PF Contribution - whether other allowance will be the part of basic wage to attract PF contribution?

Dear All, We have recently gone through PF inspection of one of our unit in Rajasthan, during inspection, PF-EO imposed liability on Other Allowance being paid to the employees. Huge liability was imposed by the notice given to us, hence kindly guide whether other allowance will be the part of basic wage to attract PF contribution? In our salary structure, basic salary is 50% and other allowance is around 20-30% along with other allowances,
Kindly guide, thank you.

"Other allowance" paid uniformly to all the employees of the establishment will be treated as part of basic wages for PF contribution. This is because basic wages per se is the total wages that an employee earns while on duty or on leave. Therefore, if you have been contributing on basic wages alone, you will have to make it on basic wage and other allowance but subject to a maximum of Rs 15000. If the PF authorities have clubbed the 'other allowance' in total without capping the total PF qualifying wages to Rs 15000, that can be challenged when you appear for 7A enquiry( enquiry under section 7 A of the EPF and MP Act)

In PF act no where it has been mentioned that what % of monthly gross should be Basic. Prior to Apex Court Verdict majority organizations were paying PF contribution on Basic +DA. But after the verdict of Feb,2019 most of the organizations are paying PF contribution on Monthly gross - HRA. In the verdict it has been told to pay contribution on all regular payable allowances other than productivity linked any payment etc.

As the present definition of Basic has not been changed and in exclusion list there is HRA, that is why the organizations are following the formula ( Monthly gross - HRA ).

The contribution may be restricted up to 15k as on date.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
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