Hi All,
I have this new ruling by Madras High Court on the applicability of Provident Fund contributions on certain allowances. Looking forward for views / impact on organisations on the same.
"
The Madras High Court in the case of Reynolds Pens India Pvt Ltd and other petitioners (‘Petitioners’) vs Regional Provident Fund Commissioner (‘RPFC’) has held that certain allowances such as Conveyance, Educational Allowances, Food concession, Medical, Special Holidays, Night Shift Incentive, City Compensatory Allowances etc. should be treated as part of Basic wages under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (‘EPF Act’). Accordingly, provident fund (‘PF’) contributions should be remitted on such allowances. "
The Employees’ Provident Fund Organisation (‘EPFO’) has in a recent internal communication1 forwarded the aforesaid judgment to its officers and directed them to utilise this judgement as per the merits of each case.
Br
Deepa
From United States, Racine
1I have this new ruling by Madras High Court on the applicability of Provident Fund contributions on certain allowances. Looking forward for views / impact on organisations on the same.
"
The Madras High Court in the case of Reynolds Pens India Pvt Ltd and other petitioners (‘Petitioners’) vs Regional Provident Fund Commissioner (‘RPFC’) has held that certain allowances such as Conveyance, Educational Allowances, Food concession, Medical, Special Holidays, Night Shift Incentive, City Compensatory Allowances etc. should be treated as part of Basic wages under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (‘EPF Act’). Accordingly, provident fund (‘PF’) contributions should be remitted on such allowances. "
The Employees’ Provident Fund Organisation (‘EPFO’) has in a recent internal communication1 forwarded the aforesaid judgment to its officers and directed them to utilise this judgement as per the merits of each case.
Br
Deepa
From United States, Racine
Dear All,
Here is that landmark judgment by Madras High Court.
I have highlighted some portions for easy reading.
I request our members to go through this and post their valuable comments...
S.Sethupathy,
Excellent Hr Services,
Erode
From India, Coimbatore
Here is that landmark judgment by Madras High Court.
I have highlighted some portions for easy reading.
I request our members to go through this and post their valuable comments...
S.Sethupathy,
Excellent Hr Services,
Erode
From India, Coimbatore
Thanks for the posting.
Please refer the CPFC's letter dated 23rd May 2011, asking the RPFC's to see PF contribution should be paid at least on minimum wages.Now this madras High court order has come. Two different guidances.Which is correct ?
To my knowledge there should be suitable amendment in the act itself. Because the Act has been enacted long back according to that period. Now things has changed a lot. New salary components are introduced as the nature of work demands.
PF authorities are just reacting to the judgements given by the court every now and then. Tomorrow another judgement will come, then they will refer that.
There should be a concrete guidance, which will enable both Employers as well as Employees about their commitment towards PF contribution.
From India, Madras
Please refer the CPFC's letter dated 23rd May 2011, asking the RPFC's to see PF contribution should be paid at least on minimum wages.Now this madras High court order has come. Two different guidances.Which is correct ?
To my knowledge there should be suitable amendment in the act itself. Because the Act has been enacted long back according to that period. Now things has changed a lot. New salary components are introduced as the nature of work demands.
PF authorities are just reacting to the judgements given by the court every now and then. Tomorrow another judgement will come, then they will refer that.
There should be a concrete guidance, which will enable both Employers as well as Employees about their commitment towards PF contribution.
From India, Madras
vetrisc, could you please tell me where i could find the letter from the CPFC to the RPFC that you mentioned. or could you tell me what the letter stated. thanks
From India, Calcutta
From India, Calcutta
Dear all,
As we all know the endless argument go's on and on. I think we have to keep our cool till the EPF organisation wakes up. Because they them self do not know what the act implies and waiting for the Court orders to come one by one to tell us what are all the components covered for PF contribution.Please note that,
1) A review Petitions have been filed before the Madhya Pradesh High Court (Gwalior Bench) which would come up for hearing on 29th July, 2011.
2) A Writ Appeal has also been filed in the High Court of Madras which is likely to come up for hearing on or around 8th August, 2011.
Wait for the judgements to come from the above petition and appeal to come.
From India, Madras
As we all know the endless argument go's on and on. I think we have to keep our cool till the EPF organisation wakes up. Because they them self do not know what the act implies and waiting for the Court orders to come one by one to tell us what are all the components covered for PF contribution.Please note that,
1) A review Petitions have been filed before the Madhya Pradesh High Court (Gwalior Bench) which would come up for hearing on 29th July, 2011.
