EPFO Update: How Does the New PF Contribution Rule on Minimum Wages Affect Employers?

Dear Members, kindly refer to the attached circular issued by EPFO on 23.05.2011. The circular mentions that employers are obligated to deduct and deposit the PF contribution based on minimum wages effective from 01.06.2011.

Thanks,

Asif Iqbal

Dear Asif, this circular is internal communication between the PF authorities. This circular is not law. Moreover, PF authorities do not have jurisdiction to enter into minimum wage questions. They can only ensure that the PF is deducted on Basic+DA or not. However, due to this circular, PF authorities will now pull many employers in the enquiry under section 7A and will make the demand of differential money if any. However, if the matter is fought out till tribunal or High Court level, the chances of winning are more favorable to the employer.

I would like to bring to your attention that the PF authorities have issued a directive through their internal order, based on a recent judgment, stating that minimum wages cannot be divided for the purpose of PF deduction. However, the concerned employer has appealed to the Appellate Tribunal, and due to the employer's Counsel's reasoning, the Tribunal has granted a stay on the authority's order. The matter is currently pending before the Appellate Tribunal.

Regards

Dear Manish/Murugan sirs, Recently, in the month of May 2011, we changed the basic salary of all entry-level employees (engineers) from Rs 4800 to Rs 5200 in Gurgaon after facing pressure from the client to ensure compliance. This change was implemented from April 2011, and the difference in the PF amount was deposited.

Understanding Minimum Wages and Basic Salary

I would like to know what the law says about minimum wages. What is the difference between the minimum wage and basic salary? Is it not mandatory to deduct PF on the minimum wage?

Thanks,
Ashish

This is what the problem is.

This subject is being discussed in another heading, "Splitting of Minimum Wages for the Purpose of PF Contribution Not Permissible."

I have been suggesting to the web designer of this forum that similar discussions must be linked so that someone who has doubts on this score and who did not have exposure to go through various suggestions and discussions on this topic, when they try to post such a question, the computer must alert them to visit a specific site. Software designing must be done in that way. Can the web designers look into this?

Now, coming back to your point; the above order issued by the PF authorities does not hold water because this is basically their internal circular. And PF authorities do not have locus standi to issue such orders. It is learned that the circular (attached by you here) issued by PF authorities has been quashed by the PF Tribunal. However, I am yet to get a copy, if any. Hence, wait for some more time to know about the current status.

Regards,
Balaji

I want to know how PF should be calculated for workers who are paid on a daily basis. These workers also receive overtime pay based on the extra work they undertake. Could you please help me?

Regards,
Rao

I understand the matter in this notification is still pending with the Appellate Tribunal. Given this background, is there any urgent need to restructure employee minimum wages to be equal to basic, and other allowances applicable over and above?

Respected seniors, this is E. Ramesh, working as a Senior Personnel Officer in a manufacturing company in Chittoor. Whatever was discussed above is only a draft notification. It will take time for 2 months. Some updates will be made. We can consider them after 2 months. We can expect another circular.

Thanks & Regards,

E. Ramesh
Senior Personnel Officer
Chittoor

Hello everyone,

If someone is working for 30 days, 26 days' wages are calculated towards EPF. What about the remaining 4 days? Is there any circular for this? Please help.

The minimum wages for 26 days include payment for the weekly off. Hence, PF payment on 26 days' wages would be adequate compliance with PF, I feel.