Dy Lab Comm, Pb (retd), Consultant And Qualified
Manager - Hr
Ir & Hr
Director, Target Hr Solutions
Labour Laws And Financial Matters
Sme-hr & Employment Laws
Senior Hr Executive
Manishi K Kapil
As per PF Act, PF has to recover from basic + DA salary which shall not be less than the minimum wages prescribed under various states for different employment.
Hence a employee whether a contract employee or casual employee or a permanent employee PF Contn has to recover for a minimum wages which is precribed for scheduled employment.
28th December 2007 From India, New Delhi
Thanks alot for the information. May i have a clause no. as per act or any other documented proof to justify the same.
Also please provide the MW notification copy for Delhi, Haryana and UP.
28th December 2007 From India, Gurgaon
This is very interesting situation and members should genuinely contribute.
My views are;
* There is no mention in PFable salary (Basic+DA) should not less than Minimum wages
* Organisation if paying above minimum wages (even if Rs.1 more than M.W) can birfurcate wages as per wish. (As per Judgement of Hon.supreme Court)
* PF Act enforce us to comply on Basic +DA.
18th July 2008 From India, Mumbai
As per my knowledge, if the Employee is drawing salary (Basic+DA) less than Rs. 6500/- then the other salary components like Medical Allowance, Conveyance Allowance, Lunch allowance and any other allowance would also be considered at least upto Rs. 6500/-(except HRA, OT, Bonus, LTA, Commission and other similar allowances) for Provident Fund deduction.
Mr. X's salary sturcture & Deductions
SALARY STRUCTURE 1 SALARY STRUCTURE 2 SALARY STRUC 3
Basic 3500 5000 5000
DA 1000 2000 2000
Conveyance All 800 800 800
Education All 200 200 200
Medical All 900 900 900
HRA 1650 1650 1650
Monthly Gross 8050 10550 10550
Provident Fund 768 840 780
ESIC 141 000 000
PT 175 200 200
Total Deduction 1084 1040 980
Net Payalbe 6966 9510 9570
FPF CONT 533 541 541
The calculation of above 3 salary structure is correct as per my knowledge.
23rd April 2009
I think the question is not properly undertood. Question is not on maximum celeing under PF Act but it is on salary to be considered for PF deduction w.r.t Minimum Wages Act.Once again I reproduce the question as under;
1)Can anybody tell me whether we can split the minimum wage into various components like HRA or Spl. Aloowance other than Basic +DA, if yes then may i have a supporting to justify the same?
2) If we give salary slightly more then minimum wage, even then Are we supposed to put the amount equivalent to minimum wage in Basic +DA or can v split it as per our company policy.
Views of mine is also appended above. Kindly refer.
Other members are requsetd to contribute as there are diffrent views from different agencies including Legal Councellor. As a matter of fact we are facing this kind of situation while dealing with PF authority as they enforce company to comoply PF deduction on atleast mininum wages.
28th April 2009 From India, Mumbai
More than the calculation part ,pls see the Airfreight Judgment.You can download from our CITE HR download section.Reading this will erase the doubts you have. More than the actual calculation Section 4 of the Minimum Wages Act has to be read plainly to understand it better.
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28th April 2009 From India, Bangalore
After viewing the above statment my submission is as per minimum wages act
Minimum wages can be bifurcated into Basic+DA+HRA.... or Basic+HRA...
One gentlement has written it can be bifurcated in no of components as per -Supreme Court... I request pls. eleborate with refrence case...
As far as PF is concern in general practice it should be deducted on Basic+DA...not VDA ... and on the other hand we have to analysis definition of "basic wage" under Sec. 2 (b) "basic wages".....in accordance with the terms of the contract of employment... and which has been interpreted by the Inspection authorities in various ways...and register the case and harsh establishment under Sec. 7A...
PF ded. should be made not less then the minimum wages has no supportings of the dept., however, RPFC commissioner(state wise) inforced the circular which is also under protest...
29th April 2009 From India
Gross = 10000
Basic = gross * 40% (Minimum Wages Act 40% Colculation for the gross).
hra = gross * 30%
conveyance = gross * 10%
Medical Allowance = Gross * 10%
Special allowance = gross * 10%
PF = Basic *12%
ESI = Total earning *1.75%
29th April 2009 From India, Madras
The Airfreight judgement of the Hon'ble Supreme Court is right answer quoted by my friend. I feel that the spirit of law must be honoured and one should not be looking around the ways to escape it. There is not only PF Act but Acts like Payment of Bonus and Payment of Gratuity are also there which are paid on the components of Basic + DA. VDA is also DA. Basic+DA+VDA (if any) should be equivalent to or more than the minimum wage fixed by the government. Bifurcation is the prerogative of the employer but not at the cost of employee. Basic + DA has to be equivalent or more than the minimum wage fixed otherwise the employee will lose in terms of gratuity and bonus.
30th April 2009 From India, Chandigarh
Ans for your first quest Minimum wage cannot be splited to other componenets like spl allow etc.... it shd be strictly BASIC +DA.
For ur 2nd quest:Whatever the hike u give more than min wage its upto company wish to make it whole as BASIC +DA and spliting into other components.
i.e For eg if X shd gets min wage of 4030 but his actual salary we fix is 5000 We can do it as BASIC+DA:4030 the remaining amount 970 can be accommodated in any components.It can be done as BASIC +DA:5000 also its purely depends on comp policy.
Hope i have cleared. If im wrong pls correct me.
