The recent judgment passed on 28.02.2019 by the Hon'ble Supreme Court in the matter of Regional Provident Fund Commissioner vs. Vivekananda Vidyamandir and other connected appeals considered the scope of 'basic wages' and allowances liable for PF contributions. The said judgment is published under the caption Surya Roshni Ltd. & Ors. vs. The State of Madhya Pradesh EPF RPFC and Ors. 2019 LLR 339 (SC).
Many messages are circulating on social media with catchy and scary titles like "Supreme Court delivered a landmark and long-awaited judgment... PF is applicable on basic salary plus all allowances, unexpected judgment."
To clarify the position of law, I have drafted an article titled as
Interpretation of term 'basic wages' of EPF & MP Act, 1952 and Impact of recent judgment of Supreme Court delivered in Surya Roshni Ltd v. EPFO, 2019 LLR 339 (SC)
Copy of Article is attached.
From India, Ludhiana
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14Many messages are circulating on social media with catchy and scary titles like "Supreme Court delivered a landmark and long-awaited judgment... PF is applicable on basic salary plus all allowances, unexpected judgment."
To clarify the position of law, I have drafted an article titled as
Interpretation of term 'basic wages' of EPF & MP Act, 1952 and Impact of recent judgment of Supreme Court delivered in Surya Roshni Ltd v. EPFO, 2019 LLR 339 (SC)
Copy of Article is attached.
From India, Ludhiana
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Dear Mr. Punit Gupta, thanks for sharing the detailed analysis. The crux is not to get confused by the title of "allowance," but to consider the type of allowance. That is, from where it flows, how it is linked, who all receive it, and when and how it is being paid. Is it a universal (paid to all), flat (non-variable from person to person), permanent, kind of regular (mandatory), ordinary, and necessary component of wages? If yes, it is part of standard wages; hence, it has to be considered as part of Basic wages.
Understanding Basic Wages
The term Basic wages, if analyzed in detail, implies wages that are standard, universal, necessary, and ordinarily paid. As rightly mentioned, if the current Basic wage exceeds Rs. 15,000/- and PF is already being deducted on this amount, there is no further liability to include allowances, even if applicable as per set precedence of the law through judgments on Bridge & Roof and Manipal Academy, and again ratified in the current judgment in six different appeals.
Implications for Contract Laborers
The larger implication could be in terms of contract laborers, as a large number of them are likely to be below the ceiling of Rs. 15,000/-, and there could be more possibilities of subterfuge and camouflaging. Principal Employers may need to look into the matter to ensure that contractors engaged by them comply with the applicable principles regarding the interpretation of the term "Basic Wage" and contribute/deduct the PF amount accordingly.
EPFO Clarifications
EPFO may come with some clarification or instructions in this regard to address the emerged anxiety and confusion among member employers. There is no need to make haste but proceed with due diligence and preoccupations, considering all possible implications.
Regards, Shailesh Parikh
[Phone Number Removed For Privacy-Reasons] Vadodara
From India, Mumbai
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Understanding Basic Wages
The term Basic wages, if analyzed in detail, implies wages that are standard, universal, necessary, and ordinarily paid. As rightly mentioned, if the current Basic wage exceeds Rs. 15,000/- and PF is already being deducted on this amount, there is no further liability to include allowances, even if applicable as per set precedence of the law through judgments on Bridge & Roof and Manipal Academy, and again ratified in the current judgment in six different appeals.
Implications for Contract Laborers
The larger implication could be in terms of contract laborers, as a large number of them are likely to be below the ceiling of Rs. 15,000/-, and there could be more possibilities of subterfuge and camouflaging. Principal Employers may need to look into the matter to ensure that contractors engaged by them comply with the applicable principles regarding the interpretation of the term "Basic Wage" and contribute/deduct the PF amount accordingly.
EPFO Clarifications
EPFO may come with some clarification or instructions in this regard to address the emerged anxiety and confusion among member employers. There is no need to make haste but proceed with due diligence and preoccupations, considering all possible implications.
Regards, Shailesh Parikh
[Phone Number Removed For Privacy-Reasons] Vadodara
From India, Mumbai
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Supreme court judgment on min wages (AIRFREIGHT).pd f
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(Fact Checked)-The user's reply contains accurate information regarding the interpretation of 'basic wages' for PF contributions as per the recent Supreme Court judgment. The user correctly highlights the factors to consider when determining if an allowance should be included in basic wages. Additionally, the user provides relevant insights on the implications for contract laborers and the responsibilities of principal employers. (1 Acknowledge point)