Holiday Pay Dilemma: Should We Deduct PF from Wages Earned on Holidays?

In our company, if a staff member is asked by the management to work on a national or festival holiday, they are paid double their normal wage. In this case, can we deduct PF on their holiday wage?

Dear Sanjib,

PF is always calculated on the basic wages and also on the provided D.A (Daily Allowance) & R.A (Retention Allowance), if any. Therefore, in case any staff from your company works on any national/festival holidays, their basic wages are not going to be different from what they earn in a regular month. You would only pay them double the rate of normal wages for the holiday work done, which would be considered as overtime. Therefore, no PF would be deducted on this overtime payment. However, if the employee is covered under ESI (Employees State Insurance), you would be required to deduct the ESI amount on the overtime payment made for the extra work performed on the festival/national holiday.

Hope I have clarified your doubt. In case of any further clarification required, please feel free to reach me at varunbvcps@gmail.com, and I would be more than happy to assist you.

Regards,
Varun Chaudhary

The reply of Mr. Varun is correct. The work done on national/festival holidays would be considered as overtime done, and there is no need to deduct PF from the overtime payment.

Regards,
Sivadasan

In our company, if a staff member is asked by the management to work on a national or festival holiday, they are paid 1.5 times their normal wage. In this case, can we deduct PF on their holiday wages for Bissic or VDA?

Rajesh Kumar (Raj.)

ESI will be payable on O.T. wages irrespective of coverage. If you are paying overtime to an exempted employee, then you still have to deduct ESI, but that deduction should be based on the overtime amount only. Please go through esic.nic.in and see the O.T. definition there.

OVERTIME ALLOWANCE

In the case where the employer, upon finding the need to expedite work in addition to normal working hours, offers the employee the opportunity to work overtime, a concluded implied contract emerges between the employer and employee when the employee accepts the overtime work. Both the remuneration received during regular working hours and for overtime constitute a composite wage, falling within the definition of Sec.2(22) of the ESI Act. Consequently, contributions are payable on overtime allowances. However, overtime allowances are considered wages solely for contribution purposes and do not affect employee coverage under the Scheme.

This perspective was upheld by the Supreme Court in its judgment on 6.11.96 in the case of Indian Drugs & Pharmaceuticals Ltd. Vs. ESIC, in Civil Appeal No.2777 of 1980. (Old instructions issued via memo No.3-1(2)/3(1)/68 dated 31)

Query Regarding PF Deduction on Holiday Wages

I am working in the Retail Industry as an HR professional. I have a query: If any employee works on a national holiday, the company will pay double salary with compensatory time off and will not deduct PF contribution on extra wages/salary. However, our company deducts PF on the extra payable salary (National Holiday's Salary). If you have any judgments or circulars, please provide me.

Thanks & Regards,

Santosh Rathod
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