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.