EPFO to take action against firms for not factoring allowances

Supreme Court has held that special allowance is part of basic wages

for EPF dues computation

An EPFO study found out that a large number of firms were splitting

their employees pay packages into numerous allowance to reduce their EPF liability

New Delhi: After the Supreme Court held that special allowance is part of basic wages

for EPF dues computation, retirement fund body EPFO has decided to take a

stringent action against those firms which will not take into account such component

in PF contributions.

The apex court in its judgement has ruled that special allowance is part

of the basic wages for computing the employees provident fund (EPF).

The employer as well as employee pay 12% of basic wages each towards

contribution for social security scheme run by the Employees' Provident Fund

Organisation (EPFO).

"Following the judgement, the EPFO will take stringent action against firms

which would not factor in special allowance for computation of EPF

contributions. The body is studying the judgement and would soon

come out with a detailed plan to implement the judgement," a source

privy to the development said.

"The case of artificially lowering basic wages which become the basis

for computation of EPF contributions, was pleaded by the EPFO in the

apex court. Thus, it is imperative for the body to implement this in letter

and spirit," the source said.

An EPFO trustee Virjesh Upadhyay, who is also General Secretary

of Bharatiya Mazdoor Sangh (BMS), said, "We welcome the apex

court decision. This is a long pending issue. In fact the EPFO's apex

decision making body Central Board of Trustees had constituted a

committee to give a detailed report and suggestions to deal with

splitting of wages by employers for reducing EPF liability."

He further informed, "The committee had given its recommendation

to deal with the issue. But in the meantime, the matter went to court

and recommendations given by the panel to include various allowance

into basic wage could not be implemented."

Earlier, the EPFO conducted a study and found out that a large number

of firms were splitting their employees pay packages into numerous

allowance to reduce their EPF liability convincing their workers that

this would result in higher taken home pay.

 

The Supreme Court in its order has allowed the appeal of the EPFO,

which sought to include allowance like special allowance in basic wages

for computation of EPF contributions

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