Can someone tell me whether Food Allowance as part of monthly wages to workers will definitely attract PF contribution? Is there any case law in this regard?
Would appreciate your answer and request it at the earliest.
Govardhan
From India, Madras
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18Would appreciate your answer and request it at the earliest.
Govardhan
From India, Madras
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Dear Swastik,
Thank you for your quick response. Do you think food allowance can be defined as the 'cash value of any food concession' under the definition of basic wages in the PF Act? Recently, an Inspector from PF defined it as such.
Your opinion, please.
Regards,
Govardhan
From India, Madras
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Thank you for your quick response. Do you think food allowance can be defined as the 'cash value of any food concession' under the definition of basic wages in the PF Act? Recently, an Inspector from PF defined it as such.
Your opinion, please.
Regards,
Govardhan
From India, Madras
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Sir please kindly help me on where I can get all this infomation regarding the laws that a HR should know, Also, just let me know what ESI is? Regards, VINAY
From India
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From India
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Dear Govardhan,
As per the definition of basic wages under the PF Act, the food value of concession is excluded. The extract of Section 2(b) is as follows:
"basic wages" means all emoluments earned by an employee while on duty, on leave, or on holidays with wages, as per the terms of the contract of employment, and paid or payable in cash to the employee. However, it does not include:
(i) the cash value of any food concession;
(ii) any dearness allowance (i.e., all cash payments by any name given to an employee due to a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission, or any other similar allowance payable to the employee for his employment or work done in such employment;
(iii) any presents given by the employer.
Therefore, if there are any concerns about how this may affect PF, kindly inquire with the PF Inspector.
Regards, SC
From India, Thane
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As per the definition of basic wages under the PF Act, the food value of concession is excluded. The extract of Section 2(b) is as follows:
"basic wages" means all emoluments earned by an employee while on duty, on leave, or on holidays with wages, as per the terms of the contract of employment, and paid or payable in cash to the employee. However, it does not include:
(i) the cash value of any food concession;
(ii) any dearness allowance (i.e., all cash payments by any name given to an employee due to a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission, or any other similar allowance payable to the employee for his employment or work done in such employment;
(iii) any presents given by the employer.
Therefore, if there are any concerns about how this may affect PF, kindly inquire with the PF Inspector.
Regards, SC
From India, Thane
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Dear Vinay, ESI = Employees' State Insurance Act, 1948 which is a social security legislation. Kindly tell me what industry you work for then I can help you. Regards, SC
From India, Thane
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From India, Thane
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Dear Swastik,
Thanks again for your prompt response. The Inspector says the food allowance is NOT the cash value of the food concession and, therefore, would form part of the basic wages defined by the Act. Is it a good argument?
Regards,
Govardhan
From India, Madras
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Thanks again for your prompt response. The Inspector says the food allowance is NOT the cash value of the food concession and, therefore, would form part of the basic wages defined by the Act. Is it a good argument?
Regards,
Govardhan
From India, Madras
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Dear Govardhan,
Actually, the food value of the concession is included under DA as per Section 6 of the PF Act. The extract given below states:
"6. Contributions and matters which may be provided for in the Scheme
The contribution that shall be paid by the employer to the Fund shall be eight and one-third per cent of the basic wages, dearness allowances, and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a contractor). The employees' contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires and if the Scheme makes provision therefore, be an amount not exceeding eight and one-third per cent of his basic wages, dearness allowances, and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section;
Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may by notification in the Official Gazette specify, this section shall be subject to the modification that for the words "eight and one-third per cent" at both the places where they occur, the words "ten per cent" shall be substituted:
Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee, or quarter to a rupee.
Explanation 1: For the purposes of this section, dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee.
Explanation 2: For the purposes of this section, retaining allowance means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working for retaining his services."
So, Food Allowance if paid as part of salary irrespective of whether you consume food or not cannot be a part of either basic wages, DA, or retention allowance as per the Act.
Regards,
SC
From India, Thane
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Actually, the food value of the concession is included under DA as per Section 6 of the PF Act. The extract given below states:
"6. Contributions and matters which may be provided for in the Scheme
The contribution that shall be paid by the employer to the Fund shall be eight and one-third per cent of the basic wages, dearness allowances, and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a contractor). The employees' contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires and if the Scheme makes provision therefore, be an amount not exceeding eight and one-third per cent of his basic wages, dearness allowances, and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section;
Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may by notification in the Official Gazette specify, this section shall be subject to the modification that for the words "eight and one-third per cent" at both the places where they occur, the words "ten per cent" shall be substituted:
Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee, or quarter to a rupee.
