Understanding PF Calculations: How Should Absences Affect Basic Salary for PF?

Hi, We have recently encountered an issue with a new client regarding PF. Under PF regulations, we have set a threshold of INR 15K as the limit for PF purposes. However, there are days when an employee is absent. For instance, if the Basic Salary is INR 19K (minimum wage) and on a pro-rata basis, the monthly basis comes to 18K, we still calculate PF based on 15K. The client suggests that the Basic should be 15000/30 days * the number of days present, resulting in around 14.5K. We have explained that capping PF calculations at 15K does not mean 15K is the default basic. Can you advise on the legal standpoint regarding this issue?

Thank you.

Until and unless, after adjustment of LWP, the Basic is below ₹15,000, PF contribution should be on a ₹15,000 basis. There is no concept in any labor laws that the default basic is ₹15,000.

Moreover, PF contribution, as per the Apex court verdict, should be on monthly gross minus HRA. Therefore, after LWP, if the basic is below ₹15,000 but adding other allowances makes it more than ₹15,000, PF contribution should be on a ₹15,000 basis.

S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions