Dear Friends,
I am working with a Publishing Company in Chennai with a PAN India strength of 60 Staff - We already covered under PF and remitting the PF for the staff getting Gross of less than Rs.25000(Around 15 Persons)
Our current salary structure consists of 60% Basic - And the Management decided to change it to 30%
So needed the following assistance and clarifications or opinions:
1. New Pay structure will be Basic 30% + HRA 35% + Spl.All-35% (Can HRA be more than Basic.?)
So, Gross Remains same, Nett will be lesser (-PF) & CTC will be higher (+PF)
2. Now we planned to cover and remit the PF to all the staff (Basic of 30% and limit the PF ceiling to Rs.15000) - But not going to change the Basic of staff who are already remitting the PF to avoid any repercussions from EPF Office (Your opinion please.!)
Going to implement the same with 2 month notice (i.e. w.e.f from 1st Jan 2019)
3. We dont have Leave Encashment policy as of now - So, what are the benefits and loss to the Employees.?
(Like Employees going to lose 50% of their Gratuity, But gets 12% of PF from Employer side, etc.)
4. How to handle the staff those who are not willing to accept the change and the points to convince them
Looking for replies - thanks in advance
Raj.
From India, Madras
I am working with a Publishing Company in Chennai with a PAN India strength of 60 Staff - We already covered under PF and remitting the PF for the staff getting Gross of less than Rs.25000(Around 15 Persons)
Our current salary structure consists of 60% Basic - And the Management decided to change it to 30%
So needed the following assistance and clarifications or opinions:
1. New Pay structure will be Basic 30% + HRA 35% + Spl.All-35% (Can HRA be more than Basic.?)
So, Gross Remains same, Nett will be lesser (-PF) & CTC will be higher (+PF)
2. Now we planned to cover and remit the PF to all the staff (Basic of 30% and limit the PF ceiling to Rs.15000) - But not going to change the Basic of staff who are already remitting the PF to avoid any repercussions from EPF Office (Your opinion please.!)
Going to implement the same with 2 month notice (i.e. w.e.f from 1st Jan 2019)
3. We dont have Leave Encashment policy as of now - So, what are the benefits and loss to the Employees.?
(Like Employees going to lose 50% of their Gratuity, But gets 12% of PF from Employer side, etc.)
4. How to handle the staff those who are not willing to accept the change and the points to convince them
Looking for replies - thanks in advance
Raj.
From India, Madras
Reduction/in downward revision in Basic resulting in reduction in EPF contribution is not permissible. Increase in HRA or any other allw. as compensatory measures, to show overall NIL reduction in gross or increase also not permissible and it cannot be undone like this. Pl.refer relevant attachment in my previous posting.
EMPLOYEES’ PROVIDENT FUND ORGANISATION
Bhavishya Nidhi Bhawan, 14,
Bhikaji Cama Place, New Delhi – 110 066.
No.Coord/4(6)2003/Clarification/VolII/7394
Dated : 23.5.2011
All Addl. CPFCs (Zones) All RPFCs (In-charge of Regions/Sub-Regions)
Sub : Splitting of Minimum Wages for the purpose of PF contribution not permissible.
Sir,
Attention of all concerned is invited towards this office circular No.Coord./4(6)2003/Clarification/13633 dated 6.6.2008 vide which it was advised to ensure that P.F. Contributions on at least Minimum Wages are remitted by the establishments. It was also directed to review all such cases disposed of u/s 7A of the Act where determination of dues has taken place on wages lesser than Minimum Wages.
2. However, it has been observed that still uniform approach in this regard is not followed by the field offices which is viewed seriously. It is also observed that the field offices are not duly defending the issue in spite of the fact that the Division Bench of Hon’ble High Court, Karnataka in the matter of Group 4 Securities Guarding Ltd. vs. RPFC has categorically upheld the view that RPFCs u/s. 7A of the Act can examine and look into the nature of contract entered between the employer and its employees as well as the pay structure to decide whether the pay is being split up under several heads as a subterfuge to avoid PF contribution.