Explanation 1: For the purposes of this section, dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee.
Explanation 2: For the purposes of this section, retaining allowance means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working for retaining his services."
So, Food Allowance if paid as part of salary irrespective of whether you consume food or not cannot be a part of either basic wages, DA, or retention allowance as per the Act.
Regards,
SC
From India, Thane
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Dear Swastik,
In Chapter V of the PF Scheme 1952 on the contributions, it is mentioned that 'the contributions payable by the employer under the Scheme shall be at the rate of ten percent of the basic wages, dearness allowance (including the cash value of any food concession) and retaining allowance payable to each employee to whom the scheme applies.'
What would be the implication of this definition of contribution found in the PF Scheme?
Regards,
Govardhan
From India, Madras
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In Chapter V of the PF Scheme 1952 on the contributions, it is mentioned that 'the contributions payable by the employer under the Scheme shall be at the rate of ten percent of the basic wages, dearness allowance (including the cash value of any food concession) and retaining allowance payable to each employee to whom the scheme applies.'
What would be the implication of this definition of contribution found in the PF Scheme?
Regards,
Govardhan
From India, Madras
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Thank you very much, Mr.Swastik. Your contribution to this topic is excellent and your help done to me is timely and great. Many, many thanks and great regards, Govardhan
From India, Madras
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From India, Madras
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Dear Vinay,
Mr. H.L. Kumar, the renowned authority on labour laws, has written many such books that meet your requirements. You can ask for a catalogue. The address is:
Labour Law Reporter
A-43, Lajpat Nagar-2
New Delhi-110024
Tel: 011-29830000, 29840000
Regards,
Anil Kaushik
From India, Delhi
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Mr. H.L. Kumar, the renowned authority on labour laws, has written many such books that meet your requirements. You can ask for a catalogue. The address is:
Labour Law Reporter
A-43, Lajpat Nagar-2
New Delhi-110024
Tel: 011-29830000, 29840000
Regards,
Anil Kaushik
From India, Delhi
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According to the definitions under the EPF Act, pay includes basic wages with dearness allowance, retaining allowance (if any), and the cash value of food concession admissible thereon. This means that in case an allowance in the form of cash is paid to an employee in his monthly salary as a food allowance (i.e., it can be even a tea allowance that is paid along with the salary), the cash value of the food amount paid is taken for the purpose of EPF contribution. Kindly read the definition part of the EPF Act for further details.
From India, Madras
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From India, Madras
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Dear SC,
I think it is only for the definition of "Basic wages." However, the contribution is recoverable on Basic wages, DA (including the cash value of any food concession and retaining allowance if any) actually drawn during the whole month whether paid on a daily, weekly, fortnightly, or monthly basis.
Please refer to Section 29(3) of EPF Scheme 1952 for more details. For further information, please visit epfindia.com under the employer/contribution section.
Regards
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I think it is only for the definition of "Basic wages." However, the contribution is recoverable on Basic wages, DA (including the cash value of any food concession and retaining allowance if any) actually drawn during the whole month whether paid on a daily, weekly, fortnightly, or monthly basis.
Please refer to Section 29(3) of EPF Scheme 1952 for more details. For further information, please visit epfindia.com under the employer/contribution section.
Regards
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Employees Provident Fund Scheme, 1952
Chapter: Contributions
Section 29: Contribution
(1) The contributions payable by the employer under the scheme shall be at the rate of ten per cent of the basic wages, dearness allowance (including the cash value of any food concessions), and retaining allowance (if any) payable to each employee to whom the Scheme applies.
Provided that the above rate of contribution shall be twelve per cent in respect of any establishment or class of establishment which the Central Government may specify in the Official Gazette from time to time under the first proviso to sub-section (1) of Section 6 of the act.
Thus, DA & Food Concession cannot be included in basic, but food Allowance is not food Concession. Concession with respect to accounts of the mess & canteen, if any, is food concession.
Generally, (Basic+DA+RA+FC) should be about 60% of the gross amount payable.
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Chapter: Contributions
Section 29: Contribution
(1) The contributions payable by the employer under the scheme shall be at the rate of ten per cent of the basic wages, dearness allowance (including the cash value of any food concessions), and retaining allowance (if any) payable to each employee to whom the Scheme applies.
