Former Central Provident Fund commissioner RC Mishra triggered a controversy by issuing a circular on his last day in office (November 30) over widening the ambit of provident fund contribution.
Former Central Provident Fund commissioner (CPFC) RC Mishra triggered a controversy by issuing a circular on his last day in office (November 30) over widening the ambit of provident fund (PF) contribution.
The new guidelines clarify the definition of basic wages, based on which the PF is calculated. Their redefinition seeks to include other allowances made by employers under sundry heads.
The clarification circular, titled 'Splitting of wages', says the basic wage "encompasses all the payments except the specified exclusions which are mentioned as commissions. All such allowances which are ordinarily, necessarily and uniformly paid to employees are to be treated as part of the basic wages."
The circular, however, does not specify any criterion for identifying those allowances which are not excluded from PF.
Workers pay 12 per cent of their basic wages as PF and employers are obliged to pay a matching contribution. The clarification is meant to help workers get a higher PF contribution from employers, PF officials said.
Top government officials, however, told MAIL TODAY that merely issuing guidelines has no relevance; instead amendment in the EPF Act by Parliament is the only way to enforce new norms for PF contributions.
BP Pant, director, labour and employment with the industry body Federation of Indian Chambers of Commerce and Industry (Ficci) said, "EPFO should make amendments to EPF Act and bring in new norms for PF contribution."
Pant added, "It is a subject of interpretation. The former CPFC issued guidelines to regional provident fund commissioners for widening the ambit of PF contribution and adding in other allowances which are at present not calculated for PF contributions."
Pant said: "It is good that the government wants to go ahead with it but by merely issuing guidelines, it would only lead to harassment of employers and lead to court cases. The matter is already subjudice before the Madras High Court and the Supreme Court besides other Courts".
The contribution envisaged under Section 6 with notification dated April 9, 1997, and para 29 of the EPF Scheme specifies the rate of contribution under the EPF Act as 12 per cent.
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