House Rent Allowance and Basic Wages: How Does the Madras High Court Judgment Affect You?

House Rent Allowance and Basic Wages

Whether house rent allowance will be treated as a component of basic wages for the Madras High Court judgment?

As per the PF Act, salary = Basic plus DA plus RA. HRA is not part of the salary for calculating contributions for PF.

Dear Mr. V. Subbarao, kindly refer to the following judgment given by the Hon'ble Punjab & Haryana High Court on PF Liability for your ready reference:

LLR316 of 2011 Punjab & Haryana High Court, Hon'ble Mr. Mahesh Grover, J. CWP NO.15443/2009(O&M) D/- 1-2-2011 (Asst. Provident Fund Commissioner Vs. M/s. G4s Security Services (India) Ltd. And Others);

Employees' Provident Funds & Miscellaneous Provisions Act, 1952 – Sec 2(b), Basic Wages – Petitioner challenging the order of EPF Tribunal negating the order of Provident Fund Authority holding that minimum wages cannot be split with House Rent, Conveyance, and Washing Allowance for attracting EPF Contributions – While dismissing the writ petition, the High Court observed: The objects and reasons of Employees' Provident Funds and Miscellaneous Provisions Act and Minimum Wages are manifestly distinct even though they converge on the beneficial aspect of the welfare of an employee – The respondents have rightly excluded certain allowances such as House Rent, Washing, and Conveyance Allowances while determining their liability towards the fund – The contention of the petitioner that there is infirmity in the Impugned order recorded by the Appellate tribunal and the petition is held to be without any merit and is dismissed.

Dear Praveen, as per the PF Act, the basic wages are considered for PF contribution at 12%. Here, the basic wages include Basic plus Dearness Allowances. Moreover, the total of Basic plus DA should meet the minimum wages of the respective region, and for the same figure, PF contribution has to be paid by the management as a minimum.

FUI - Now, the PF authority has recently issued a circular stating that "Splitting wages below minimum wages to avoid the excess of PF contribution by Management is considered illegal."

Regards,
Boopathi

Dear Praveen,

As per the PF Act, the basic wages are considered for PF contribution at 12%. Here, the basic wages include Basic plus Dearness Allowances. Moreover, the total of Basic plus DA should meet the minimum wages of the respective region, and for that same figure, PF contributions have to be paid by the management as a minimum.

For your information, the PF authority has recently issued a circular stating that "Splitting wages below minimum wages to avoid the excess of PF contribution by Management is considered illegal."

Regards,
Boopathi