Provided that the above rate of contribution shall be twelve per cent in respect of any establishment or class of establishment which the Central Government may specify in the Official Gazette from time to time under the first proviso to sub-section (1) of Section 6 of the act.
Thus, DA & Food Concession cannot be included in basic, but food Allowance is not food Concession. Concession with respect to accounts of the mess & canteen, if any, is food concession.
Generally, (Basic+DA+RA+FC) should be about 60% of the gross amount payable.
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Dear Aby_Vas,
Is there any case law or anything to quote to establish that 'food allowance' cannot be defined as 'cash value of food concession' and therefore would not attract PF contribution?
Regards,
Govardhan
From India, Madras
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Is there any case law or anything to quote to establish that 'food allowance' cannot be defined as 'cash value of food concession' and therefore would not attract PF contribution?
Regards,
Govardhan
From India, Madras
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The thing is you are not required to prove the same, so you don't need any law. (Still, there is a case, but I am not able to spot it. Somewhere around 2002 if you are able to spot it). The Enforcement Officer or the RPFC has to demonstrate that food allowance means food concession and issue a notification, schedule, or amendment accordingly. In most cases, state amendments are not applicable since it is a central Act with little relevance to respective states.
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If you refer explanation 1 to Section 6, it indicates that Food Allowanace will attract PF deduction. Please refer any case laws which states that PF is not deductible on Food Allowance.
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Dear All,
Can anyone show me any court case where the Court has upheld the inclusion of Food Allowance in the computation of contributions?
Allowance is paid by an Employer in cash on fulfillment of a service contract; it is paid on a periodic basis as mentioned in the service agreement. The allowance has no relation to the expenditure incurred under the head it is paid. For example, Conveyance Allowance is fixed irrespective of the employee incurring on conveyance. Similarly, if you are paying Food Allowance, the amount remains the same whether you have food at the roadside or a 5-star hotel.
While in the cash value of food concession, the Employer does not make any payment in cash but absorbs the cost excess of the concession. For example, if the cost of Rice is Rs. 10 per Kg and the employees receive a monthly ration of 5 Kg Rice @ Rs. 7 per Kg, the cash value of Food Concession per month is Rs. 15 (Rs 3 per Kg) and must be added while calculating PF. This type of cases are usually present in Police, Armed Forces, and were prevalent in many PSUs which used to run subsidized Canteens.
So, Food allowance cannot be brought under PF and it can never be equated or is in no way similar to the Cash Value of Food Concession.
In the end, I would like to state that I feel, if there is a Cost Canteen present in the establishment where people have food and is the only place where the employees can have food and there is no other place available or it is compulsory for all employees to have meals in that canteen only, then and only then can you equate Food Allowance and Cash Value of Food Concession.
Regards,
SC
From India, Thane
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Can anyone show me any court case where the Court has upheld the inclusion of Food Allowance in the computation of contributions?
Allowance is paid by an Employer in cash on fulfillment of a service contract; it is paid on a periodic basis as mentioned in the service agreement. The allowance has no relation to the expenditure incurred under the head it is paid. For example, Conveyance Allowance is fixed irrespective of the employee incurring on conveyance. Similarly, if you are paying Food Allowance, the amount remains the same whether you have food at the roadside or a 5-star hotel.
While in the cash value of food concession, the Employer does not make any payment in cash but absorbs the cost excess of the concession. For example, if the cost of Rice is Rs. 10 per Kg and the employees receive a monthly ration of 5 Kg Rice @ Rs. 7 per Kg, the cash value of Food Concession per month is Rs. 15 (Rs 3 per Kg) and must be added while calculating PF. This type of cases are usually present in Police, Armed Forces, and were prevalent in many PSUs which used to run subsidized Canteens.
So, Food allowance cannot be brought under PF and it can never be equated or is in no way similar to the Cash Value of Food Concession.
In the end, I would like to state that I feel, if there is a Cost Canteen present in the establishment where people have food and is the only place where the employees can have food and there is no other place available or it is compulsory for all employees to have meals in that canteen only, then and only then can you equate Food Allowance and Cash Value of Food Concession.
