Pl find the attached regarding not split the minimum wages for reducing of PF contribution is offence as per attached file. Review once this most usefull for all HR folks. Regards Satya
From India, Bangalore
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2From India, Bangalore
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Is this applicable only for those who are splitting wages below the minimum wage, or for many establishments that pay much higher than the minimum wage? In other words, is it legal if an organization pays a high basic wage and then divides it under different headings while still ensuring that the basic wage is above Rs 6500/-?
From India
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From India
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Dear Satya,
Many thanks for your circular.
What we are doing in our factory is paying Rs. 150 as basic to employees and Rs. 25/day as HRA to entry-level workmen, as Rs. 175 is the minimum wage. We used to deduct PF only on Rs. 150, whereas for ESIC, we used to pay for both basic and HRA. Your circular indicates that we should pay PF also for Rs. 150+25. Is this so? I think many senior HR consultants here in Gujarat are also not aware of it. This is what we have been doing for the last year, and it increases our liability. Can you please inform us whether we can now contribute for earlier missed PF contributions?
Best regards,
SHD
From India, Surat
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Many thanks for your circular.
What we are doing in our factory is paying Rs. 150 as basic to employees and Rs. 25/day as HRA to entry-level workmen, as Rs. 175 is the minimum wage. We used to deduct PF only on Rs. 150, whereas for ESIC, we used to pay for both basic and HRA. Your circular indicates that we should pay PF also for Rs. 150+25. Is this so? I think many senior HR consultants here in Gujarat are also not aware of it. This is what we have been doing for the last year, and it increases our liability. Can you please inform us whether we can now contribute for earlier missed PF contributions?
Best regards,
SHD
From India, Surat
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Dear SHD,
Please read the notification and try to understand what is meant by basic wages, minimum wages, and wages for statutory duties. Also, have an idea of allowances. HRA is an allowance and therefore is not a part of the basic wage. Basic wages are declared by the state government under the minimum wages act as per the work categories. Basic + DA is the statutory wage for other calculations like PF/BONUS, etc.
Thanks,
Bijay
From India, Vadodara
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Please read the notification and try to understand what is meant by basic wages, minimum wages, and wages for statutory duties. Also, have an idea of allowances. HRA is an allowance and therefore is not a part of the basic wage. Basic wages are declared by the state government under the minimum wages act as per the work categories. Basic + DA is the statutory wage for other calculations like PF/BONUS, etc.
Thanks,
Bijay
From India, Vadodara
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Dear All, Our establishment taken exemption of PF under Basic + D. A. is more than Rs. 6500/-. Please clear me What is the latest ammendment said. SKT
From India, Nasik
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From India, Nasik
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Dear Pals,
The PF circular quoted talks about payment of contribution on less than minimum wages prescribed by various states and notified to many industries. It appears that some companies have further split this Minimum wages to bring down their liability, which is certainly not the intention of lawmakers. In such cases, the interpretation of "basic wages" should be construed as not less than the minimum wages prescribed for various industries by the appropriate Government.
If you are already covering/paying contribution equal to or more than minimum wages and paying HRA/Conveyance/etc. as additional allowances, you need only to pay PF contribution on minimum wages and not on other split allowances.
HC. Subbaramu HR & Labour Law Consultant Vijayanagar, Bangalore.
From India, Kochi
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The PF circular quoted talks about payment of contribution on less than minimum wages prescribed by various states and notified to many industries. It appears that some companies have further split this Minimum wages to bring down their liability, which is certainly not the intention of lawmakers. In such cases, the interpretation of "basic wages" should be construed as not less than the minimum wages prescribed for various industries by the appropriate Government.
If you are already covering/paying contribution equal to or more than minimum wages and paying HRA/Conveyance/etc. as additional allowances, you need only to pay PF contribution on minimum wages and not on other split allowances.
HC. Subbaramu HR & Labour Law Consultant Vijayanagar, Bangalore.
From India, Kochi
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By definition, the minimum wage is BASIC+DA+HRA. Previously, we used to deduct PF on Basic+DA and not on HRA. However, if PF is to be paid on the minimum wage, then we need to consider the HRA contribution under PF calculation.
Best regards,
SHD
From India, Surat
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Best regards,
SHD
From India, Surat
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Dear Mr. SHD,
Minimum wages prescribed by the governments normally have two components only, i.e., BASIC and DA (In Karnataka and others). DA is revised every year but not the Basic. The revision of Basic is done rarely if the whole wage structure is required to be revised for compelling reasons.
HC Subbaramu HR & Labour Laws Bangalore
From India, Kochi
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Minimum wages prescribed by the governments normally have two components only, i.e., BASIC and DA (In Karnataka and others). DA is revised every year but not the Basic. The revision of Basic is done rarely if the whole wage structure is required to be revised for compelling reasons.
HC Subbaramu HR & Labour Laws Bangalore
From India, Kochi
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Dear all,
Please note that we, along with some other lawyers, have taken a serious view against this notification. The notification is not in accordance with the EPF Act/law. Please do not follow this circular. Our reply is given below:
TO,
The Addl. Central P.F. Commissioner (Compliance) Bhavishya Nidhi Bhawan 14, Bhikaji Cama Place New Delhi - 110 066.
