Scribd Logo
Upload

Welcome to Scribd!

  • 136 views

    Decision of Supreme Court On EPF Contribution PDF

    Uploaded by

    Abhishek Sethiya
    The Supreme Court recently clarified the definition of "basic wages" for calculating Employee Provident Fund contributions. It held that allowances must be universally paid to all employees to be included. Specifically, allowances must not be variable, linked to incentives, paid only to some employees, or providing extra pay beyond regular work. This reaffirms prior precedent and provides guidance to employers, employees, and authorities on determining provident fund liability from wage components.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Decision of Supreme Court On EPF Contribution PDF

    Uploaded by

    Abhishek Sethiya
    136 views2 pages
    The Supreme Court recently clarified the definition of "basic wages" for calculating Employee Provident Fund contributions. It held that allowances must be universally paid to all employees to be included. Specifically, allowances must not be variable, linked to incentives, paid only to some employees, or providing extra pay beyond regular work. This reaffirms prior precedent and provides guidance to employers, employees, and authorities on determining provident fund liability from wage components.

    Original Title

    decision of Supreme Court on EPF Contribution.pdf

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The Supreme Court recently clarified the definition of "basic wages" for calculating Employee Provident Fund contributions. It held that allowances must be universally paid to all employees to be included. Specifically, allowances must not be variable, linked to incentives, paid only to some employees, or providing extra pay beyond regular work. This reaffirms prior precedent and provides guidance to employers, employees, and authorities on determining provident fund liability from wage components.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    136 views2 pages

    Decision of Supreme Court On EPF Contribution PDF

    Uploaded by

    Abhishek Sethiya
    The Supreme Court recently clarified the definition of "basic wages" for calculating Employee Provident Fund contributions. It held that allowances must be universally paid to all employees to be included. Specifically, allowances must not be variable, linked to incentives, paid only to some employees, or providing extra pay beyond regular work. This reaffirms prior precedent and provides guidance to employers, employees, and authorities on determining provident fund liability from wage components.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    ANALYSIS OF RECENT DECISION OF

    SUPREME COURT ON EMPLOYEES’ PROVIDENT FUND CONTRIBUTION

    Recent decision of the Supreme Court has tried to settle the long drawn litigation about the
    allowances which need to be considered for the purpose of contribution under the Employee
    Provident Fund Scheme. Let us discuss the law and the implications of the Supreme Court
    decision.

    A Bench of Hon'ble Justices Arun Mishra and Navin Sinha of the Hon'ble Supreme Court vide
    judgement dated 28th February 2019 in the case of The Regional Provident Fund
    Commissioner (II) West Bengal Vs Vivekananda Vidyamandir & Ors.1 has reiterated the
    principle that the crucial test to be applied for inclusion of allowances as part of "Basic Wages"
    is that of universality i.e. all allowances which are universally, uniformly, necessarily and ordinarily
    paid to all employees would form part of "Basic Wages" for the purpose of computing provident fund
    contributions under the Employees' Provident Fund and Miscellaneous Provision Act, 1952 (Act).

    Backdrop

    This judgment of the Hon'ble Supreme Court has been long awaited and is a welcome
    clarification given the ambiguities that prevailed in determining the scope of "Basic Wages" as
    defined under the Act in proceedings before competent authorities under the Act. Employers
    have been structuring wages/ remuneration payable to their employees by inclusion of
    allowances under various heads and nomenclature to minimise their liability to contribute
    under the Act.

    In this context, the Hon'ble Supreme Court jointly heard five appeals arising from various High
    Courts on the common question of law i.e. whether allowances including special allowances
    could fall within the ambit of "basic wages" under the Act for the purposes of determining
    provident fund liability of an employer.

    In RPFC (II) West Bengal v. Vivekananda Vidyamandir and Others, an unaided school paid special
    allowance by way of incentive to teaching and non-teaching staff pursuant to an agreement
    between them. The incentive was reviewed from time to time upon enhancement of the tuition
    fees of the students and its determination within the scope of basic wages was in question. In
    the matters of Surya Roshni Limited v. EPF and Others, U-Flex v. EPF and Another, Montage
    Enterprises v. EPF and Another and The Management of Saint-Gobain Glass India Ltd. v. RPFC,
    EPFO, the appellants had excluded from the perspective of determining provident fund liability
    all allowances such as house rent allowance, special allowance, management allowance,
    conveyance allowance, education allowance, food concession, medical allowance, not
    specifically included as basic wages under the Act.

    1
    https://www.sci.gov.in/supremecourt/2008/2232/2232_2008_Judgement_28-Feb-2019.pdf

    Page 1 of 2
    It was argued in remaining appeals that only those emoluments that are earned by an employee
    in accordance with the terms of employment, would qualify as basic wage and discretionary
    allowances not earned in accordance with the terms of employment would not be deemed basic
    wage.

    The Supreme Court, while deciding these appeals, has reiterated the principle laid down
    in Bridge and Roof Co. (India) Ltd. vs. Union of India, (1963) 3 SCR 978 and held that only such
    allowances not payable uniformly by all concerns and which may not be earned by all
    employees of the concern would stand excluded from the definition of "Basic Wages". There
    were divergent views that had emerged resulting in ambiguity amongst stakeholders including
    the employers, employees and the provident fund authorities alike. The provident fund
    authorities tried to bring in clarity and consistency by issuing various Circulars particularly
    aimed at clarifying the expression "commission or any other allowance payable to the
    employee" under the Act but owing to challenge before the courts, such circulars were not
    implemented or kept in abeyance.

    Findings and conclusions by the court

    The Supreme Court observed that the Act is beneficial social welfare legislation and must be
    interpreted as such. To exclude an allowance from the ambit of basic wages, it must be
    demonstrated that the same is either (a) variable; or (b) linked to any incentive for production
    resulting in greater output by an employee; or (c) paid especially to those who avail the
    opportunity; and (d) that the allowance in question is not paid across the board to all
    employees, in a particular category. Therefore, it must be demonstrated that the employee
    concerned had become eligible to get this additional amount beyond the regular work which he
    was otherwise required to put in.

    The judgement has reinforced and reiterated the principle of universality originally
    propounded in the Bridge and Roof judgement.

    To conclude, while employers may structure the wages and pay certain components of the
    wages as allowances, it is advisable to ensure that such allowances are not being paid with a
    view to subterfuge and reduce provident fund liability.

    Hope the information will assist you in your Professional endeavors. In case of any query /
    information, please do not hesitate to write back to us.

    Page 2 of 2

    You might also like