Regards,
SC
From India, Thane
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Dear SC,
You have cited very nice examples to prove your point. Regarding the canteen part you mentioned, as we have the same case in our company, we also provide a food allowance and have a canteen on our work site. The canteen, located on a hill, is the only place on-site to have food. It operates on a no-profit, no-loss basis as per the Contract Labour Act (1970) and State Rules (1971). Therefore, we do not offer any concessions to employees on food consumption, which also means that no PF deductions are applicable.
Aby
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You have cited very nice examples to prove your point. Regarding the canteen part you mentioned, as we have the same case in our company, we also provide a food allowance and have a canteen on our work site. The canteen, located on a hill, is the only place on-site to have food. It operates on a no-profit, no-loss basis as per the Contract Labour Act (1970) and State Rules (1971). Therefore, we do not offer any concessions to employees on food consumption, which also means that no PF deductions are applicable.
Aby
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Dear Aby and Govardhan,
First, Aby, do the following conditions apply:
(i) Canteen/Food Allowance?
(ii) Is it compulsory for all workers to have food at the canteen or can they bring food from home and eat it?
If you pay Canteen/Food Allowance and it is compulsory to have food in the canteen, then the PF Inspector can claim inclusion of the same (not must or shall and depends on his interpretation).
Now, Govardhan, to avoid any more interactions, just change the name of the allowance by a circular. First, abolish it and then bring out a second circular giving the same amount by any other name you feel fit (Don't give the name Meal or Canteen :P).
Regards,
SC
From India, Thane
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First, Aby, do the following conditions apply:
(i) Canteen/Food Allowance?
(ii) Is it compulsory for all workers to have food at the canteen or can they bring food from home and eat it?
If you pay Canteen/Food Allowance and it is compulsory to have food in the canteen, then the PF Inspector can claim inclusion of the same (not must or shall and depends on his interpretation).
Now, Govardhan, to avoid any more interactions, just change the name of the allowance by a circular. First, abolish it and then bring out a second circular giving the same amount by any other name you feel fit (Don't give the name Meal or Canteen :P).
Regards,
SC
From India, Thane
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Dear SC,
The food allowance provided is a fixed amount (Only Rs. 200). The canteen operates separately, offering somewhat diet-friendly rates similar to a Co-operative Mess, at approximately Rs. 25 for three meals. Food from outside can also be consumed in the canteen, and there are no restrictions on this, though it is not specifically mentioned anywhere. There is no compulsion to have food in the canteen as well. It is a canteen by the workers, of the workers, and for the workers.
Dear Govardhan,
We do not provide food concessions, and thus no PF is deducted on the same.
Aby
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The food allowance provided is a fixed amount (Only Rs. 200). The canteen operates separately, offering somewhat diet-friendly rates similar to a Co-operative Mess, at approximately Rs. 25 for three meals. Food from outside can also be consumed in the canteen, and there are no restrictions on this, though it is not specifically mentioned anywhere. There is no compulsion to have food in the canteen as well. It is a canteen by the workers, of the workers, and for the workers.
Dear Govardhan,
We do not provide food concessions, and thus no PF is deducted on the same.
Aby
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Dear Swastik,
Thank you for the interest you have shown in this subject and all the efforts you have taken to drive the point that food allowance will not attract PF contribution. No doubt, it is the best solution to totally do away with this allowance if this was proving to be a headache and is disputable as to its nature to attract PF contribution due to misunderstandings and misinterpretations of the law.
But, I am more and more convinced now with your arguments - not just because it suits me - that food allowance will not attract PF contribution. So, I would like to take it forward to the extent possible to establish clearly that our views are correct and someone's misunderstanding of the law cannot be a good reason for expecting people to fall in line with their misinterpreted concept. Your contributions to the subject are really excellent.
Thanks and regards,
Govardhan
From India, Madras
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Thank you for the interest you have shown in this subject and all the efforts you have taken to drive the point that food allowance will not attract PF contribution. No doubt, it is the best solution to totally do away with this allowance if this was proving to be a headache and is disputable as to its nature to attract PF contribution due to misunderstandings and misinterpretations of the law.
But, I am more and more convinced now with your arguments - not just because it suits me - that food allowance will not attract PF contribution. So, I would like to take it forward to the extent possible to establish clearly that our views are correct and someone's misunderstanding of the law cannot be a good reason for expecting people to fall in line with their misinterpreted concept. Your contributions to the subject are really excellent.
