Bifurcation of minimum wages

Dear Mr. Ravit,

There are two conflicting judgments on this issue. The one which is often cited by the provident fund authorities is that of Group 4 Securities v. RPFC, 2004 (II) LLJ 1142 (Karnataka)(DB) wherein the PF authorities have been held to be empowered to determine whether basic wages have been split to avoid liability under provident fund. However, as per the judgement in APFC v. G4S Security Services (India) Limited, 2011 LLR 316 (P&H), as minimum wages prescribed under the Minimum Wages Act, 1948 have not been adopted under the EPF Act, 1952, therefore, the employer has the right to exclude allowances like HRA, washing, conveyance, from the ambit of the basic-wages for purposes of remittance of provident fund.

Further, since the observations made by Hon'ble Karnataka HC have been set-aside by Hon'ble Supreme Court, therefore, in my humble opinion, it is legal for the employer for reasonable splitting up of wages to minimise the provident fund liability.

Best,

Uttam Maheshwari, Advocate

Dear Mr. Ravit,

There are two conflicting judgments on this issue. The one which is often cited by the provident fund authorities is that of Group 4 Securities v. RPFC, 2004 (II) LLJ 1142 (Karnataka)(DB) wherein the PF authorities have been held to be empowered to determine whether basic wages have been split to avoid liability under provident fund. However, as per the judgement in APFC v.G4S Security Services (India) Limited, 2011 LLR 316 (P&H), as minimum wages prescribed under the Minimum Wages Act, 1948 have not been adopted under the EPF Act, 1952, therefore, the employer has the right to exclude allowances like HRA, washing, conveyance, from the ambit of the basic-wages for purposes of remittance of provident fund.

Further, since the observations made by Hon'ble Karnataka HC have been set-aside by Hon'ble Supreme Court, therefore, in my humble opinion, it is legal for the employer for reasonable splitting up of wages to minimise the provident fund liability.

Best,

Uttam Maheshwari, Advocate

There could be conflicting views by EPF authorities and the Courts, on the allowances specifically excluded under the EPF Act & Scheme. However, there could not be a conflict where the definitions under the Act/Scheme are certain. Please check the definition of "basic wages"  under the EPF Act, Section 2(b) and the exclusions - (ii) any dearnessless allowance (that is to say, all cash payments by whateer named called/paid to an employee on account of a rise in the cost of living)........

The dearness allowance is included under Chapter V, 29 Contributions - EPF Scheme for reckoning the contribution

Hence all those allowances split out of the components of minimium wages prescribed, particularly Special Allowance, CCA etc. would definitely attact PF contribution.

Vasudevan