D Ravi
Employees Provident Fund
Contributions for the subscribers. Are we to formulate, basic salary as 70% of the gross salary.
So far we are not able to provide correct authentication. Is it verbal or any written GO or circular is there.
Please post your comments | suggestions.

From India, Chennai
Industrial Relations And Labour Laws
Freelancer In Hr &indirect Taxes For
Labour Consultant
D Ravi
Self Employed
+1 Other


There is no 70% or 80% base for contribution of PF but PF should be contributed on 100% of the salary. Here salary means the amount of remuneration agreed with the employee in return for the services/labour that he puts. Obviously, any incentive which is earned as a result of satisfying certain conditions, like achieving certain sales/production figure, goals etc or overtime wages which is also an amount earned on satisfying a condition of working beyond a certain fixed period per day or week, only are outside the purview of wages for paying PF.
Though the EPF & MP Act excludes HRA from wages, the same applies only to such allowances which are paid to those who reside in rented houses as part of their employment.
You may have different components in your salary,like Basic, Dearness allowance, HRA, Special allowance, travelling allowance etc. A very simple test to decide which of these components of salary will qualify for PF contribution is to see on which component will you deduct Loss Of Pay if an employee remains absent without pay. Certainly, it is not the basic alone or Basic and DA alone which is not paid when an employee is on leave without pay but the entire component is not paid. As such the total salary is the salary which qualifies PF contribution. HRA, if paid separately to those who stay in rented houses, will obviously be paid in full even if he is on leave. Therefore, only such HRA will be excluded from salary.
If the total salary exceeds Rs 15000, naturally, the employer can restrict the PF qualifying salary to Rs 15000.

From India, Kannur

Hello Mr. Ravi, One of the EOs during the inspection did say so that basic salary has to be fixed at 70% and above. This was some time in 2012-13, I do not remember correctly.
From India, Chennai

There was such directions during that period. This was due to the reluctance of employers to pay PF on salary component other than Basic. At that time there was no clarification by the Apex Court also. Now, since there is a clear clarification of the definition of wages by the Supreme Court, everything is clear now.
From India, Kannur

Dear Madhu.T.K sir, you explain very simple and clear, you give the super example for LOP. Share things like this for growing us...
From India, Madurai

As mentioned by Madhu sir, epf be paid on actual salary earned,this would also include allowances which are paid to all employees generally,regularly and mandatorily.Pls refer the court order passed recently.
From India, Vadodara

Hi All, If some one has the PDF of the court order, plz share.
From India, Mohali

Dear Mr. D. Ravi,
There is recent amendment on Code on Wages dated 8th August, 2019 which read definition of wages as under: (copy attached for reference)
Definition of wage simplified. If payments made by the employer to the employee, exceeds 50% of the all wages (basic pay, DA, retaining allowance) the excess
shall added to the wages. (Section 2(y).
Prior to the Hon'ble Supreme Court Judgement dated 28.02.2019, there was no specific provision in the EPF&MP Act, 1952, what should be the % of Basic wages on gross salary and not even till 7th August, 2019. (SC Judgement copy attached)

From India, Thane

Attached Files (Download Requires Membership)
File Type: pdf Code on Wages 2019.pdf (220.2 KB, 188 views)
File Type: pdf SC_Judgement_PF coverage on allowances.pdf (393.3 KB, 194 views)

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