Should Extra Wages for High-Rise Work Count Towards Provident Fund Contributions?

Minimum Wages Notification for High-Rise Buildings

The minimum wages notification issued by the West Bengal Government states that workers employed on high-rise buildings or any structure over 30 feet in height shall be paid 20% of the minimum wages fixed under the notification for the appropriate category as extra wages (please refer to point No (d) on page 4). A copy of the notification issued by the West Bengal Government is enclosed herewith.

Contractors are currently paying provident fund contributions only on the minimum wages fixed by the West Bengal Government, as the "Extra Wages" are not being paid or are not applicable to any worker at present.

Contractors will soon engage their workers to work on high-rise structures and will pay the extra wages to their workers as per the notification.

However, the extra wages will not be paid universally or ordinarily to all workers. Extra wages will be paid only to those who work at a height to compensate for the nature of their work as per the notification. Therefore, generally, these wages will not be earned by all workers on the project.

We would like to know whether such wages payable as extra wages, as fixed by the notification (on account of work on high-rise structures), should be considered as basic wages for the purpose of payment of provident fund contributions.

We request your legal views to further advise contractors to comply accordingly.

Regards,
[Username]

In my opinion, when extra wage, i.e., 20% over and above the minimum wage, is notified and declared under the Minimum Wages Act, it shall be deemed as basic wage, and EPF contribution is accordingly payable.

P. K. Sharma

Dear Ghosh,

Please attach the government notification for the same. However, in my view, PF should not be deducted on high altitude allowance. First, we have to see from the notification in which category the government is paying it.

Dear Sir,

Sorry, I forgot to attach the notification. Please see the 4th Page, Point No. d).

Thank you.

Dear Ghosh,

I have gone through your notification and it states that an additional 20% is to be paid if a worker works on a building above 30ft, high raises, or in tunnels. You need to understand that once you pay provident fund on a certain amount, it cannot be reduced. However, in this specific case, when the same worker works on the ground, this extra 20% amount will not be given to him, and now the PF wages cannot be reduced. Therefore, it would be best if you pay PF based on minimum wages and show this as a high raise allowance without deducting PF from it.

Thank you.

Dear Mr. Ghosh and Mr. Malik,

The 20% extra wage is a part of the minimum wage and as such, it is not an allowance. It is a similar case to the minimum wages notification of the Himachal Pradesh Government, where they allow a 25% extra wage for persons deployed in snow-bound areas. In my opinion, the 20% extra wage is purely a minimum wage, and EPF contribution is payable.

P.K. Sharma

Thank you very much. I have the same doubt regarding whether it will attract PF or not. The height allowance is paid to workers who work at a height of 30 feet or more. Since the PF wage does not include the height allowance, it is only basic plus DA/COLA, whatever we call it.

However, it can be considered only when it is given to all employees and not to some employees for doing different work. It will not be considered for PF since we are providing it to work differently, at a height. If tomorrow their roles change, you will not provide this allowance. Hence, it will not attract PF.

I am still feeling uncomfortable accepting your idea of a violation of Section 12 of the EPF & MP Act if the role of such employees changes later on and this extra wage is withdrawn.

Understanding Section 12 of the EPF & MP Act

Section 12 states: No employer in relation to an establishment to which any Scheme or the Insurance Scheme applies shall, by reason only of his liability for the payment of any contribution to the Fund or the Insurance Fund or any charges under this Act or the Scheme or the Insurance Scheme, reduce whether directly or indirectly, the wages of any employee to whom the Scheme or the Insurance Scheme applies or the total quantum of benefits in the nature of old-age pension, gratuity, provident fund, or life insurance to which the employee is entitled under the terms of his employment, express or implied.

In this case, we will not be violating the terms of the section at that stage, since their special provision of the minimum wage will not be applicable, which results in a reduction. It is not a case where we are altering/tailoring the wage into allowances just to deprive the workers of their EPF benefit.

Kindly share your views as well.

Regards, P. K. Sharma

Let me just share a practical view on this and also affirm the opinion/analogy as stated under:

Understanding Provident Fund Applicability

As we all are aware, PF only gets attracted wherever the earnings have the characteristic of being: 1) ORDINARILY contributing to the earnings, 2) NECESSARILY contributing to the earnings, and 3) UNIVERSALLY applicable to all the employees. In our case, none of these three elements are getting attracted: 1) NOT ORDINARILY, as it is temporary in nature and hence not allowed in the ordinary course of operations, as there exists a provision of "working on structure over 30 feet height," 2) likewise, NOT NECESSARILY because if the same employee works at surface or below the threshold height of 30 feet limit, then this privilege would not be allowed to him, and 3) This element of earning is NOT UNIVERSALLY allowed to all other employees in the category.

So, keeping the above in mind, it is evident that the PF element would not be applicable on the "20% of Minimum wages as extra wages/height allowance to workers employed on high rise buildings or any structure over 30 feet height." A copy of the Hon’ble Supreme Court judgement in "Jay Engineering Works Ltd v Union of India" has been shared with you in this mail.

Regards