Thanks and regards,
Govardhan
From India, Madras
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Dear Aby, I do not know if I was clear in my question to you. My question was whether you pay PF contribution for the food allowance part (Rs.200)? Thanks, Govardhan
From India, Madras
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From India, Madras
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No No No! That’s what I’ve been advising you if you check this topic and my Posts. Aby
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Thought the definition of Basic Wage is given under Section 2(b) of the Act, the charging section is Section 6 of the Act, which states that the contribution should be on Basic + DA + Retaining allowance. As per the Explanation, DA includes dearness allowance, shall be deemed to include also the cash value of any food concession allowed to the employee. So, I think PF gets attracted in your case. Difference of opinion is solicited.
From India, Hyderabad
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From India, Hyderabad
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Dear Govardhan,
I wish to state that in the whole discussion, we all missed - including me - forgot to touch upon one of the main points.
The point I am indicating is: why is the Cash Value of Food Concession included in PF calculation?
Well, the answer is that this Cash Value has a similar effect to Dearness Allowance, both paid to compensate the employee against inflation and price escalation. Both are fixed and changed by the Government and/or Employer from time to time with respect to the change in price. Neither of them is changed in between unless compelled by extraordinary circumstances. Both components are linked to prices in the Market and not to the Salary Structure (may be linked to Rank or Position).
Let me explain with an example:
Say a Company decides to sell Rice @ Rs. 10 per Kilo for the month of September. The current market price is Rs. 15. Now, suppose the price rises to Rs. 18 from the 10th of September and falls to Rs. 13 from the 20th. Whatever may be the price, the Company will have to sell rice at Rs. 10 only, and the Cash Value will be calculated accordingly. As you can see, it can both rise and fall. Similarly, the PF liability of the Company will rise and fall with the change in Market Price. This is similar to the logic of the Dearness Allowance rate.
You may wonder what happens if the price falls to Rs. 8; in that case, the employees will buy from the market, the cash value will be zero for the period, and the whole PF Liability will be without this component. Hence, this cash value is a variable component like DA and varies with market price.
In the case of DA, employees gain that extra amount.
Now, you can see that Food Allowance, which you are talking about, is quite different both in concept and nature.
Regards,
SC
From India, Thane
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I wish to state that in the whole discussion, we all missed - including me - forgot to touch upon one of the main points.
The point I am indicating is: why is the Cash Value of Food Concession included in PF calculation?
Well, the answer is that this Cash Value has a similar effect to Dearness Allowance, both paid to compensate the employee against inflation and price escalation. Both are fixed and changed by the Government and/or Employer from time to time with respect to the change in price. Neither of them is changed in between unless compelled by extraordinary circumstances. Both components are linked to prices in the Market and not to the Salary Structure (may be linked to Rank or Position).
Let me explain with an example:
Say a Company decides to sell Rice @ Rs. 10 per Kilo for the month of September. The current market price is Rs. 15. Now, suppose the price rises to Rs. 18 from the 10th of September and falls to Rs. 13 from the 20th. Whatever may be the price, the Company will have to sell rice at Rs. 10 only, and the Cash Value will be calculated accordingly. As you can see, it can both rise and fall. Similarly, the PF liability of the Company will rise and fall with the change in Market Price. This is similar to the logic of the Dearness Allowance rate.
You may wonder what happens if the price falls to Rs. 8; in that case, the employees will buy from the market, the cash value will be zero for the period, and the whole PF Liability will be without this component. Hence, this cash value is a variable component like DA and varies with market price.
In the case of DA, employees gain that extra amount.
Now, you can see that Food Allowance, which you are talking about, is quite different both in concept and nature.
Regards,
SC
From India, Thane
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Dear Swastik,
You have only elaborated on the underlying concept or the spirit with which the cash value of food concession has been included in the wage definition of the PF Act to attract contribution. Also, you have emphasized that Food Allowance cannot be equated to the Cash Value of food concession as the allowance is NOT linked to the 'increase' in the cost of living like DA or any other such component. Thanks.
I have not come across organizations that pay PF contributions for the amount of subsidy they provide for canteen food when the canteen is provided by the company, and the subsidies are given, maybe or may not be on the basis of an agreement with the union. What do such companies do in this regard? Do they pay PF on the subsidy part? Any ideas?
Govardhan
From India, Madras
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You have only elaborated on the underlying concept or the spirit with which the cash value of food concession has been included in the wage definition of the PF Act to attract contribution. Also, you have emphasized that Food Allowance cannot be equated to the Cash Value of food concession as the allowance is NOT linked to the 'increase' in the cost of living like DA or any other such component. Thanks.
