How Will the New PF Ruling on Employee Benefits Affect Your Contributions?

Madhya Pradesh High Court Ruling on Employee Benefits

The Madhya Pradesh High Court's ruling that employee benefits, such as house rent, conveyance, and special allowances, should be taken into account while computing the employee provident fund contributions may soon be implemented all over the country.

EPFO – Head office has forwarded the judgment to all PF regional offices.

Please find attached the same for your reference.

Regards

Flooded with inquiries as to what should be done for provident fund contribution in view of the recent rulings of the Madhya Pradesh High Court and the Madras High Court, which have clubbed almost every allowance with basic wages/dearness allowance for deduction and deposit of provident fund contributions. The Provident Fund Authorities have leapt on it as if they have found the gold mines of El Dorado. Sluggish and lethargic otherwise; the authorities showed remarkable agility and tearing hurry in sending the circulars in bulk for propagating the operative portions of the decisions, forgetting the basic tenet of the legal system that those rulings have not attained the status of finality. This attitude of the authorities is nauseating, reflecting their impaired mentality towards the economic growth of the country.

However, we consider it our bounden duty to clarify the legal position (as gathered by the concerned advocates) which, as of today, is that:

1. Review Petitions have been filed before the Madhya Pradesh High Court (Gwalior Bench) which would come up for hearing on 29th July 2011.

2. A Writ Appeal has also been filed in the High Court of Madras which is likely to come up for hearing on or around 8th August 2011.

In view of the pendency of the aforesaid Petitions, the judgments of the High Courts are not definitive. So wait and watch.

Dear Mr. Rameshpr, can you please give feedback regarding the review petitions filed before MP HC (Gwalior Bench) which came up for hearing on the 29th of July?

Thanks & Regards,
R K Nair

I agree with Mr. Rameshpr. It is premature to reach a conclusion since the matter is under judicial review. We can only wait and watch.

Thank you.

I think if PF makes such amendments, then it won't be fair as it will reduce the take-home pay of employees too. It will be extra expenditure for the organization. CII may not accept this amendment. They have to think a hundred times before taking such steps. The Honourable MP High Court has given such a verdict because the employer played with minimum wages, splitting them into various components of salary, resulting in a lower basic pay than the standard and less contribution to PF.

For example, according to the Minimum wages in MP, if Basic + DA = 6000/- for that period, PF contributions should be made on this full amount. However, this employer split the 6000/- into Basic, HRA, and Special Allowance, resulting in a lower amount for basic pay and consequently less contribution to PF.

Discussion on High Court Judgments

Why do people only discuss these judgments? The Punjab and Haryana High Court have given a verdict that minimum wages can be split, and there is nothing wrong with doing so. What is the sanctity of this High Court judgment? PF authorities have adopted the judgment, which is in their favor, and they did not mention the other judgment. Everyone interprets the law in their own way. People in power try to pressure others. It is high time that all employers together apply a memorandum to the government, and only then will there be a solution to this.

Regards,
Balaji

Dear All, just to add to the discussion, it may be recollected that in Assistant Provident Fund Commissioner, Gurgaon Vs. G4S Security Services (India) Limited & Anr, 2011 LLR 316, the Punjab & Haryana High Court has held that the provident fund contributions are not necessarily to be paid on the wages which are fixed under the Minimum Wages Act.

Being aggrieved, the EPFO filed a Letters Patent Appeal No. 1139 of 2011 before the Division Bench challenging the order of the learned Single Judge. The Division Bench, comprising the Hon'ble Chief Justice Adarsh Kumar and the Hon'ble Justice A.K. Mittal, on 20.07.2011, dismissed the appeal.

Regards, Ashutosh

Still, we are confused. Let's talk straight. Do we need to follow the judgments of the Madras and MP High Courts, or should we maintain the status quo until some solid judgment comes?

Regards,
Balaji