27th June 2009 From India, Bangalore
Salary Survey India, Online Wage Survey, Salary Survey by Paycheck India
27th June 2009 From India, Bangalore
27th June 2009 From India, Bangalore
Pf doesn`t say about minimum wages. it only says about basic+DA to be considered for PF calculation, however it is implied that you are stipulated to the min wages act which is also equally applicable to your factory. in any case PF inspector cannot demand the min wages comply
6th August 2010 From India, Madras
6th August 2010 From India, Madras
mimimum wages means its a limit of wages for a person like unskilled , semiskilled and skilled. Means government is saying that if you are saying to any person helper then you have to pay the basic +vda which is decided by the government for helper. Means you have to deduct the p.f on government decided basic+v.da ( for example if minimum wages of helper is 4000/- and you are paying him 5000 then you can spilt but remember basic + vda will be 4000/- and 1000 extra will go in other parts. Ok?
6th August 2010 From India, Rudarpur
what the employee is entitiled to get is the wages, the totality thereof, at the rate not less than the minimum wages rate prescribed and therefore , if the employee is paid more than the minimum wages, it cannot be said that there was breach of the employer's duty as defined by the section 12(1) of the act .
even as per the judgement of apex count no need of paying VDA separately.
6th August 2010 From India, Pune
Much was discussed on this subject. The actual point for discussion is whether the minimum wages paid to an employee can be bifurcated into various components like Basic, DA, HRA, Conveyance Allowance, Washing Allowance, Special Allowance etc and by including all these allowance it should not be less than the minimum wages prescribed by the Government to a particular class of establishments/category of employees.
As per Section 2 sub-section (h) Payment of Minimum Wages Act, 1948, the wages is defined as "all remuneration, capable of being expressed in terms of money, which would, if the terms of the contract of employment, express or implied, were fulfilled be payable to a person in respect of his employment or of work done in such establishment and includes house rent allowance but does not exclude certain type of allowances as mentioned in clauses (i) to (v) under the afore said section.
By persuing the language used in the above definition the minimum wage constitutes all the allowances which are capable of being expressed in terms of money. Hence there is no harm in bifurcating the minimum wage component in to various nomenclature of allowances but it should be keep in mind that all these allowances put to gether should not be less than the minimum wages prescribed by the Government to the particular class of establishment/factory.
However, as per Section 6 of the P F Act says the contributions as per the rates fixed by the Government shall be payable on "basic wages, dearness Allowance and retaining allowance if any and Sec 2(b) defines what is basic wage. According to which basic wage means all emoluments which are earned by an employee while on duty in accordance with its terms of employment but does not include HRA/Commission/any other similar wages. For example in out pay structure if HRa/Special Allowance /Commission is included it will satisfy the requirement of Minimum Wages Act and also not liable to pay contributions on those allowance under the PF Act. From the above it is clear we can bifurcate the minimum wages as per the standing orders of the Company and pay the PF contributions only on those allowances as defined under the PF Act.
8th August 2010 From India, Hyderabad
1. You can't split minimum wages into various components other then Basic & DA, if your providing more than the minimum wages notified for your specif trade then you can split excess amount into various components according to your wish to evade PF & ESI.
Example /- Minimum Wages is Rs.165/- specified by the Govt. if you're providing Rs.190/- then by keeping Rs.165/- as Basic & DA you can split the remaining amount into various components as per your wish.
Yes, wt ever PF Authorities says is correct in this particular regard. Better refer recent Karnataka High Court Judgement on the same (Group 4 Security Vs RPFO)
Regards / Pavan, 9629488214
8th August 2010 From Australia
I had argument with many HR professionals about spliting of Miinimum Wages. Those who are truly HR profession will never allow to split the minimum wages. Even those who are good employer will never allow to split. There are high court judgement which is saying you can split the MW if you are paying more than MW but PF authorities will allow it or not I am not aware of it.
I also need a notification copy by PF authorities which says that PF do not have any concern with Minimum Wages (Basic+DA).
11th September 2010 From India, Pune
It was a useful discussion so far. No doubt that an employer has to pay minimum wages as per Minimum Wages applicable in that state. The question is whether this minimum wages payable can be split into different components and PF can be administered accordingly.
Assume Minimum Wages applicable to a particular state is Rs.182/- per day. This means we need to pay around Rs.4750/- p.m. Now, the question is whether this can be split into various components? Answer is “Yes”. For example, we can split like this
Basic HRA CCA Conv Other allowance Gross salary
1250 1750 500 800 450 4750
Hence, we need to pay 12% PF contribution only on the basic. I had attended a seminar convened by Employers' Federaration of Southern India (EFSI) recently in Chennai, wherein Commissioner of PF was one of the speakers. One of the participants raised a question that "was there any rule that certain percetage of Gross must be maintained as Basic (+DA)". He answered there is/was no such rule like that. It is employer's wish to have basic as 3500 or 1000. Only difference that will make is at the time of retirement, the superannuated employee will be left with little pension to be paid to him. It is employer's wish to give him more benefit or not - he asserted.
Hence there is
1. Nothing wrong in spliting the Minimum Wages in different components as long as you pay the min wages i.e. Rs.4750/- (in our example)
2. No specific set of rules w.r.t. fixing Basic wage for an employee/labour
13th October 2010 From India, Madras
You can not split the Minimum wages for the purpose of PF you go through the Minimum wages is clearly defined in to Basic and DA. Splitting the minimum wages it self is non compliance.
As per minimum wages act you have to pay defined basic Wages and DA and 5% HRA which is minimum (it may vary state to state). You can pay extra but not less than the defined.
25th October 2017 From India, Pune
Deputy Labour Commissioner, Punjab (Retired)
Consultant (Labour Laws) &
Certified External Member for ICC under the Sexual Harassment Act, 2013
26th October 2017 From India, Chandigarh