I have not come across organizations that pay PF contributions for the amount of subsidy they provide for canteen food when the canteen is provided by the company, and the subsidies are given, maybe or may not be on the basis of an agreement with the union. What do such companies do in this regard? Do they pay PF on the subsidy part? Any ideas?
Govardhan
From India, Madras
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Subsidy is a synonym for concession, rebate, discount, exemption, and the like. Avoid linking such words with food allowance, or this shall attract PF.
Let me cite an example. Say, on considering the accounts of the canteen, the diet rate turns out to be 12.31 paise. If the diet is charged at the rate of Rs. 10, the balance amount shall invite PF for the whole month, per diet consumed.
To balance this, proper care should be taken so that other miscellaneous expenses are accordingly balanced to show that no discount as such is offered on food, even though practically the discount is being offered. Remember, the canteen should be generally run on a no-profit-no-loss basis. Losses, however, if the result of any discounts provided, shall entertain PF, and profits shall enrage the employees' dissatisfaction levels.
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Let me cite an example. Say, on considering the accounts of the canteen, the diet rate turns out to be 12.31 paise. If the diet is charged at the rate of Rs. 10, the balance amount shall invite PF for the whole month, per diet consumed.
To balance this, proper care should be taken so that other miscellaneous expenses are accordingly balanced to show that no discount as such is offered on food, even though practically the discount is being offered. Remember, the canteen should be generally run on a no-profit-no-loss basis. Losses, however, if the result of any discounts provided, shall entertain PF, and profits shall enrage the employees' dissatisfaction levels.
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Dear Aby,
What happens if the management-union agreement talks about a subsidy precisely mentioning the subsidized price of food? Will that not be contradictory to the accounts showing no loss on account of the subsidy? Unions may demand a clear agreement to claim they have negotiated for more canteen subsidy. That will be a trap if the accounts are not reflecting the same.
Any ideas, please?
Thanks,
Govardhan
From India, Madras
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What happens if the management-union agreement talks about a subsidy precisely mentioning the subsidized price of food? Will that not be contradictory to the accounts showing no loss on account of the subsidy? Unions may demand a clear agreement to claim they have negotiated for more canteen subsidy. That will be a trap if the accounts are not reflecting the same.
Any ideas, please?
Thanks,
Govardhan
From India, Madras
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Dear Govardhan,
Two things:
1) A statutory canteen is usually a cost canteen whose balance sheet must be audited separately by a chartered accountant. If it is a subsidized canteen, the proper accounting treatment must be given to the subsidiary amount to get it audited as per law.
2) Now, how the subsidized amount is apportioned among employees or adjusted for PF calculation depends on the company.
Regards,
SC
From India, Thane
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Two things:
1) A statutory canteen is usually a cost canteen whose balance sheet must be audited separately by a chartered accountant. If it is a subsidized canteen, the proper accounting treatment must be given to the subsidiary amount to get it audited as per law.
2) Now, how the subsidized amount is apportioned among employees or adjusted for PF calculation depends on the company.
Regards,
SC
From India, Thane
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Union is of the workers' and they are well aware of how much discount they are getting, and I don't feel they will have concerns with the accounts. Still, they (UNION LEADERS) can misuse to misguide the innocent workers and say that the company is committing fraud. My advice is to maintain two types of accounts: one showing the original discount for the UNION and the other for PF and Government compliance done by the C.A.
What is your manpower strength? How many worker UNIONS? Etc. Etc.
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What is your manpower strength? How many worker UNIONS? Etc. Etc.
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Dear Swastik and Aby,
Thank you for your elucidations. I would suggest that no company maintains two accounts for this purpose. It is always better to have one proper account, but professionally nullifying the impact of subsidy on PF in whatever way it should be done from the accounts' point of view.
However, it will be quite strange if any PF officer makes much ado about food allowance, though it is explicitly intended to be just an allowance but not concession, and keeps mum over the large amount of subsidy visibly going as food concession, but hidden to the PFO because the accounts are set right to make this subsidy hidden or disappear.
Regards,
Govardhan
From India, Madras
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Thank you for your elucidations. I would suggest that no company maintains two accounts for this purpose. It is always better to have one proper account, but professionally nullifying the impact of subsidy on PF in whatever way it should be done from the accounts' point of view.