3. The order of the Division Bench was challenged by the establishment before the Apex Court. While tentatively upholding the order of the Division Bench, the Hon’ble Supreme Court in its order dated 23.7.2004 again granted liberty to the authorities to decide the matter in accordance with law on its merits. As such the authorities have to consider the order of the Division Bench of Hon’ble High Court, Karnataka unless there is substantial evidence to lead otherwise.
4. Accordingly, the matter has been examined in view of the Apex Court’s direction and the following guidelines are issued which should be adhered to and followed by all strictly.
5. The EPF & MP Act, 1952 is a beneficial social security legislation. In construing the provisions of the Act, it has already been settled earlier* that wherever two views are reasonably possible, the view which helps the achievement of the object should be preferred and accordingly the assessing authority while determining dues under section 7A should curb any attempt to curtail the legitimate social security benefits of the employees. It is needless to reiterate the impact of contribution on lesser wages by splitting the wages into different heads, which results in lesser accumulations in PF account and miniscule pension to the member/family.
[*The RPFC, Punjab vs. Shibu Metal Works - 1965 (1) LLJ 473].
6. As you are aware, section 2(b) of EPF & MP Act, 1952 defines the basic wage which excludes all kind of allowances from being considered as basic wage. As the term suggests, ‘basic wage’ or ‘basic salary’ is the base salary which is provided to a person in lieu of his services. It is without any allowances which may or may not be added to basic wages in terms of employment.
7. However, it appears that some confusion is prevailing among field offices as to whether basic wages can be lower than the minimum wages or whether an establishment paying minimum wages to its employees can be allowed to split up the wages into various allowances reducing the PF contribution by making it a part of “terms of employment or Contract”.
8. It would be worth to see that the terms ‘basic’, ‘basic wage’ and ‘minimum wage’ are defined in Oxford Dictionary as below :
(i) “basic. Adj.1. forming an essential foundation; fundamental. 2. consisting of the minimum required or offered”
(ii) “basic wage. n.1 a minimum wage earned before additional payments such as overtime. 2. Austral/NZ/ the minimum living wage, as determined by industrial tribunal”
(iii) “minimum wage, n. the lowest wage permitted by law or by agreement”.
9. Thus, whereas the minimum wage is the lowest permitted wage ought to be paid to a worker as per law as upheld and revisited on various occasions by the Hon’ble Supreme Court*, basic wage is only relevant for allowing additional allowances by treating it (basic wage) as a basic/floor level.
(*Crown Aluminium Works vs. Workers Union, [1958 Vol.I LLJ, Page I), Unichoyi vs. State of Kerala [1961 Vol.I LLJ P.631], Kamani Metals & Alloys Ltd. vs. Their Workmen [1967 Vol.II-55; (1967) 2 SCR Page 463]).
10. Another aspect of basic wage/salary is that it is provided to all classes of employees irrespective of quantum of their salary and its quantum varies with every class/post of an employee whereas minimum wage is prescribed only for the lowest paid employee to whom any lesser payment of wages is not permitted by law.
11. From above, it is abundantly clear that basic wage in no case can be lesser than the minimum wage as the same is not only contrary to law of land but is also beyond logic and rationale that an establishment which cannot pay even minimum wages to its employees, would be willing to pay allowances to them and if such instances exist, there is certainly a malafide motive which may be considered as knowingly making or causing to make false statement/representation punishable u/s 14(1) of EPF & MP Act, 1952. It may also attract the provision of section 418 of IPC.
12. Further, it also needs to be kept in mind that any agreement which negates any law of land
1064EMPLOYEES’ PROVIDENT FUND ORGANISATION
Bhavishya Nidhi Bhawan, 14,
Bhikaji Cama Place, New Delhi – 110 066.
No.Coord/4(6)2003/Clarification/VolII/7394
Dated : 23.5.2011
All Addl. CPFCs (Zones) All RPFCs (In-charge of Regions/Sub-Regions)
Sub : Splitting of Minimum Wages for the purpose of PF contribution not permissible.
Sir,
Attention of all concerned is invited towards this office circular No.Coord./4(6)2003/Clarification/13633 dated 6.6.2008 vide which it was advised to ensure that P.F. Contributions on at least Minimum Wages are remitted by the establishments. It was also directed to review all such cases disposed of u/s 7A of the Act where determination of dues has taken place on wages lesser than Minimum Wages.
