The Supreme Court judgement on PF contributions related to allowances may have substantial impact on your provident fund kitty and even your take-home pay. Currently, as per the salary structure, the employees are supposed to contribute the mandatory 12 per cent of their Basic Salary or Wage ( 10 per cent for certain establishments) towards their PF. The other emoluments are shown as different allowances such as house rent allowance, special allowance etc. even though they form a part of the total salary or cost to the company. Presenting a judgment related to EPFO and certain establishments, the Court has ruled out that the allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund account of the employees. Essentially, it means that the PF contribution will be on the total amount including all the allowances paid to an employee and not just on the basic salary. The matter of concern The appeals made by the various establishments to the SC raised a common question of law i.e. if the special allowances paid by an establishment to its employees would fall within the expression \u201cbasic wages\u201d under Section 2(b)(ii) read with Section 6 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 for computation of contribution towards employees provident fund. SC version SC stated that \u201cNo material has been placed by the establishments to demonstrate that the allowances in question being paid to its employees were either variable or were linked to any incentive for production resulting in greater output by an employee.\u201d The Court also felt that \u201cIn order that the amount goes beyond the basic wages, it has to be shown that the workman concerned had become eligible to get this extra amount beyond the normal work which he was otherwise required to put in.\u201d Definition of wages As per the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, \u201cbasic wages\u201d means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him. However, the Act excludes these two important emoluments following from the definition of Basic Wages or Salary: (i) the cash value of any food concession; (ii) any dearness allowance that is to say, 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 or of work done in such employment Impact The impact of such a decision could be two-fold. One, the contribution towards EPF will be on a higher amount and hence less take-home pay for the employee. And, secondly, the retirement kitty will see more inflows as higher monthly PF contribution will move into the employee's PF account.