Understanding PF Deductions: Why Is Rs. 6500 the Benchmark for Construction Staff?

Dear Seniors,

We are a construction company with a staff strength of 17, and we deduct Provident Fund (PF) from the basic salary as we do not have Dearness Allowance (DA). The majority of the staff members have a basic salary ranging from 4000 to 6000.

A PF inspector provided us with a report a week ago. According to the book "The Employees' Provident Funds and Miscellaneous Provisions Act, 1952," the term 'basic salary' excludes House Rent Allowance (HRA), bonus, commission, overtime, and includes all salary emoluments other than the mentioned components. Additionally, he orally mentioned that if the basic salary is less than Rs. 6500, we should include certain components to make it reach Rs. 6500, and it is mandatory to deduct from Rs. 6500.

Questions:

1. What is the minimum wage for the construction industry (management staff)?
2. Why is Rs. 6500 taken as the PF amount when it is a pension scheme slab?

Thank you.

Hello seniors,

If the basic is say Rs 6,000/-, then in this case, is it right to deduct Rs 6,000 x 12% or do we have to compulsorily make the minimum basic to Rs 6,500/- in order to deduct the PF, as the above explanation seems to imply that? Please clarify.

I saw the link you sent to me, but it only has DA. How can we find the minimum wages for Chennai?

Dear All,

The PF inspector is not correct. In many sectors, including construction, the rates of minimum wages notified by the Government are less than Rs 6500/-. For argument's sake, if we take minimum wages as the base for PF, it comes out to be less than Rs 6500/-. Allowances such as HRA and Bonus are excluded from the PF purview. However, the employer must ensure that the amount of allowances is not abnormal and should be within a reasonable limit. In other words, Sunday should not be longer than Monday.

Hope this is clear to all.

S. N. Bansode

Dear friend,
If your basic is ₹6,000, then deduct PF only on that amount, and you need not increase it to ₹6,500.
S.N. Bansode

Dear,

The MW is your base. Where did this inspector come from? The labor department or from the enforcement?

Dear Bansode,

Nowadays, PF offices, mainly in Chennai, are concentrating mostly on these kinds of cases and stating that many companies are paying less PF because they have kept their Basic less and other components more. Also, to avoid these kinds of issues, they are recommending keeping the basic at 60% of the gross for those members who are drawing basic less than Rs. 6500.

As you know, these PF rules have so much in fine print; most of us come to know about them only when we are at the firing line.

Regards,

Guru.k

Dear Brother from Chennai,

You should ask the Inspector to issue us the notice in this regard, as there is a judgment in Group4 Security v/s. EPF tribunal in June 2009 which allows us to bifurcate the wages into parts like HRA, conveyance, etc.

Please provide me with your email ID and the specific notice from the Inspector so that I can send you the specific judgment I have.

With regards,

SHISH RAM UNIYAL COMPLIANCE CONSULTANT 09811681660

Hi,

Please take note of what Mr. Shish said; he is right. Ask the PF inspector to give you notice regarding this matter. He cannot force you to increase the basic wage to Rs. 6,500/-. Kindly note these points:

1. The basic wage can never be less than the minimum wage.
2. The local PF can decide the approximate percentage of gross pay to be kept as basic, as some authorities suggest around 60%. This decision falls under the jurisdiction of the PF Commissioner, who acts in the best interest of employees. However, they cannot compel the employer to raise this amount. You have the option to seek legal recourse and obtain a judgment in your favor.

Regards,
Manish

Dear Brother,

There are a lot of explanations that you need. Kindly visit the mentioned site: [EPFO](http://www.epfindia.com/) so that you get correct and proper information.

With Warm Wishes,

Sandeep Janardhanan