SC rules that leave encashment shoul not be included in wages for PF calculation
sumesh
(Querist) 24 April 2008
This query is : Resolved
Dear Sir
Wrt the recent supreme court ruling of
Civil Appeal No. 1832 of 2004
With Civil Appeal Nos. 2535, 2536, 2539, 2540 and 2541 of 2004
MANIPAL ACADEMY OF HIGHER EDUCATION
Vs
PROVIDENT FUND COMMISSIONER, it has been mentioned very clearly that leave encashment should not be included in wages for PF calculation. My query is whether there are any circulars/ notification to the above and do we discontinue deducting PF on leave encashment going forward based on the apex court ruling.
Manish Singh
(Expert) 24 April 2008
Dear Mr. Sumesh,
Supreme Court ruling speaks itself about a rule or notification or law declared by tHE SC. You need to follow the SC ruling since when the matter reaches to court, the same ruling will be enforced.
H. S. Thukral
(Expert) 24 April 2008
The Supreme Court has only interpreted the definition of Wages and no notification, circulars are required in this regard. As per SC the amount received by encashing the earned leave is not a part of "basic wage" under s. 2(b) of Employees' Provident Fund and Miscellaneous Provisions Act, 1952, requiring pro rata employer's contribution. The term 'basic wage' which includes all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in accordance with the terms of the contract of employment can only mean weekly holidays, national holidays and festival holidays etc - Basic wage was never intended to include amounts received for leave encashment.