Splitting of Minimum Wages for Provident Fund Contributions
Sir,
Our attention has been invited to your Circular No. Coord/4(6)2003/Clarification/Vol-II/7394 dated 23.5.2011 under the caption of “Splitting of minimum wages for the purpose of Provident Fund contribution not permissible”.
While we appreciate the efforts made in digging out old cases even from 1961 onwards and concluding ‘wherever the matter regarding splitting of wages is challenged or pending in a court of law, the stand of the department along with all rules and guidelines of Hon'ble Supreme Court should be effectively utilized to defend the case. It is also mentioned that nothing said above shall come in the way of implementation/execution of any order of a court of law. However, we must say that the conclusion drawn in your circular is bereft of any merit, devoid of legality, and a sheer ‘colorable exercise’ by turning a blind eye to the latest judicial pronouncement directly on the subject.
Much emphasis has been laid down on the judgment of the Division Bench of Karnataka High Court in the matter of G4S Guardings Limited vs. RPFC and the judgment of the Supreme Court in Airfreight Ltd. vs. State of Karnataka & Ors. In fact, the main issue of ‘wages’ got obfuscated in the judgment of Karnataka High Court. It did not settle the law with regard to splitting of minimum wages for Provident Fund contributions; hence, no weightage can be accorded to it since it had been left open to the Authorities to decide. But it hardly needs to be underlined that they (Authorities) can never go beyond the parameters as laid down by the legislature defining ‘wages’ under clause (h) of the Minimum Wages Act, 1948, and sub-section (b) of section 2 of the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. Needless to state, that at the time of enactment of section 2(b) defining ‘basic wages’ under the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952, the definition of wages was already there under the Minimum Wages Act, 1948.
So far as the case of Airfreight Limited (supra) is concerned, this has not been under the Employees’ Provident Funds & Miscellaneous Provisions Act but in a different context.
Therefore, the recent judgment of Punjab and Haryana High Court, in the case of Assistant Provident Fund Commissioner, Gurgaon vs. G4S Security Services (India) Ltd. & Anr, 2011 LLR 316 (P&H HC), is the only direct judgment on the subject of splitting of wages for the purpose of provident fund contribution, which has unequivocally and unambiguously permitted for splitting the minimum wages for the purposes of the Provident Fund. Strangely, this landmark judgment has been overlooked in the Circular for reasons beyond anybody’s comprehension, although one of the officers of Provident Fund Department was the Party - rather Petitioner to it - and he was duly represented by an Advocate. The impugned circular, thus, appears to be motivated to supersede the judgment which could be only modified by an amendment in the Act and not by (a) overstepping a contested judgment of Punjab & Haryana High Court (b) by usurping the domain of the legislature. It is also inexplicable as to why this Circular was not issued for over seven long years after the judgment of the Karnataka High Court but issued with tearing haste, i.e., within two months of the reported judgment of Punjab & Haryana High Court. The interpretations as given in the Circular are against the principles of interpretation.
It is pertinent to state here that both the cases of Karnataka High Court and the judgment of the Supreme Court in the Airfreight Limited as relied upon in the Circular have been discussed and distinguished by the Hon’ble Punjab and Haryana High Court in detail. Hence, in the fitness of administrative wisdom and the obligations of an Autonomous Body to honor the sanctity of High Court judgment, the impugned Circular may kindly be withdrawn and the gist of Punjab & Haryana High Court be circulated. It is desirable that a corrigendum be issued immediately in the larger interest of the public; otherwise, this so-called clarification Circular will confuse, confound, and complicate the matter resulting in the opening of the sluice gate of litigation and harassment.
Thanking you,
Manish Gupta
From India, Mumbai
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Please note that we, along with some other lawyers, have taken a serious view against this notification. The notification is not in accordance with the EPF Act/law. Please do not follow this circular. Our reply is given below:
TO,
The Addl. Central P.F. Commissioner (Compliance) Bhavishya Nidhi Bhawan 14, Bhikaji Cama Place New Delhi - 110 066.
Splitting of Minimum Wages for Provident Fund Contributions
Sir,
Our attention has been invited to your Circular No. Coord/4(6)2003/Clarification/Vol-II/7394 dated 23.5.2011 under the caption of “Splitting of minimum wages for the purpose of Provident Fund contribution not permissible”.
While we appreciate the efforts made in digging out old cases even from 1961 onwards and concluding ‘wherever the matter regarding splitting of wages is challenged or pending in a court of law, the stand of the department along with all rules and guidelines of Hon'ble Supreme Court should be effectively utilized to defend the case. It is also mentioned that nothing said above shall come in the way of implementation/execution of any order of a court of law. However, we must say that the conclusion drawn in your circular is bereft of any merit, devoid of legality, and a sheer ‘colorable exercise’ by turning a blind eye to the latest judicial pronouncement directly on the subject.
