EPF allowances: Clarification by Jan

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SummaryThe labour ministry has asked the Employees Provident Fund Organisation to keep into abeyance the implementation of a new rule that calls for clubbing various allowances into the basic wage, until a new list of such allowances are drawn up by next month.

say there was “no malafide intent” in the circular as far as employees are concerned and it was meant to help assessing officers to detect whether a company was paying the statutory dues adequately or evading them, experts say it has added to the confusion and greater clarity was needed after looking into the legal sanctity.

“Many private companies and MNCs include their own and the employees’ PF contribution within the CTC. In such cases, the employees’ net salary will come down (if the new circular is implemented). In case of PSUs, where employer’s PF contribution is over and above the salary, then employees will be reduced slightly,” said Vineet Agarwal, partner at KPMG.

However, Amitava Ghosh, a senior vice-president of TeamLease, says there is no such threat of the new EPFO circular in reducing the net pay of employees whose basic wages are well above the EPFO eligibility limit of up to R6,500 per month.

“Wherever, the employer is contributing on wages more than R6,500 as basic pay, there is no such liability on the employer to pay PF on conveyance allowance or night shift allowance,” he said.

To clear the haze, the authorities need to see whether the EPFO circular has legal sanction, E Balaji, CEO of Randstad India, advocated. “Whether it is binding to all organisations, we need to wait and see. There could be cost implications and salary structures may have to be restructured,” he said.

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