Workshop Insights on PF Contribution and Wage Structure
I am just entering my office after attending a workshop convened by the Employers' Federation of Southern India (EFSI), which concluded an hour ago. There were extensive deliberations on splitting wages into different components. Three PF commissioners (from Royapettah, Ambattur, and Tambaram jurisdictions) were present, and they unanimously stated that there is no rule that 60% of wages must be considered for PF contribution. Therefore, my dear friends, do not have a different opinion on this subject.
However, there was one point that might concern you. Wherever you pay your employees a wage of Rs. 5000/- p.m. (where the minimum wage is Rs. 4000/-) and you follow this assumed wage pattern:
- Basic - Rs. 1500
- HRA - Rs. 1000
- Conveyance - Rs. 500
- Special Allowance - Rs. 1000
- Washing Allowance - Rs. 1000
Then, excluding the HRA, you must contribute PF for Rs. 4000/-. That is what one of the commissioners of PF said, and they will view the salary structure like that. They also added that this will be followed for employees who receive wages less than their prescribed limit of Rs. 6500/-. Those who earn basic wages more than Rs. 6500/- are not particular about it.
To add fuel to the fire, there is a judgment pronounced by the Madhya Pradesh High Court in the case of Surya Roshini Ltd Vs. Employers' Provident Fund and Another (LLR 568 - June 2011 issue), wherein it was held that allowances such as Transport Allowance, Attendance Incentive, Washing Allowance, and Special Allowance paid to employees have to be included in the Basic salary to calculate PF contribution. This will certainly go against the employer.
In the meantime, Labour Law Reporter (Mr. H.L. Kumar, Advocate at the Supreme Court) wrote a letter to the PF commissioner in New Delhi questioning the sanctity of the circular issued by PF authorities and insisting they withdraw the circular. Let's wait and see what their reaction is to this letter.
Hope all these points will give you additional ideas on this.
Regards,
Balaji