• Jun
  • 28
  • 2011

Conveyance & Special allowance to be included in definition of basic wages for PF Calculation

EPFO – Forwarding of Landmark Judgment delivered by the Hon’ble Division Bench of Madhya Pradesh High Court on the issue of considerable components of Basic Wages

Montage Enterprises Pvt. Ltd versus Employees Provident Fund (Madhya Pradesh High Court)- In aforesaid case, the Madhya Pradesh High Court has contended that;

1. Conveyance allowance is included in the definition of basic wages because it is universally, necessarily and ordinarily paid to all across the board.

2. Special allowance is included in the basic wages since it is paid to all the workers and there are no specific criteria to determine the amount of special allowance.

However it is pertinent to note that, review petition has been filled by Montage Enterprise Pvt. Ltd before the Gwalior bench of Madhya Pradesh High Court as against the aforesaid judgment. In view of the same, the aforesaid judgment of Madhya Pradesh High Court is not definitive.

EMPLOYEES’ PROVIDENT FUND ORGANISATION

(Ministry of Labour & Employment, Govt. of India), Head Office-

Bhavishya Nidhl Bhawan, 14, Bhlkaiji Camaji Place, New Delhi – 110 066.No. Coord./4(6)2003/Clarification/Vol.II/2482 Dated: 21.06.2011Sub: Forwarding of Landmark Judgment delivered by the Hon’ble Division Bench of Madhya Pradesh High Court on the issue of considerable components of Basic Wages – regarding,Sir,Please find enclosed herewith a copy of Judgment dated 24.03.2011 in the matter of Montage Enterprises Pvt. Ltd versus Employees Provident Fund, Indore & one another delivered by the Hon’ble Divisional Bench of Madhya Pradesh High Court Bench at Gwalior whereby, the Hon’ble Court has laid down a principle for treatment of certain allowances like Conveyance/Transportation allowance, Special Allowance etc. as component of “Basic Wages” for the purpose of Provident Fund liabilities if the same are being paid uniformly, necessarily and ordinarily to all employees. The same may be utilized as per merits of the case.

Yours faithfully

End: As above.

(Anita S. Dixit)

Regional PF Commissioner-I (Coord.)

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Montage Enterprises Pvt. Ltd versus Employees Provident Fund

Sandeep Kanoi

9 Responses to “Conveyance & Special allowance to be included in definition of basic wages for PF Calculation”

  1. Frane Dsouza says:

    Illustration 1

    Production Incentive/Allowance

    A company gives an incentive/allowance of Rs 500 to motivate its workers to give increased production.
    Say Rs 500 for producing 500 pieces of safety pins, Rs 400 for 400 pins and so on.

    That is- there is a criteria/condition, for getting the allowance is his fulfilling the condition of producing the proportional number of pins.

    Attendance Incentive/Allowance

    A company gives an incentive/allowance of Rs 200 to motivate its workers to attend their duty the maximum number of days in a month.
    Say Rs 200 is given if a worker takes only 2 days leave per month.
    Rs 170 are given when 3 to 5 leaves are taken per month and so on.

    That is- there is a criteria/condition, for getting the allowance is his fulfilling the condition of attending the maximum number of days a month.

    Then according to the judgment given by a Division bench of the M.P. High Court bench at Gwalior in Montage Enterprises Pvt. Ltd vs EPFO Indore :
    Both these allowances – Production & Attendance will not be taken into account for calculating PF.

    But both these allowances are treated as wages as per the Minimum Wages Act.
    But both these allowances are not treated as Basic wages as per the Provident Fund Act.

    Illustration 2

    Let’s say a company gives an allowance without any criteria /condition, unconditionally, where no condition is to be fulfilled by the worker to receive that allowance – The allowance is given just like that. Then in that case- the unconditional allowance will be taken into account to calculate PF. This is solely according to the judgment in the case of Montage Enterprises.

    This allowance is treated as wages as per the Minimum Wages Act.
    This allowance is not treated as Basic wages as per the Provident Fund Act, and will not be taken into account for calculating PF according to the PF Act.

    But the circular which cites the case of Montage Enterprises No 7 (1) 2012/RCs Review Meeting/21224, dated 18 December 2012 issued by the Central PF Commissioner, the 30th November Circular has been placed in abeyance with immediate effect until further orders.

  2. Tripti says:

    Plz. Sir mail me as it is not visible and m working on the same so need to know… For this i will be greatful to you ,, my mail ID – tripti.mba09@gmail.com

    Thanks and Regards,
    Tripti

  3. Mayank says:

    Please send me a copy of Judgement

  4. admin says:

    Please click the link it the post to download attachment.

  5. MurthyRSN says:

    please mail me the attachment

  6. aksaxena says:

    I have gone through the judgement but Mrs Dixit order is not clear Pf official can issue the order for implementation but not issued in my point of view the employer break the basic wages in so many allowance to avoid pf contribution similarly it will not attract gratuity, lta, medical and etc. if possible the ministry should amend the various law to give benefit in welfare act at-least.

  7. P V Rama Rao says:

    Due to some technical problem the attachment is not opening. Pls mail me the same.

  8. admin says:

    Its already there

  9. Ashok Asthana says:

    Please upload the attachment also. Thanks

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