Understanding EPF Contributions: Why HRA and Allowances Aren't Included in Basic Wages

Latest Judgment on EPF and Minimum Wages

Dear Members, please read the latest judgment published in the Labour Law Reporter - September 11 issue on pages 943 and 944. The definition provided under section 2(b) of EPF cannot be equated with the definition given under the Minimum Wages Act for basic wages. Therefore, splitting of minimum wages is not a violation for EPF contribution on Basic Wages.

Reference: 2011 LLR 943 of the Punjab & Haryana High Court. LPA No.1139/2011 (O&M) dated 20/07/2011.

Has the Central PF commissioner issued any circular in support of his claim? If yes, please arrange to provide the scanned copy. If not, what is the validity of this order by the court?

Regards,
Rajiv Kaushesh

No central PF commissioner has issued any circular in support of splitting minimum wages, but an order has been issued stating that the minimum wage should be the basic salary.

Regards,
Sumit

Dear Murugavel, kindly go through the attachment. You will find better information. The circular dated 25-05-2011 regarding the splitting of minimum wages for the purpose of PF contribution not being permissible is kept in abeyance. Therefore, the "splitting of minimum wages is not a violation to have EPF contribution on Basic Wages" has not been amended yet.

Regards,
Ratikanta Rath

Dear Member,

When the EPF appellate tribunal gives the verdict that the EPF authority has no power to equate or compare basic salary with the wage definition of other labor laws like Minimum Wages and Payment of Wages, how is it practically possible for a Central RPFC to issue a circular or make any comment on the splitting of minimum wages?

Dear Member, the circular that you have mentioned was dated in the month of May '11, whereas my attachment of the EPF tribunal is a verdict passed in the month of August '11. The impugned order is pending before the HC, not before the EPF Appellate Tribunal. The Court can pass an order with reference to the facts and documents placed before it. As you may be aware, any court order will never become a law. However, we could draw some inferences from the court verdict.

Dear members,

It is true that EPF contributions will not be attracted to HRA, conveyance, and washing allowance. The EPF notification and court order submitted by Mr. Rath are indeed updates. Thanks for that. However, upon reviewing them, we find that the matter is sub judice. Therefore, confidently stating a split of minimum wages is not justified. It would be more appropriate to proceed with an inquiry under section 7A ourselves.

Thanks & Regards,

Sumit Kumar Saxena