Basic wages question haunts EPFO again

The move had been put on hold by Labour Ministry after adverse reports in sections of media

The Employees Provident Fund Organisation (EPFO) is all set to revive a circular issued in 2011 to curb the flexibility exercised by employers and PF authorities in the definition of basic wages.

The move had been put on hold by the Labour Ministry after adverse reports in sections of the media.

However a committee set up by the ministry, and comprising employers and employees organisations has given its approval to the circular which also seeks to curb the powers of the EPFO officials and inspectors in demanding scrutiny of PF accounts beyond seven years.

This was criticized as a move that helped employers. However Central Provident Fund Commissioner Anil Swarup speaking at a seminar on EPFO programmes organized by the PHD Chamber here said that the media distorted the notification and the revival of the circular is being considered by the Labour Ministry .

 
One of the points in the circular regarding a definition of basic wages   was a clarification (not an amendment) regarding  the definition of basic wages, based on which provident fund is calculated, though reports said that the definition was being changed, says Ravi Wig  representative of employers in the Central Board of Trustees in the EPFO and a member of the committee that went through the circular .

Workers pay 12% of their basic wages and employers are obliged to pay a matching contribution.   

 The clarification was meant to help workers get higher PF contributions from employers, PF officials said. Anyway a circular cant change what is there in the EPFO Act, only an amendment can, they pointed out.

 
 The circular signed by the former Central Provident Fund Commissioner RC Mishra  addressed a rampant practice of splitting basic wages to several allowances to reduce the amount payable under PF.  

The clarification titled Splitting of Wages says that  basic wages, "encompasses all the payments except the specified exclusions. All such allowances which are ordinarily, necessarily and uniformly paid to the employees are to be treated as part of the basic wages.''

This is a reiteration of what the EPFO Act says. As per the Act,  PF does not cover certain "specified exclusions'' like "cash value of any food concession;  any dearness allowance ... 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 ..''

 
Speaking of the circular which seeks to limit the period allowed for scrutiny of PF payments by member organisations to seven years,  Ravi Wig said:  "The only intent  its only intent was to curb an excessive concentration of powers in inspectors. It does not prevent scrutiny of PF accounts beyond seven years when required in a specific case. It only curbs the tendency to harass organizations asking for several years’ accounts on a routine basis."

Wig ridiculed the controversy saying that the circular was a result of suggestions unanimously agreed upon in CBT by employers and employees.  "If CBT was agreed, then why should anyone object to it?" he asks.