However, it will be quite strange if any PF officer makes much ado about food allowance, though it is explicitly intended to be just an allowance but not concession, and keeps mum over the large amount of subsidy visibly going as food concession, but hidden to the PFO because the accounts are set right to make this subsidy hidden or disappear.
Regards,
Govardhan
From India, Madras
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Dear Govardhan,
"It will be quite strange if any PF officer makes much ado about food allowance, though it is explicitly intended to be just an allowance but not a concession, and keeps mum over the large amount of subsidy visibly going as food concession, but hidden to the PFO because the accounts are set right to make this subsidy hidden or disappear.
The amount cannot be hidden or made to disappear as it appears in the Audited Balance Sheet of the Canteen. If you give a subsidy and record it once, it remains. What I was saying is that the method of apportionment of the subsidy amount.
For instance, say the Canteen has a subsidy amount of Rs. 50,000/-. Now, as you know that PF is made up of both employee and employer's contributions, it becomes difficult or impossible administratively to keep track of how many meals a worker had in the Canteen to determine the individual concession amount. The other thing is from a practical point of view, as we all know that it is not only workers but sometimes guests or outsiders are even allowed, so it is very difficult to apportion it. The other thing is never is it mandatory to have food from the Canteen even if there is a subsidy (I have not seen it anywhere). So, for practical sake, the amount is not included. Please do not be of the opinion that the Employer wants to evade PF in these cases. Always remember an Employer other than a Food/Hotel Industry who has subsidized the Canteen will ever try to do something like this as they epitomize Social Commitment.
Regards,
SC
From India, Thane
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"It will be quite strange if any PF officer makes much ado about food allowance, though it is explicitly intended to be just an allowance but not a concession, and keeps mum over the large amount of subsidy visibly going as food concession, but hidden to the PFO because the accounts are set right to make this subsidy hidden or disappear.
The amount cannot be hidden or made to disappear as it appears in the Audited Balance Sheet of the Canteen. If you give a subsidy and record it once, it remains. What I was saying is that the method of apportionment of the subsidy amount.
For instance, say the Canteen has a subsidy amount of Rs. 50,000/-. Now, as you know that PF is made up of both employee and employer's contributions, it becomes difficult or impossible administratively to keep track of how many meals a worker had in the Canteen to determine the individual concession amount. The other thing is from a practical point of view, as we all know that it is not only workers but sometimes guests or outsiders are even allowed, so it is very difficult to apportion it. The other thing is never is it mandatory to have food from the Canteen even if there is a subsidy (I have not seen it anywhere). So, for practical sake, the amount is not included. Please do not be of the opinion that the Employer wants to evade PF in these cases. Always remember an Employer other than a Food/Hotel Industry who has subsidized the Canteen will ever try to do something like this as they epitomize Social Commitment.
Regards,
SC
From India, Thane
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Dear Swastik,
Thank you for your further writings on the subject. I never mentioned intentional evasion on the part of any employer with a subsidized canteen. I was only wondering how the actual food concession through subsidy legally escapes from the DA definition, and how a food allowance - just because the word "food" is associated with this allowance - becomes disputable.
Regards,
Govardhan
From India, Madras
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Thank you for your further writings on the subject. I never mentioned intentional evasion on the part of any employer with a subsidized canteen. I was only wondering how the actual food concession through subsidy legally escapes from the DA definition, and how a food allowance - just because the word "food" is associated with this allowance - becomes disputable.
Regards,
Govardhan
From India, Madras
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Dear Govardhan,
Now coming to the real issue, why is it like that? Well, my friend, politics is causing all the confusion. You may ask, what does politics have to do with PF? The answer is everything.
The situation:
PF cannot give you the high-interest rate it used to give, i.e., 12%. The government wanted to reduce it to 8%, but the best would have been at the level of the bank interest rate. However, the Left has kept up the pressure and not allowed the Finance Ministry to reduce the rate as per the Finance Ministry's recommendation. The loss has been huge. Where will the government give you that high rate when the overall rates are so low? The only option was the stock market. The Left has also stalled that move (you must have read the newspapers or seen news regarding this last year).
Now the question arises, where is PF going to get this extra amount to compensate for the loss? It has come up with some measures:
1) Strict inspection for compliance to maximize collection.
2) One-day PF (even if you work for a day, PF must be deposited. Tell me, who takes the trouble to get this amount from PF?)
