I have an employee who is on minimum wage. His basic% is 55% of the minimum wage. On which amount would the PF be deducted? Please share the law mentioning this, if any and if possible
From India, Mumbai
Acknowledge(0)
Amend(0)
From India, Mumbai
Acknowledge(0)Amend(0)
Understanding Basic Wages and Minimum Wages
How can you say that his basic wages are 55% of the minimum wages? If you have a wage structure without Variable DA but with a total salary equal to the minimum wages, that total salary should be taken as the base for calculating PF, Gratuity, leave encashment, etc. The act of not paying VDA and keeping basic wages low, but paying some other components to meet the minimum wages will be deemed a deliberate attempt to reduce the burden of paying statutory payments to employed persons. Therefore, if the total salary does not exceed Rs 15,000, there is no way you can pay the PF on Basic alone.
From India, Kannur
Acknowledge(0)Amend(0)
4526How can you say that his basic wages are 55% of the minimum wages? If you have a wage structure without Variable DA but with a total salary equal to the minimum wages, that total salary should be taken as the base for calculating PF, Gratuity, leave encashment, etc. The act of not paying VDA and keeping basic wages low, but paying some other components to meet the minimum wages will be deemed a deliberate attempt to reduce the burden of paying statutory payments to employed persons. Therefore, if the total salary does not exceed Rs 15,000, there is no way you can pay the PF on Basic alone.
From India, Kannur
Acknowledge(0)Amend(0)
So in that case, say the salary of a person is $17,000, the basic is 55%, while the remaining 45% is HRA. In this case, at what amount would the PF be paid? (Minimum wages as per the state government for this employee are approximately $12,000).
From India, Mumbai
Acknowledge(0)Amend(0)
From India, Mumbai
Acknowledge(0)Amend(0)
It is not the minimum wages but the total salary that will qualify for PF. Normally, for an employee whose salary is just Rs 17,000, HRA is not expected to be a compensatory allowance. However, as long as no inspection takes place, you can pay PF on the basic pay that you have fixed, i.e., 9,350.
However, it may be challenged by the EPFO, asking to show whether HRA is paid to all employees or only to those who reside in rented/leased houses. If HRA is paid to all employees, including those who live in their own houses or houses in the name of spouses, or if the spouses are also in receipt of HRA, the component of HRA will be included in basic wages.
From India, Kannur
Acknowledge(0)Amend(0)
However, it may be challenged by the EPFO, asking to show whether HRA is paid to all employees or only to those who reside in rented/leased houses. If HRA is paid to all employees, including those who live in their own houses or houses in the name of spouses, or if the spouses are also in receipt of HRA, the component of HRA will be included in basic wages.
From India, Kannur
Acknowledge(0)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
PF Contribution on not less than Minimum Wage.pdf
SALARY with out PF Deduction.xls