Understanding PF Calculations: Is Minimum Wage Always the Basic Amount?

Can anyone help me regarding PF? Is the minimum wage considered as basic for PF calculation, or can another amount be considered as basic?

Thank you.

PF Calculation: Understanding the Basic Amount

For PF calculation, the maximum ceiling of 6500 basic is to be considered. If the basic amount is less than 6500, then the actual amount is to be taken for PF calculation.

PF Calculation Guidelines

PF is to be calculated not merely on Basic but on Basic + D.A. (Dearness Allowance) + retaining allowance, if any. If the minimum wages paid are Rs. 6500/- or less, you have to pay contribution on it.

Regards,
B. Saikumar
Mumbai

PF Deduction on Minimum Wages

PF has to be deducted at 12% on minimum wages, whatever may be the structure of the salary.

The maximum limit on which PF should be deducted is 6500 (basic). However, it depends on the company, with mutual agreement with the employee, whether it is to be deducted if the basic goes above 6500.

Regards,
Shardaprasad

The maximum limit of PF deduction is Rs. 780 (which is 12% of Rs. 6500). However, it depends on the company's mutual agreement with the employee whether to deduct more than Rs. 780 if the basic salary exceeds Rs. 6500.

Regards,
Shardaprasad

All of your suggestions are apart from the question.

Understanding Minimum Wage Components

Minimum wage is not a basic amount. You can bifurcate the minimum wage into basic, HRA, etc.

Suppose Haryana's minimum wage is 4847.00, then you can divide it as follows: Basic - 3000.00, HRA - 1347, Con - 500.

Provident Fund Contribution Details

The contribution to the PF is calculated at 12% of the basic pay, DA, cash value of food concession, and retaining allowance, if any, subject to a maximum of Rs. 6500/- per month. Voluntary higher contributions are also acceptable at the joint request of the member and the employer.

Exceptions to the 12% Contribution Rate

However, the rate of contribution is 10% in respect of the following categories of establishments:

1. Any establishment covered prior to 22.9.97 in which fewer than 20 persons are employed.
2. Any sick industrial company as defined in Clause (0) of Sub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction.
3. Any establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.
4. Any establishment engaged in the manufacturing of (a) Jute, (b) Beedi, (c) Brick, (d) Coir (other than the spinning sector), (e) Guar Gum Industries/Factories.

N.B. Source: EPFO, India

PF Contributions and Minimum Wages

PF is required to be paid on minimum wages, which include basic and special allowance. There are many judgments wherein courts, and I think the EPFO has issued a circular as well, have upheld that minimum wages should not be further bifurcated (basic/DA/HRA, whatever it may be) for the payment of PF contributions. However, if the minimum wages paid are more than Rs 6500/-, then the payment of PF contributions may be limited to Rs 6500 as per the PF Act.

Is it possible for the basic percentage to differ from person to person in the same company? Also, could you please clarify if ESIC is calculated based on the basic salary or the gross salary?

Regards,
Shona

Dear Sir,

Is there any minimum wage limit for PF deduction of an employee? For example, in Chhattisgarh, the minimum wages for unskilled workers are Rs. 8450/- per month. Suppose an employer divides this wage into two heads, i.e., Basic, HRA, and Conveyance, i.e., Rs. 5070/-, Rs. 2535/-, and Rs. 845/- respectively. Then, on which amount is the employer liable to deduct the amount, on basic or gross? Please consider this question important as it has been troubling me for quite some time.

Thanks and Regards, Dolly Sasmal