% of basic for PF purpose and salary limit for employer for PF contribution

Dear friends,
There is no act stipulating what should be the Basic pay and @ the other allowances should be, except in the case of Minimum wages & wage revisions notified by the central govt & state govts. category wise/industry wise from time to time. However this doesn't mean the basic pay should be < or > other allowances. For e.g. if you study the pattern followed by pay commissions (central & state), banks etc. FDA/VDA used to be more than double of basic. This phenomena undergoes changes as and when FDA/VDA merged/absorbed in basic pay while wage settlement agreements are signed, raising it and VDA is linked to the price index published from time to time for further revision either quarterly or half yearly.
Now, the SC in its' judgment dt.28.2.19 attached in the previous posts, clearly defined as to how various allowances should be reckoned for the purposes of recovery towards EPF. This judgment has settled all doubts reg.whether or not certain allowances should be included or excluded for EPF calculations. The impact of the judgment obviously add to financial outgo of employers and employees' EPF a/c get a boost and in some take home pay would be lighter. I don't think anyway the judgment could be disputed or side tracked or ignored. The financial strain on employers howsoever big or small notwithstanding, the judgment is a welcome measure as it has settled all disputes and interpretations, that much clarity long awaited.

Dear Sirs,
Recently Cement Wage Board has been settled between CMA and Trade unions before the Chief Labour Commissioner, New Delhi which is effective from 1.4.2018. Arrears and two service weightage increments are under preparation. While this is so, the plant level union submitted a letter demanding the management to pay differential Holiday wages, differential leave encashment from 1.4.2018. Is the demand is justified and employer is required to pay this. Please clarify. Aman/Kadapa

Dear Aman,
It's clearly understood that when a wage settlement is reached 'with retrospective effect' and received authentication by authorities it's without doubt all relevant past emoluments, will be impacted such as, OT/holiday wages, leave encashment, EPF, bonus etc which were paid at pre-revised wages for the period from 1.4.18 till date. Accordingly differences have to be re-worked and disbursed. This can be avoided only if the parties to agreement specifically agree to forego arrears meaning 'effective from the prospective date' only. The demand of the union deserves on merit to arrears and employers have to rework the same & disburse.

Dear Sirs,
Can we given HRA more than 40% or 50% of basic. Commission is a salary component when we can use this.
Please reply
Regards Sandeep

It is reasonable that HRA is ltd around 30% of basic. This again dependent what's the amount of basic itself. One can easily justify HRA being considered even >30% in a country urbanisation is fast catching up and HR is ever on the increase. Less we talk about metro like Delhi, Mumbai,Chennai, Kolkata and so on as in these cities no amount of HRA would suffice. But one should be aware of IT on HRA received vs.HR paid. HRA received over and above the exempted limits is subject to IT as per the formula under IT Act.
Commission as a salary component is considered for those in marketing/sales & business devt. JD and those employees are always driven by targets. This commission, as a fixed sum at minimum used to be paid monthly in the salary and achievement in excess of bench marks rewarded as commission/bonus computed at certain formula is paid. The amount need not be fixed sums for everyone/every month, bound to vary based on policies.
For those involved in processing & production related jobs, are paid production incentives/incentive bonus. It's possible these employees become eligible for these payments either continuously month on month or intermittently.

Dear Team,
i would like to know, whether Washing allowance can be taken into consideration while calculating PF.?

Good to know.
All these above points are well taken. In my view - once you deduct the PF & ESI on a basic wages, it can't be reduced later on just to reduce the PF contribution.

Yes Chandan. Except, when a reduction in salary, consequently reduction in PF & ESI may be possible, if and when the incumbent's salary is reduced as a result of penal action awarded to him/her as a 'punishment' of any 'disciplinary action' taken by the appropriate authority. But no reduction is possible just in order to reduce PF & ESI contributions.
Hi Raghav,
So far as 'Washing Allowance' for reckoning PF is concerned please go thru' the relevant issue in this link -
https://taxguru.in/corporate-law/pf-...pt-hra-sc.html
Copy of judgment attached.

Hi,
Can any one please provide Circular/ Notification / Gazette from PF department regarding PF deduction on other allowances except HRA, OT etc.. in response to supreme court order dated 28th Feb 2019.