Is There a Legal Requirement to Set Basic Pay at Rs 6,500 for PF Benefits?

Is there any provision for fixing the basic pay of an employee whose gross is more than Rs 10,000 per month? Nowadays, it has come to our notice that PF enforcement officers are asking to fix the basic pay of employees to at least Rs 6,500 out of the gross Rs 10,000 so that employees can avail maximum benefits. Is there any legal provision or court judgment on this? Please share on an urgent basis.

Regards

At present, there is no such rule amended. You can fix your basic pay as per your convenience, but don't forget that the basic is fully taxable. So, always keep the basic less than 40% of the gross.

Thank you.

Basic Salary and PF Deductions

The basic salary must be 40 to 50% of the gross salary. If the gross salary is Rs. 10,000 and below, then the basic salary must be at least the minimum wages of that state. Currently, the minimum wages in Gurgaon are Rs. 5,547.

PF will be deducted on the basic salary. If the basic salary is more than Rs. 6,500, then the employer is not bound to deduct PF for those employees whose basic salary is more than Rs. 6,500. If the employer wishes, they can deduct PF on the actual basic salary or Rs. 6,500, i.e., PF Basic salary.

An enforcement office of EPFO cannot force the fixing of basic wages up to the ceiling limits, i.e., Rs. 6500/- per month. The management is at liberty to either pay the whole amount as basic or bifurcate it into certain allowances, considering the taxation implications as well. However, the allowances should be justifiable in terms of nature and amounts.

However, since the Minimum Wages Act is the subject matter of the concerned states, it stipulates a need-based minimum wage that cannot be bifurcated into certain allowances not included in the definition of minimum wage, such as other than basic, DA, and HRA.

Regards,
P K Sharma

Compliance with Minimum Wages Act

The basic salary should be at least as per the Minimum Wages Act. If it is less than that, even though the gross salary is equal to or more than the Minimum Wages Act, the employer would be a defaulter under the M.W. Act. This could lead to different liabilities since it is a technical issue.

Dear Seniors,

If an employee's salary is as per the minimum wages, for example, (Basic, Special Allowance, HRA, Conveyance Allowance, Medical Allowance) = ₹15,000/-. If an employee is absent for 12-13 days in a month, then his salary would be less than the Minimum Wages. Can we show the employee less basic, special allowance, HRA, conveyance allowance, and medical allowance? Is it legally right?

Please guide me.

Thanks & Regards,
Jagdish

Dear Pramod, is the minimum wage applicable to white-collar employees?