The result is what you are facing. Not only you but almost everyone is facing this issue. You will find even on this site, posts relating to PF always have large hits, indicating the problems organizations are facing.
In the future, the new PF Amendment will remove the minimum number of workers and eliminate the Rs. 6500 basic ceiling. This will bring more people into PF.
Govardhan, EPFO is going to hit you hard and will always trouble us as long as the Left continues to put pressure on making them pay more interest than they are capable of paying, as per the economic situation.
Regards,
SC
From India, Thane
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Now coming to the real issue, why is it like that? Well, my friend, politics is causing all the confusion. You may ask, what does politics have to do with PF? The answer is everything.
The situation:
PF cannot give you the high-interest rate it used to give, i.e., 12%. The government wanted to reduce it to 8%, but the best would have been at the level of the bank interest rate. However, the Left has kept up the pressure and not allowed the Finance Ministry to reduce the rate as per the Finance Ministry's recommendation. The loss has been huge. Where will the government give you that high rate when the overall rates are so low? The only option was the stock market. The Left has also stalled that move (you must have read the newspapers or seen news regarding this last year).
Now the question arises, where is PF going to get this extra amount to compensate for the loss? It has come up with some measures:
1) Strict inspection for compliance to maximize collection.
2) One-day PF (even if you work for a day, PF must be deposited. Tell me, who takes the trouble to get this amount from PF?)
The result is what you are facing. Not only you but almost everyone is facing this issue. You will find even on this site, posts relating to PF always have large hits, indicating the problems organizations are facing.
In the future, the new PF Amendment will remove the minimum number of workers and eliminate the Rs. 6500 basic ceiling. This will bring more people into PF.
Govardhan, EPFO is going to hit you hard and will always trouble us as long as the Left continues to put pressure on making them pay more interest than they are capable of paying, as per the economic situation.
Regards,
SC
From India, Thane
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Dear SC,
The PF department is one of the highest revenue earners for the government after the Tax Department. The thing is, Congress is changing its policy. For fifty years, they strived to remove poverty, but to no avail. And now, it's time to remove the poor. No poor, no poverty. The percentage losses on oil prices reflected are actually reduced profit margins in the petroleum industry. For example, if the previous financial year's profit was around 50,000 crores and this year it's 42,000 crores, a loss of 8,000 crores is highlighted, whereas profit is nowhere represented.
The poor shall be eradicated by the policy of dominance and materialism, which is initiated by the US.
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The PF department is one of the highest revenue earners for the government after the Tax Department. The thing is, Congress is changing its policy. For fifty years, they strived to remove poverty, but to no avail. And now, it's time to remove the poor. No poor, no poverty. The percentage losses on oil prices reflected are actually reduced profit margins in the petroleum industry. For example, if the previous financial year's profit was around 50,000 crores and this year it's 42,000 crores, a loss of 8,000 crores is highlighted, whereas profit is nowhere represented.
The poor shall be eradicated by the policy of dominance and materialism, which is initiated by the US.
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The critical thing is to convince the PF Authority that PF is not applicable to Food Allowance. Interpretation can be debatable, but if supported by any legal evidence, it cannot be challenged until there is a change in the law regarding the same.
Please advise if there are any case laws to support that PF is not applicable to Food Allowance.
SJ
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Please advise if there are any case laws to support that PF is not applicable to Food Allowance.
SJ
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Dear Sanjay, Ask them to refer to case laws. Let the PF authorities show us the cases. If necessary allow them to drag you to Court and solve the matter and let us know. Regards, SC
From India, Thane
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From India, Thane
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In TATA Power Company Limited & Others Vs Regional Provident Fund Commissioner, Maharashtra & Goa & Others reported in 2008-III-LLJ-992(Bom), the Hon'ble Mumbai High Court, while interpreting Explanation 1 of Section 6 of the EPF & MP Act, 1952, has held that payment of food allowance, without any supply of any food item, cannot be treated as "cash value of food concession" included in Dearness Allowance by virtue of Explanation 1 of Section 6 of the EPF & MP Act. The judgment is available in my file.
From India, Ernakulam
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From India, Ernakulam
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Some employees of a government company are being paid advance salary from April 2008 onwards pending finalization of the wage agreement between the union and the government. The company is not remitting any contribution towards EPF on this advance salary. Is it contrary to the statutory provisions? Any reported case in the matter?
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From India, Ernakulam
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From India, Ernakulam
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf