Government Committee Clears the Controversial EPFO Circular
A review committee set up by the government has cleared the EPFO circular, which proposed clubbing all allowances with basic pay for the deduction of Provident Fund.
The circular was an effort to check the practice of splitting wages by employers to reduce their provident fund obligations. However, it was put on hold following reports that criticized the move of the retirement fund body. The government later constituted a committee to look into the matter.
The tripartite panel set up by the Labour Ministry has endorsed the controversial EPFO circular issued on November 30, 2012, which involves clubbing all allowances with basic pay for the deduction of provident fund and redefined the process of assessment and inquiry for companies defaulting on PF contributions.
The review committee, constituted to look into the details of clubbing allowances with basic pay for PF deductions, has supported the idea for enhancing the social security benefit under the EPF scheme run by the Employees' Provident Fund Organisation (EPFO). According to a senior official of the Employee Provident Fund Organisation (EPFO), the circular has been revived and sent to the Labour Ministry for further approvals.
The committee's suggestion would be vetted by the Labour Ministry and would be put before the EPFO's apex decision-making body, the Central Board of Trustees (CBT), for a final decision on it.
Source: People Matters - Strategic Human Resource Management, Leadership & Management, HR Magazine India
From India, Pune
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177A review committee set up by the government has cleared the EPFO circular, which proposed clubbing all allowances with basic pay for the deduction of Provident Fund.
The circular was an effort to check the practice of splitting wages by employers to reduce their provident fund obligations. However, it was put on hold following reports that criticized the move of the retirement fund body. The government later constituted a committee to look into the matter.
The tripartite panel set up by the Labour Ministry has endorsed the controversial EPFO circular issued on November 30, 2012, which involves clubbing all allowances with basic pay for the deduction of provident fund and redefined the process of assessment and inquiry for companies defaulting on PF contributions.
The review committee, constituted to look into the details of clubbing allowances with basic pay for PF deductions, has supported the idea for enhancing the social security benefit under the EPF scheme run by the Employees' Provident Fund Organisation (EPFO). According to a senior official of the Employee Provident Fund Organisation (EPFO), the circular has been revived and sent to the Labour Ministry for further approvals.
The committee's suggestion would be vetted by the Labour Ministry and would be put before the EPFO's apex decision-making body, the Central Board of Trustees (CBT), for a final decision on it.
Source: People Matters - Strategic Human Resource Management, Leadership & Management, HR Magazine India
From India, Pune
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Thank you for the update. However, can you please explain the effect of the implementation of the circular? Clubbing of allowances with Basic for the deduction of Provident Fund needs to be reviewed in practical terms. Two questions arise:
1. Will the eligibility limit for employees earning up to Rs. 6500/- per month to become PF members continue to be considered on Basic Wages or on Basic with allowances after the implementation of the circular in question?
2. It appears that the PF authority aims for the deduction of PF contribution based on Minimum wages. Even though the total wages of an employee with allowances are equal to the minimum wages, their basic wages would naturally be lower than the minimum wage limit. Therefore, if Basic is lower than Minimum wages, PF will be deducted on Minimum Wages. Is this the correct interpretation of the Circular?
Can you please share your views?
Thank you again,
Janak Soni
From India, Surat
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1. Will the eligibility limit for employees earning up to Rs. 6500/- per month to become PF members continue to be considered on Basic Wages or on Basic with allowances after the implementation of the circular in question?
2. It appears that the PF authority aims for the deduction of PF contribution based on Minimum wages. Even though the total wages of an employee with allowances are equal to the minimum wages, their basic wages would naturally be lower than the minimum wage limit. Therefore, if Basic is lower than Minimum wages, PF will be deducted on Minimum Wages. Is this the correct interpretation of the Circular?
Can you please share your views?
Thank you again,
Janak Soni
From India, Surat
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EPFO circular regarding TDS on Payment of Provident Fund.pdf
Provident fund.zip