Are "Food Allowance" and "Canteen Allowance" Mandatory on Factory Payslips? Seeking Clarity on the Factories Act Requirements

Hi, I am stuck with a problem. I want to understand if there are any specific heads that are compulsory under which salary/wages are paid under the Factories Act. In other words, I need to understand if it is compulsory to have headings such as "Food Allowance" and "Canteen Allowance" on the payslip of a factory.

Canteen Provision Under the Act

It is not compulsory under the Act to provide a canteen if you have more than 250 workmen. However, you are supposed to provide food at a subsidized rate.

Regards,
Sivasankaran

We do not have 250 workmen. We do not have a canteen, but we have provided a place for them to have food. We have Food Allowance and Canteen Allowance as part of our salary, which reflects in payslips as well as the wages register. One PF inspector has visited the factory and informed us that food/canteen allowance is part of the basic salary under the PF Act, and we need to pay PF contribution on this amount. I checked in the Bare Act, and it's correct. We may change the name of the allowance in the future, but wanted to understand if under the Factories Act or any other act, is it compulsory to pay the allowances.

Thanks.

Regards

Yes, he is right. All such allowances are covered under PF and ESI. Changing it is not going to solve your problem. At the most, you can make it part of HRA.

Question on Allowances

Why two allowances for food and canteen? I do not understand the logic.

Regards,
T. Sivasankaran

We have workers to whom we pay Canteen Allowance and staff members to whom we pay Food Allowance. We are thinking of changing the name of these allowances to Misc. Allowance, but that will be a future step. Before that, I wanted to understand if there are any specific allowances we need to pay under the Factories Act.

Now, I am clear that there are no specific headings/allowances under the Factories Act. I will speak to our consultant as well and make a decision.

I am thankful for your guidance.

Regards,
Gopinath

Hi Siva, I also wanted to understand if there are any specific allowances we need to pay under the Factories Act.

Regards,
Rushi Joshi
Jr. HR Executive
Ahmedabad

No, there is no provision to pay a food allowance or arrange for subsidized rates in the canteen. What is required by law is to arrange for a canteen if the number of employees exceeds 250. The rates may be decided by the Works Committee formed under the I.D. Act. Allowances, etc., are decided under agreements with the Union and not by legal provisions.

My counterparts have clearly mentioned that no act will insist on the management to pay food allowance or canteen allowance. According to the Factories Act Sec. 46, the State Govt. may make rules requiring that in any specified factory wherein more than 250 workmen are ordinarily employed (confirmed+staff+contract+staff+trainees/Probationers+security+canteen workers all put together), a canteen shall be provided and maintained by the occupier for the use of workers.

In most cases where there are fewer than 250 workers, during the wage settlement process, the management splits the basket amount into various heads for cost-effectiveness and to avoid contributions to PF and payment of Gratuity. This decision is up to the management and the union to sit and sort out these issues during negotiations.

Regards,
G.K. Manjunath
Sr. Manager HR