Understanding Basic Wages and Provident Fund Contributions
This is very irregular. Concerned employees should take it up with their employers to rectify the error. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) defines basic wages to include any other allowance similar to dearness allowance, house rent allowance, etc., payable to the employee in respect of his employment or work done in such employment. As per Section 2(b) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (Act), basic wages mean all emoluments earned by an employee while on duty, on leave, or on holidays with wages in accordance with the terms of the contract of employment and which are paid or payable in cash to him. However, basic wages do not include: (i) the cash value of any food concession; (ii) dearness allowance; house-rent allowance; overtime allowance; bonus; commission; or any other similar allowance payable to the employee in respect of his employment or work done in such employment; (iii) any presents made by the employer.
EPF Account Requirements and Contributions
An EPF account is mandatory for all employees with a basic salary up to Rs. 15,000 per month in firms employing more than 20 workers. The contribution paid by the employees is 12 percent of basic wages plus dearness allowance plus retaining allowance. An equal contribution is payable by the employers. If the basic pay is less than Rs. 15,000, then 8.33% of that full amount will go into EPS A/c. However, the Hon'ble Supreme Court of India, vide its judgment dated 28/02/2019, held that all amounts, whether or not categorized as "allowances," if paid equally across the board to all employees, should be considered as part and parcel of the "basic wage" for the purpose of calculating provident fund (PF) contribution under Section 6 of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952.