Delhi High Court Ruling: Should Canteen Allowance Be Part of Basic Wages for PF Deductions?

Delhi High Court Ruling on Canteen Allowance

The Delhi High Court, in its order dated 22.7.2013 (copy attached), in the case of Whirlpool of India Ltd vs RPFC, has held that Canteen Allowance is part of basic wages, and PF is to be deducted from it.

Thanks

I agree with this nice update. Previously, the component considered for the deduction of EPF was Basic + DA + food concession (if any). It seems that after withdrawing the canteen subsidy, the payment against the same was treated as a food concession, so the liability of EPF exists.

Thanks & Regards,
Sumit Kumar Saxena

Thank you very much for the update. I would like to draw attention to meal coupons and meal cards, which are now used by many companies as part of my basket allowance (MBA) in CTC. The cost of a meal card does not attract any concession or subsidy, even if it is used in canteens; it is treated like any purchase in hotels and malls food courts.

Recently, it has come to my notice that PF inspectors are looking from a subsidy angle. How come some PF inspectors are now examining purchases made with meal cards or meal coupon vendors? Can some experts discuss this?

In respect of meal coupons (Sodexo, etc.), neither the employer nor the employee gets any concession. In fact, the employer has to incur service charges, which are also a cost to the company but are normally not included as part of the CTC. Meal coupons, therefore, are on par with cash that can be exchanged at various retail outlets. The only benefit available to employees is the income tax benefit. Since it is a benefit other than salaries and allowances, it will not attract PF contributions. Certainly, once the PF comes out with a new definition of salary with a broader meaning covering all allowances as per the terms of the contract of employment, then, of course, the same will also come within its meaning. Until then, meal coupons are to be considered excluded from PF contributions.

The court verdict is relevant because even in the past, there has been a practice that whatever is agreed upon in a wage settlement, which typically binds all employees, will be treated as part of the salary. The issues pertaining to special allowances (other than DA) paid to all employees either as part of a settlement or a practice followed by the company are also considered part of the salary for PF purposes.

Regards, Madhu.T.K

Certainly, the Sodexo meal coupon is a part of the contribution as per Sec. 2(b)(i), which states that "the cash value of any food concession." Since most people are using these coupons at various food stalls, including Spencer, More outlets, and Reliance departmental stores, the PF authorities may need to consider covering it. Please give your valuable suggestions.

Regards,
PBS Kumar

I am not convinced because meal coupons are not something given as a substitute for food. If we delve into the details, we can also see that Sodexo, provided to employees as part of a tax-saving benefit, is given to those employees who fall under tax brackets. For them, the PF qualifying salary (Basic + DA) itself would be over Rs 6500. In such circumstances, how can PF claim that these allowances would attract PF contributions? In my understanding, most states' minimum wages have surpassed Rs 6500. Unless this limit is increased, there would be no point in demanding contributions on these allowances since the PF Organization cannot mandate contributions on a salary exceeding Rs 6500. It was clarified in the Marathwada Gramin Bank's case that PF cannot be demanded on salaries above Rs 6500.

Regards,
Madhu.T.K