Labour Law Experts Please Help Me Pf Issue - DOCX Download

Dear Experts, I am working in a Pvt. Ltd. Co. in Mumbai as HR. My company has 30 employees, but there is no PF and ESI as of date. The majority of employees have a salary of more than 25,000 without any split-up today.

Applying for PF and Salary Structure

Now, my company has decided to apply for PF, starting with 20 employees. My MD has instructed me to split the salary into Basic, HRA, Conveyance, Education, and Medical, with the basic ranging between 4,000 to 5,500.

I informed my MD that we should provide the basic at the minimum wage rate, but he disagrees. He has shown me wage slips from a dozen companies in Mumbai where the basic salary is between 4,000 to 5,500, and PF is deducted based on this basic amount.

I am now confused about what to do. I need your advice at the earliest.

If the company is paying more than the applicable minimum wages, the employer has the right to realistically structure the various salary components. Please proceed as per the instructions. Basic pay appears to be 20% of the gross salary. Please do not waste time; at least now you are covered under EPF.

ESI is applicable only for employees drawing a gross salary of Rs. 21,000 and below. Something is better than nothing.

Dear SRINATH SAI RAM ji,

I feel you need to review your answer by reading the query once again. It seems to me that you have made a mistake in reading the query. The company is paying a basic component less than the minimum wage rate. A basic component between 4000 to 5500 is definitely much lower than the minimum wages in any of the scheduled industries in Mumbai. The query needs to be examined under the scenario wherein the establishment does not fall under a scheduled industry.

Dear all,

Realistic Salary Structure

The salary structure should always be realistic. Why should Rs. 4000 to Rs. 5500 be treated as Basic? Why not have a zero basic, and treat all your remunerations/salary as HRA or any other allowances? You are employing more than 20 persons, and the applicability of ESIC and EPF is there. Now, when you intend to get the establishment covered, you are going to split your salary into certain allowances, and such practices are opted to deprive employees of benefits. The inspecting authorities, in such cases, can make you liable to pay contributions on the wages as they existed on the day or prior to the day of coverage.

Restructuring Salary with Employee Confidence

Anyhow, if you are going to restructure your salary, take into confidence the staff members too and fix allowances in a genuine way.

Dear Korgaonkarji, the reply given was based on the following judgments:

1. Minimum wages can be split into allowances.
2. Employers, not the PF Authority, can fix wages for contributions.

The judgments are attached for your perusal. Besides, the present gross salary is around Rs 25,000/-. I subscribe to your opinion entirely, but as already mentioned, the concerned Managing Director has provided wage slips from a dozen companies in Mumbai where the basic salary is shown between 4000 to 5500, and PF is deducted based on this basic amount. The PF coverage is already delayed, and any future consequences will be at the sole risk of the employer.

Thank you.

When considering the salary structure of employees, I believe that when we divide the gross salary/CTC into various allowances, we should ensure that the basic + DA amount is not less than the existing minimum wages of that particular region or state. It would be beneficial for the company to set the amount in Basic + DA higher than the minimum wages because PF contributions are based on it.

Failure to comply with the minimum PF contribution may lead to action being taken by the PF Department. Additionally, the labor department may also take steps regarding this matter.

Thank you.

Dear All,

Thanks for your valuable comments and inputs. Mr. Ajay Kr Kuntail, can you provide any notification in this regard that basic salary should be minimum wage? I have employees with low salaries. If we show state-wise minimum wage for them, the net is less for them, though we are following the same for safeguard. If you have any notification, please share.

Debashree Ghosh Dutta
Email: hrdebashreeghoshdutta@gmail.com