2) A Writ Appeal has also been filed in the High Court of Madras which is likely to come up for hearing on or around 8th August, 2011.
Wait for the judgements to come from the above petition and appeal to come.
From India, Madras
As per offer document of Hinduja Foundries : "We challenged this decision of the PF Commissioner vide W.P. 22480 of 2010 before the Madras High Court, which was dismissed vide order dated June 7, 2011. We have filed a writ appeal numbered 1096 of 2011 on July 6, 2011, before the Division Bench of the Madras High Court, against the said order. The High Court has vide order dated October 10, 2011 granted an interim stay of the operation of the impugned order"
From India , Madras
From India , Madras
There are similar judgements from other courts also. All the judgements focus on one issue and that is definition of wages. It is very clear that PF should be contributed on basic wages and dearness allowance and the former shall include all allowances which are earned by an employee while on duty or on leave. That means if you have a conveyance allowance which is paid to you even if you are on a paid leave, then that will be part of wages qualifying PF deduction. Similarly if that allowance is proportionately deducted if you take an unpaid leave, that allowance is part of wages only.
In many private establishments the total salary is first decided, say, Rs 15000. It will then be bifurcated as Basic pay Rs 5000, HRA Rs 4000, Conveyance Rs 3000 and Special allowance (without any special skill to perform the work!) Rs 3000. If the employee takes say three days' leave without pay, he will get only Rs 13500 that month. That means his HRA, Conveyance and Special Allowances are also reduced proportionately. It is not that LOP is made only from basic pay.
Public sector companies, like Banks, pay HRA to officers. That is either reimbursement or paid by the bank directly to the landlord. This is called House Rent Allowance or HRA and this is even if the employee is on leave for a few days.
Therefore, there is no need for any confusion. Basic wage/ salary means the total salary. And any allowance that you give based on the category of employment, skill set required etc are only allowances. You will require that a particular employee be available near your factory and for that you give him an allowance so that he can take a house for rent and that is HRA. This is not paid uniformly to all employees. Similarly, you may pay some additional amount to some employees who work in some risky operations. That can be termed as Special allowance. A section of employees may work during night shift and for that you pay night shift allowance. A person carrying cash to bank ay be given cash handling allowance. These are allowances not paid to all the employees of the establishment and as such not forming part of wages/ salary and obviously will be outside the scope of PF.
Therefore, whatever interpretation you make, the essence is that salary as per contract of employment is the PF qualifying salary.
From India, Kannur
In many private establishments the total salary is first decided, say, Rs 15000. It will then be bifurcated as Basic pay Rs 5000, HRA Rs 4000, Conveyance Rs 3000 and Special allowance (without any special skill to perform the work!) Rs 3000. If the employee takes say three days' leave without pay, he will get only Rs 13500 that month. That means his HRA, Conveyance and Special Allowances are also reduced proportionately. It is not that LOP is made only from basic pay.
Public sector companies, like Banks, pay HRA to officers. That is either reimbursement or paid by the bank directly to the landlord. This is called House Rent Allowance or HRA and this is even if the employee is on leave for a few days.
Therefore, there is no need for any confusion. Basic wage/ salary means the total salary. And any allowance that you give based on the category of employment, skill set required etc are only allowances. You will require that a particular employee be available near your factory and for that you give him an allowance so that he can take a house for rent and that is HRA. This is not paid uniformly to all employees. Similarly, you may pay some additional amount to some employees who work in some risky operations. That can be termed as Special allowance. A section of employees may work during night shift and for that you pay night shift allowance. A person carrying cash to bank ay be given cash handling allowance. These are allowances not paid to all the employees of the establishment and as such not forming part of wages/ salary and obviously will be outside the scope of PF.
Therefore, whatever interpretation you make, the essence is that salary as per contract of employment is the PF qualifying salary.
From India, Kannur
Dear Satz4u,
Yes, I/we know that your question was not answered. I did not answer your question because the question that you posted was not relevant to the present discussion which is focussed on PF qualifying wages. You can post it as a separate question and to that you will get responses, else you can use search tool available, and I am sure you will get plenty of answers relevant to your query. Probably your query has been the most attended query in this forum.
From India, Kannur
Yes, I/we know that your question was not answered. I did not answer your question because the question that you posted was not relevant to the present discussion which is focussed on PF qualifying wages. You can post it as a separate question and to that you will get responses, else you can use search tool available, and I am sure you will get plenty of answers relevant to your query. Probably your query has been the most attended query in this forum.
From India, Kannur
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Basic wages & allw.-Madras High Court ruling on the applicability of Provident Fund.docx
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