Much emphasis has been laid down on the judgment of the Division Bench of Karnataka High Court in the matter of G4S Guardings Limited vs. RPFC and the judgment of the Supreme Court in Airfreight Ltd. vs. State of Karnataka & Ors. In fact, the main issue of ‘wages’ got obfuscated in the judgment of Karnataka High Court. It did not settle the law with regard to splitting of minimum wages for Provident Fund contributions; hence, no weightage can be accorded to it since it had been left open to the Authorities to decide. But it hardly needs to be underlined that they (Authorities) can never go beyond the parameters as laid down by the legislature defining ‘wages’ under clause (h) of the Minimum Wages Act, 1948, and sub-section (b) of section 2 of the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. Needless to state, that at the time of enactment of section 2(b) defining ‘basic wages’ under the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952, the definition of wages was already there under the Minimum Wages Act, 1948.
So far as the case of Airfreight Limited (supra) is concerned, this has not been under the Employees’ Provident Funds & Miscellaneous Provisions Act but in a different context.
Therefore, the recent judgment of Punjab and Haryana High Court, in the case of Assistant Provident Fund Commissioner, Gurgaon vs. G4S Security Services (India) Ltd. & Anr, 2011 LLR 316 (P&H HC), is the only direct judgment on the subject of splitting of wages for the purpose of provident fund contribution, which has unequivocally and unambiguously permitted for splitting the minimum wages for the purposes of the Provident Fund. Strangely, this landmark judgment has been overlooked in the Circular for reasons beyond anybody’s comprehension, although one of the officers of Provident Fund Department was the Party - rather Petitioner to it - and he was duly represented by an Advocate. The impugned circular, thus, appears to be motivated to supersede the judgment which could be only modified by an amendment in the Act and not by (a) overstepping a contested judgment of Punjab & Haryana High Court (b) by usurping the domain of the legislature. It is also inexplicable as to why this Circular was not issued for over seven long years after the judgment of the Karnataka High Court but issued with tearing haste, i.e., within two months of the reported judgment of Punjab & Haryana High Court. The interpretations as given in the Circular are against the principles of interpretation.
It is pertinent to state here that both the cases of Karnataka High Court and the judgment of the Supreme Court in the Airfreight Limited as relied upon in the Circular have been discussed and distinguished by the Hon’ble Punjab and Haryana High Court in detail. Hence, in the fitness of administrative wisdom and the obligations of an Autonomous Body to honor the sanctity of High Court judgment, the impugned Circular may kindly be withdrawn and the gist of Punjab & Haryana High Court be circulated. It is desirable that a corrigendum be issued immediately in the larger interest of the public; otherwise, this so-called clarification Circular will confuse, confound, and complicate the matter resulting in the opening of the sluice gate of litigation and harassment.
Thanking you,
Manish Gupta
From India, Mumbai
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Dear Manish,
Judgment on Provident Fund Authority's Power
Over and above the Punjab and Haryana judgment, the Employees' Provident Fund Appeal Tribunal, New Delhi, in ATA No.364(8)2009, in the case of M/s. Benchmark Infocom (P) Ltd v/s RPFC Indore, has quashed the order to the Provident Fund Commissioner. In its judgment dated 2.06.2011, it stated that the Authority has the power to resolve the dispute regarding the payment of dues, but it has no power to determine whether the minimum wages amount to basic wage or not, or whether the payment was made as per the Minimum Wages Act. The order of the Authority is set aside.
Kindly refer to the said judgment, where it is amply clear that the PF authority has no power to dictate the terms of payment of PF based on minimum wages. It's a landmark judgment quashing all the circulars of the PF authority.
Regards,
Jaikishen Kumtekar
[Email Removed For Privacy Reasons]
[Phone Number Removed For Privacy Reasons]
From India, Mumbai
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Judgment on Provident Fund Authority's Power
Over and above the Punjab and Haryana judgment, the Employees' Provident Fund Appeal Tribunal, New Delhi, in ATA No.364(8)2009, in the case of M/s. Benchmark Infocom (P) Ltd v/s RPFC Indore, has quashed the order to the Provident Fund Commissioner. In its judgment dated 2.06.2011, it stated that the Authority has the power to resolve the dispute regarding the payment of dues, but it has no power to determine whether the minimum wages amount to basic wage or not, or whether the payment was made as per the Minimum Wages Act. The order of the Authority is set aside.
Kindly refer to the said judgment, where it is amply clear that the PF authority has no power to dictate the terms of payment of PF based on minimum wages. It's a landmark judgment quashing all the circulars of the PF authority.
Regards,
Jaikishen Kumtekar
[Email Removed For Privacy Reasons]
[Phone Number Removed For Privacy Reasons]
From India, Mumbai
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Is the letter addressed to CPFC responded to? The CPFC issued a circular dated 2/12/2011, keeping in abeyance the matter regarding the splitting of wages by citing the P&H Division Bench judgment challenged by SLP by EPFO.
The authority is not adhering to the circular dated 2/12/11. They say the circular is not binding on them, and they proceed with assessing dues.
From India, Mumbai
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The authority is not adhering to the circular dated 2/12/11. They say the circular is not binding on them, and they proceed with assessing dues.
From India, Mumbai
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EPF-Circular-da ted-23-May-2011 -Splitting-of-M inimum-Wages-fo r-the-Purpose-o f-PF-Contributi on-Not.pdf