Confused About Minimum Wage Splitting for PF? Seeking Clarity on Salary Structure Guidelines

Understanding PF Guidelines and Minimum Wage Splitting

As per the new PF guideline, the splitting of minimum wages further into basic, HRA, conveyance, and other allowances is not allowed. Instead, the entire minimum wages should be considered as basic for the purpose of PF calculation. However, I have come across a recent judgment by the High Court of Punjab and Haryana where it has been clearly stated that the minimum wage can be further split into Basic, HRA, Conveyance, and other allowances. Therefore, the PF contribution should be calculated on the bifurcated basic (which may be less than the minimum wages). Can someone guide me on the actual scenario and what structure I should follow in creating the salary structure?

Regards,
DG

It's surprising. Can you please forward the details of the judgment?

Now, it is an accepted fact that the minimum wage as declared by the respective state governments should be treated as basic wages for PF contribution.

Regards,
Kamal

The employees engaged in any office must be paid the Minimum Wages, for which we have to deduct the PF. What is the purpose of cutting short the PF Amount? Whether to deprive the benefit of the employee or to control the remittance of the PF Amount in less value, it should be paid fully because it is the only savings available to the employees. Do not curtail their privileges.

In addition to the Minimum Wages, you can give them HRA, Conveyance, Food Subsidy, etc., either in kind or in cash (as an allowance or reimbursement) for which you can make the payment through vouchers instead of entering it in the Paysheet.

Clarification on Court Ruling and PF Circular

DG's doubt is genuine that there is a court ruling in G4S Security Agency's case stating that the employer can split the minimum wages. This was held before the new circular of the Central PF Commissioner was issued. The same circular has been questioned in the PF Appellate Tribunal as well. Therefore, the fate of the circular is still unclear, though the PF organization has given a clarification that enforcement on the minimum wages can be made even when the case is pending with the Appellate body.

I would like to add one more thing: if it is to make contributions on the minimum wages and if the minimum wages are more than Rs 6500, then can the circular stand? No, not at all. The circular does not say that 'if the minimum wages are less than Rs 6500, no bifurcation of the wage is allowed,' but it is a general circular directing to follow the minimum wages as PF qualifying salary. Still, the very object of the circular is good as it intends to fix those who bifurcate the wages into small compartments just to reduce the burden of their PF. It is clear from the wording of the circular that it is "beyond logic and rationale that an establishment which cannot pay even minimum wages to its employees would be willing to pay allowances to them."

Regards,
Madhu.T.K

Understanding Minimum Wages and PF Wages

As per the concept of minimum wages versus PF wages, it is only Basic + DA that should satisfy the minimum wages, and PF is calculated based on the above.

Best Regards,
P. Manoz Kumar

The judgment by the Punjab and Haryana High Court is yet to be endorsed by the Central PF Commissioner. Therefore, as per the PF office record, splitting of minimum wages for the purpose of curtailing PF contribution is not allowed.

Please see the circular relying on the judgment at https://www.citehr.com/285737-legal-...#axzz1WJ1p0i4f.

Regards,
Rajan Law Firm