Will somebody clarify the following:
Government Guidelines on Splitting Minimum Wages
Whether there is any official circular or guidelines from the government regarding the splitting of minimum wages into HRA and CCA to ease the burden of employers from contributing higher PF as per the court order in the appeal NO 9284/2013 in the case between APF Commissioner Vs M/S Gas Security Services (India) Ltd and others. The appeal was dismissed on 17-08-2023 by the Honorable Supreme Court of India.
Impact on Employees
If this ruling is implemented, will it not be in the interest of employees?
Attachment: Court Order
From India, Bengaluru
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4Government Guidelines on Splitting Minimum Wages
Whether there is any official circular or guidelines from the government regarding the splitting of minimum wages into HRA and CCA to ease the burden of employers from contributing higher PF as per the court order in the appeal NO 9284/2013 in the case between APF Commissioner Vs M/S Gas Security Services (India) Ltd and others. The appeal was dismissed on 17-08-2023 by the Honorable Supreme Court of India.
Impact on Employees
If this ruling is implemented, will it not be in the interest of employees?
Attachment: Court Order
From India, Bengaluru
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The Management of Trident Facility Services Pvt Ltd vs. The PO, EPF Appellate Tribunal, New Delhi and Others
Madras High Court – 2023 LLR 344:
Gist of the Case:
EPF Act, 1952 – Section 7 A - The EPF Authority discarded splitting the wages into Basic, HRA, Overtime Allowance, etc. Further, the petitioner was paying wages less than the notified Minimum Wages. Hence, the petitioner was directed to remit EPF contributions on the notified Minimum Wages. The appeal filed by the petitioner was rejected by the Appellate Authority, and the petitioner challenges the order before the High Court.
Held as follows:
Basic wages under Section 2(b) read with Section 6 of the Act do not include HRA and OTA. The contention of the EPF authority is that the petitioner is required to comply with labor laws, including the Minimum Wages Act. As per settled law, basic wages defined under Section 2(b) contain exceptions and will not include what would not ordinarily be earned in accordance with the terms of the contract of employment. However, whatever is payable in all concerns and is earned by all permanent employees is included in "basic wages." But whatever is not payable by all concerns or not earned by all employees of a concern is excluded for the purpose of "basic wages," attracting EPF contributions. Dearness Allowance and Retaining Allowance payable to all permanent employees will attract EPF contribution. However, house rent allowance, not paid in many concerns and sometimes in the same concern, paid to some employees but not to others, is excluded from basic wage. Overtime allowance not earned by all employees is excluded from basic wages. Emoluments earned by an employee in accordance with the terms of employment would qualify as basic wage, and discretionary allowances not earned in accordance with the terms of employment would not be covered by basic wage. As such, the contributions made by the petitioner on the basic pay excluding these allowances cannot be strictly found fault with.
The requirement of EPF contributions on notified minimum wages is not proper since there is no enabling power conferred on the EPF authority to adopt such powers for the purpose of the calculation of the EPF contributions. Wages paid less than the Minimum Wages in violation of the law cannot be paid, but it does not imply that for the calculation of EPF contributions, the employer could not follow statutory provisions of the EPF Act. The Minimum Wages Act is a self-contained Act providing for payment of minimum rates of wages. Section 22 of the Minimum Wages Act takes care of the instances when an establishment contravenes the mandatory requirements of the payment of Minimum Wages and imposes a penalty thereunder.
However, failure to pay Minimum Wages would not empower the EPF Commissioner to step into the shoes of the authorities under the Minimum Wages Act and determine the contributions as per the notified Minimum Wages. In the absence of any enabling provisions under the EPF Act to do so, the entire exercise of the inquiry conducted under Section 7 A of the Act is deemed to be without authority and jurisdiction, and therefore, the consequential demand for the payment of the difference of contributions cannot be sustained.
From India, Madras
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Madras High Court – 2023 LLR 344:
Gist of the Case:
EPF Act, 1952 – Section 7 A - The EPF Authority discarded splitting the wages into Basic, HRA, Overtime Allowance, etc. Further, the petitioner was paying wages less than the notified Minimum Wages. Hence, the petitioner was directed to remit EPF contributions on the notified Minimum Wages. The appeal filed by the petitioner was rejected by the Appellate Authority, and the petitioner challenges the order before the High Court.
Held as follows:
Basic wages under Section 2(b) read with Section 6 of the Act do not include HRA and OTA. The contention of the EPF authority is that the petitioner is required to comply with labor laws, including the Minimum Wages Act. As per settled law, basic wages defined under Section 2(b) contain exceptions and will not include what would not ordinarily be earned in accordance with the terms of the contract of employment. However, whatever is payable in all concerns and is earned by all permanent employees is included in "basic wages." But whatever is not payable by all concerns or not earned by all employees of a concern is excluded for the purpose of "basic wages," attracting EPF contributions. Dearness Allowance and Retaining Allowance payable to all permanent employees will attract EPF contribution. However, house rent allowance, not paid in many concerns and sometimes in the same concern, paid to some employees but not to others, is excluded from basic wage. Overtime allowance not earned by all employees is excluded from basic wages. Emoluments earned by an employee in accordance with the terms of employment would qualify as basic wage, and discretionary allowances not earned in accordance with the terms of employment would not be covered by basic wage. As such, the contributions made by the petitioner on the basic pay excluding these allowances cannot be strictly found fault with.
The requirement of EPF contributions on notified minimum wages is not proper since there is no enabling power conferred on the EPF authority to adopt such powers for the purpose of the calculation of the EPF contributions. Wages paid less than the Minimum Wages in violation of the law cannot be paid, but it does not imply that for the calculation of EPF contributions, the employer could not follow statutory provisions of the EPF Act. The Minimum Wages Act is a self-contained Act providing for payment of minimum rates of wages. Section 22 of the Minimum Wages Act takes care of the instances when an establishment contravenes the mandatory requirements of the payment of Minimum Wages and imposes a penalty thereunder.
However, failure to pay Minimum Wages would not empower the EPF Commissioner to step into the shoes of the authorities under the Minimum Wages Act and determine the contributions as per the notified Minimum Wages. In the absence of any enabling provisions under the EPF Act to do so, the entire exercise of the inquiry conducted under Section 7 A of the Act is deemed to be without authority and jurisdiction, and therefore, the consequential demand for the payment of the difference of contributions cannot be sustained.
From India, Madras
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Court Order on Splitting of Minimum Wages for PF.pdf