RECKLESS
SPLITTING OF WAGES INTO ALLOWANCES FOR EPF WILL COST DEARLY TO THE EMPLOYERS
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Labour
Law Reporter has been persistently warning the subscribers to adopt protective
wage structure in view of the judgments of High Courts upholding all allowances
except HRA will form part of basic wages for EPF contributions. Now the
Supreme Court in its judgment dated 28.2.2019 reported in 2019 LLR 399. has
upheld the judgments of the High Courts. An appeal by EPFO against
judgment of Calcutta High Court has been accepted by the Supreme Court holding
that special allowance will also form the part of wages for EPF contributions.
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While
issuing the appointment letters to the employees the employers' recklessness is
found to be most shocking. The discrepancy with regard to the splitting of many
allowances speaks volumes about the glaring irresponsibility. As a result of
it, the employers are often caught in the dragnet of the PF authorities, who
derive perverted pleasure in harassing them. It is seen that some employers
split the wages into allowances without considering as to what for that
allowance is given.
For
instance, special allowance is invariably even by the employers, in addition to
basic wages, but when questioned as what is the speciality for giving a special
allowance, no valid clarification is offered.
While
coming across such anomalies the 'Labour Law Reporter' had been exhorting
subscribers particular employers covered under the Employees' Provident Funds
& MP Act, that these allowances can create problem for them since Gujarat,
Madhya Pradesh and Madras High Courts have held that all the allowances other
than house rent allowance would attract provident fund contributions. Despite that
many employers have not cared to rectify. Now the Supreme Court has upheld the
judgments of the above High Courts including that of Calcutta High Court
holding that special allowance will attract provident fund contributions. This
may lead to heavy financial liability in addition to interest, damages, even
prosecutions and loss of face for the organisation.
Hence,
instead of recklessly adopting the wage structure of any other establishment,
the employers must consider as to whether it would be excluded under the
Employees' Provident Funds & MP Act for attracting contributions and also
if there is any supporting justification. Accordingly, the Labour Law
Reporter in the interest of the subscribers cautions the employers to revise
their wages structures particularly those who are covered under the Employees'
Provident Funds & MP Act.
For
full judgment visit : www.labourlawreporter.com
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