Rs 1800, being 12% of the total wages, should be paid as PF. This is because of the following reasons:
1. PF is payable on total wages as per the contract of employment with the employee.
2. Total wages as per the contract of employment cannot be less than the statutory minimum wages fixed by the government.
3. HRA and Compensatory Allowance
HRA, to be excluded from the scope of wages, should be a compensatory allowance. A compensatory allowance is payable only to those employees who are eligible for it. An employee who is residing in a rented house, and whose spouse is not in receipt of similar HRA from his/her employer, is entitled to receive HRA. Therefore, if HRA is paid to all employees, that amount will be treated as part of wages only.
4. Payment of HRA
When an employee is paid HRA, it is not paid along with wages but will be paid as an allowance either directly to the landlord or as reimbursement. Moreover, the amount of HRA is fixed for a period and is paid in full even if the employee has been absent for a few days in the month. In private companies, when an employee takes a single day leave without pay, the HRA is also proportionately deducted; hence, it is part of wages.
5. Special Allowance
The same principle applies to special allowance as well. Special allowance paid to a special category of workers who require specific skills or take risks in performing their duties shall be given a special allowance. If it is given to all employees, it will be considered part of wages.
Therefore, pay PF on the entire amount of salary if it is not more than Rs 15000.