying 0.75% of it as ESI and some 1800 as PF.
Good Morning Madhu garu,
Your comments are perfect!
If the salary is more than 21000 automatically the employees are exempted under ESI Act and they will manage their medical issues. OK.
In view of changes in PF & ESI matters, the applicable wages to the employees / workers ranging from 15000 to 21000, which wage structure is the best one? Currently, we are having more than 5 wage components and we wish to rationalise and restrict them to three components as mentioned in my previous querry. The components such as HRA and Washing Allowances are already existing in our current wage structure. Also, a sudden increase of salary / wage is not in the hands of HR Department.
Even though if we implement the proposed salary structure, the TAKE HOME SALARY of the employee / worker will also be reduced to that extent. It is a major concern for the industry in the case of low salaried employees / contract workers, whose salaries are being protected in terms of the Minimum Wages Act.
Further, we wish to know how to calculate Gratuity and Leave Encashment of an employee? Whether it is only on Basic Wage or PF Gross (Basic + Children Edn. + Washing Allow.) as directed by SC .
In view of the above your expert advice is helpful to the HR community to avoid any show-cause notices from the respective departments.
Regards,
Krishna Kumar

I have already given so many comments on the applicable wages for PF, Gratuity, leave encashment, Bonus etc. To repeat in a single sentence,the wage which is taken for deducting the salary of an employee if he had taken LOP is the wage for deciding PF, Gratuity or retrenchment allowance or any thing. If for example, your salary is Rs 15000 and of which you have fixed Rs 6000 as Basic salary and you have been deducting PF on this amount only. Similarly,you take this amount for computing Bonus, leave encashment and obviously, gratuity. But if he takes a leave without pay, you will deduct Rs 500 from his salary. This is one 30th of 15000. If his salary is Rs 6000 and all the other components are just allowances, why can't you deduct only Rs 200, being 0ne 30th of Rs 6000?
Basic Salary means the salary as per contract of employment. Anything that you pay in addition to this is allowance and only such allowances can be excluded from PF, Gratuity etc. Obviously, for PF, the employer even has the privilege of restricting it to Rs 15000. Even HRA is part of salary if it is paid to all employees without considering whether he lives in a rented house or not. Washing allowance paid to employees to whom you have not provided uniform is also a part of salary even for calculating ESI.
Restructuring the salary keeping the cost to company unchanged based on changes in law is unfair. If it is permitted, then poor employees will become victims even when there is a hike in salary by means of a notification from the government. The employer will not hesitate to add the electricity charges of a ceiling fan put for an employee or the tea and snacks the employer provides for the employee in order to make it equal to statutory salary. Therefore, I will never give an advise as to how can you restructure your salary in order to protect your employer. I will only advise that PF is an investment and whatever deduction the employee may have in his take home salary is only temporary and being an HR person convince the employees that higher contribution would result in higher PF and higher pension.

Thank you very much sir.
Regards,
Krishna Kumar


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