2. However, it has been observed that still uniform approach in this regard is not followed by the field offices which is viewed seriously. It is also observed that the field offices are not duly defending the issue in spite of the fact that the Division Bench of Hon’ble High Court, Karnataka in the matter of Group 4 Securities Guarding Ltd. vs. RPFC has categorically upheld the view that RPFCs u/s. 7A of the Act can examine and look into the nature of contract entered between the employer and its employees as well as the pay structure to decide whether the pay is being split up under several heads as a subterfuge to avoid PF contribution.
3. The order of the Division Bench was challenged by the establishment before the Apex Court. While tentatively upholding the order of the Division Bench, the Hon’ble Supreme Court in its order dated 23.7.2004 again granted liberty to the authorities to decide the matter in accordance with law on its merits. As such the authorities have to consider the order of the Division Bench of Hon’ble High Court, Karnataka unless there is substantial evidence to lead otherwise.
4. Accordingly, the matter has been examined in view of the Apex Court’s direction and the following guidelines are issued which should be adhered to and followed by all strictly.
5. The EPF & MP Act, 1952 is a beneficial social security legislation. In construing the provisions of the Act, it has already been settled earlier* that wherever two views are reasonably possible, the view which helps the achievement of the object should be preferred and accordingly the assessing authority while determining dues under section 7A should curb any attempt to curtail the legitimate social security benefits of the employees. It is needless to reiterate the impact of contribution on lesser wages by splitting the wages into different heads, which results in lesser accumulations in PF account and miniscule pension to the member/family.
[*The RPFC, Punjab vs. Shibu Metal Works - 1965 (1) LLJ 473].
6. As you are aware, section 2(b) of EPF & MP Act, 1952 defines the basic wage which excludes all kind of allowances from being considered as basic wage. As the term suggests, ‘basic wage’ or ‘basic salary’ is the base salary which is provided to a person in lieu of his services. It is without any allowances which may or may not be added to basic wages in terms of employment.
7. However, it appears that some confusion is prevailing among field offices as to whether basic wages can be lower than the minimum wages or whether an establishment paying minimum wages to its employees can be allowed to split up the wages into various allowances reducing the PF contribution by making it a part of “terms of employment or Contract”.
8. It would be worth to see that the terms ‘basic’, ‘basic wage’ and ‘minimum wage’ are defined in Oxford Dictionary as below :
(i) “basic. Adj.1. forming an essential foundation; fundamental. 2. consisting of the minimum required or offered”
(ii) “basic wage. n.1 a minimum wage earned before additional payments such as overtime. 2. Austral/NZ/ the minimum living wage, as determined by industrial tribunal”
(iii) “minimum wage, n. the lowest wage permitted by law or by agreement”.
9. Thus, whereas the minimum wage is the lowest permitted wage ought to be paid to a worker as per law as upheld and revisited on various occasions by the Hon’ble Supreme Court*, basic wage is only relevant for allowing additional allowances by treating it (basic wage) as a basic/floor level.
(*Crown Aluminium Works vs. Workers Union, [1958 Vol.I LLJ, Page I), Unichoyi vs. State of Kerala [1961 Vol.I LLJ P.631], Kamani Metals & Alloys Ltd. vs. Their Workmen [1967 Vol.II-55; (1967) 2 SCR Page 463]).
10. Another aspect of basic wage/salary is that it is provided to all classes of employees irrespective of quantum of their salary and its quantum varies with every class/post of an employee whereas minimum wage is prescribed only for the lowest paid employee to whom any lesser payment of wages is not permitted by law.
11. From above, it is abundantly clear that basic wage in no case can be lesser than the minimum wage as the same is not only contrary to law of land but is also beyond logic and rationale that an establishment which cannot pay even minimum wages to its employees, would be willing to pay allowances to them and if such instances exist, there is certainly a malafide motive which may be considered as knowingly making or causing to make false statement/representation punishable u/s 14(1) of EPF & MP Act, 1952. It may also attract the provision of section 418 of IPC.
12. Further, it also needs to be kept in mind that any agreement which negates any law of land