It raised a lot of queries and caused much confusion
Union Labour and Employment Minister Mallikarjun Kharge on Thursday said the November 30 circular issued by the Employees Provident Fund Organisation (EPFO) on the inclusion of certain allowances for calculating Provident Fund contribution has been kept in abeyance.
Talking to The Hindu here, he said since there were a lot of queries and confusion on the circular issued by the Chief Commissioner of Provident Fund, the government had decided to keep it in abeyance until further order. “So the status quo will continue.”
Informed sources said though the circular — on fixing the PF contribution while calculating employees’ basic wages — contained nothing new and only highlighted what was there in Section 2 of the EPF Act, there was a lot of confusion among employers.
The circular stated that all allowances, except a few, should be taken into account for calculating wages, and from that the PF contribution of employers had to be arrived at. This meant an employer had to contribute more towards PF for the employees. However, it did not clarify which of the allowances were to be taken into account for calculating basic wage.
Originally, the circular was issued to arrest the growing trend among some employers to lessen their burden on PF contribution by splitting the basic salary into various allowances and thus bringing down their contribution. This results in loss to employees.
There are over 5 crore subscribers in the EPFO and employees have to contribute a statutory minimum of 12 per cent of their basic salary towards PF and an equal amount is contributed by employers.
The circular said basic wages “encompasses all payments except the specified exclusions. All such allowances which are ordinarily, necessarily and uniformly paid to the employees are to be treated as part of the basic wages.”
PF does not cover certain “specified exclusions” like “cash value of any food concession; any dearness allowance ... all cash payments by whatever name called paid to an employee on account of a rise in the cost of living, house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment …”