Are Canteen and Ad Hoc Allowances Included in Provident Fund Calculations?

We do not have any statutory canteen; it is run and managed by the committee. We are extending only fixed costs to the contractor of the company. The meal rate is decided on a no-profit, no-loss basis by the committee. Based on the worker agreement, we are issuing coupons (as a part of the employer share), and the balance amount is being paid by the workmen. However, based on the agreement, we are also paying canteen allowances (to meet the expenses of the employee share of the canteen) as a part of wages. For other ad hoc allowances, they are paid in lieu of tea expenses.

Inquiry on Provident Fund Computation

Please let us know whether these two components shall be a part and parcel of P.F. for computation or not. It is to be noted that we are paying 80% of the amount as wages, which attracts the P.F. components, and the remaining 20% as other allowances, inclusive of canteen and ad hoc allowances.

Regards,
R.K. Dixit

Court Verdicts on Canteen and Tiffin Allowances

There are different verdicts on the same from different courts. In Whirlpool India Ltd vs. Regional PF Commissioner, the Delhi High Court held that canteen allowance, which is paid as part of a settlement (settlement under section 12(3) of the ID Act) and is paid to all employees, will be part of basic wages attracting PF contribution. The court referred to the definition of basic wages given in the landmark judgment of the Supreme Court of India in Bridge & Roof Co. India Ltd vs. Union of India, stating that allowances paid to all employees should be considered part of basic wages.

However, in another case, NRB Bearings Ltd vs. Asst. Provident Fund Commissioner (2014 LLR 470), the Bombay High Court stated that tiffin allowance, which is paid according to the attendance of employees, is not part of basic wages, and no PF contribution can be paid on tiffin allowance. Since the nature of payment differs in each case, it should be examined on a case-by-case basis only.

Regards,
Madhu. T. K

Any food concession/canteen allowance, etc., falls within the definition of wages under the EPF Act.

Normally, ad hoc allowances are paid temporarily and are either merged with other allowances once a decision about the pay structure is made. However, for the actual interpretation, we need to refer to the settlement document.

Regards,
Madhu.T.K