Understanding Average Daily Wages in the Maternity Act: Basic or Gross Salary?

Hello,

What is meant by average daily wages under the Maternity Act? Is the salary payable based on the basic salary or gross salary? Also, should we pay PF contributions for this period? Can anyone clarify this?

In my opinion, the maternity benefit paid under the Maternity Benefit Act, 1961 is not considered wages, and no EPF contributions are payable on said amount. However, you can refer to the definition of "wages" under the EPF & MPs Act, 1952 and the rules/regulations framed thereunder.

Definition of Average Daily Wages

The term "average daily wages" is defined in the Explanation to Section 5 of the Maternity Benefit Act, 1961. The term "wages" is defined under Section 3(n) of the same Act. Please refer to the same. For more information, kindly also see other discussions on the same subject on this site. The online link is mentioned as follows: https://www.citehr.com/518143-matern...nefit-pay.html

Regards

Maternity Leave Pay Entitlements

During maternity leave, a woman employee is entitled to receive the gross pay she was receiving immediately before her leave days. However, she is not entitled to reimbursements, if any, such as telephone expenses (since she is not on duty but is on leave and therefore is not expected to make official calls) or traveling allowance (since she is not traveling to and from the office).

PF should also be deducted from the salary because it is a payment given to her while in employment, similar to how we pay PF for the days one remains on CL or EL.

Regards,
Madhu.T.K

Answers to you are as under:

What is meant by average daily wages under the Maternity Act?

According to the explanation in Section 5, the average daily wage means the average of the woman's wages payable to her for the days on which she has worked during the period of three calendar months immediately preceding the date from which she absents herself on account of maternity.

"Wages" means all remuneration paid or payable in cash to a woman, if the terms of the contract of employment, express or implied, were fulfilled and includes:

- Such cash allowances (including dearness allowance and house rent allowances) as a woman is for the time being entitled to,
- Incentive bonus, and
- The money value of the concessional supply of food grains and other articles but does not include:
- Any bonus other than incentive bonus;
- Overtime earnings and any deduction or payment made on account of fines;
- Any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the woman under any law for the time being in force; and
- Any gratuity payable on the termination of service.

Is the salary payable on the basic salary or gross salary?

Salary payable is Gross Salary. According to Section 5, payment of maternity benefit is at the rate of the average daily wage, as defined in the answer to Q1 above.

Also, should we pay PF contributions for this period?

There is no legal clarity in this respect, according to me. Various CPFCs during their tenure have given clear instructions that certain categories of allowances, including Maternity Benefit, will not form part of the "basic wages" as defined under Section 2(b) of the EPF Act. EPFO Chennai says Maternity Benefit is a part of basic wages and included in the term "wages" for the purpose of PF contribution.

I advise including Maternity Benefit as a part of "basic wages" for PF contribution. Maternity Benefit is paid for the leave during maternity, and therefore, it is a kind of paid leave on which PF attracts.

Any organization covered under the ESI Act or Maternity Benefit Act is not applicable. If the organization is covered under ESI, maternity benefits will be passed on to the women employee concerned. Please also take this into consideration along with the other experts who have enlightened their valuable views.

Clarification on Maternity Act Queries

The queriest's questions are on the Maternity Act, and the responses given by members are in context with the questions asked.

Regards,