On what allowances should PF deduction be applicable?
Aggrieved by an order of the Assessing PF Authority, the appellant-The Supreme Industries filed an appeal (ATA No.383(8) 2009) before the Employees’ Provident Fund Appellate Tribunal. The PF Appellate Authority in its order dated 11-10-2012 has considered the provisions of section 6 of the Act regarding allowances to be or not to be as component of basic wages and has dealt all the impugned allowances, in seriatim, with supporting reasons as under:
i) Leave Encashment : Supreme Court, in the case of Manipal Academy of Higher Education vs Provident Fund Commissioner, 2008 LLR 243 (SC), has held that the amount paid towards leave encashment would be excluded from the purview of ‘basic wages’. Hence, the EPF Tribunal has held that the impugned order under section 7A passed by the concerned authority is legally incorrect.
ii) Leave Travel Allowance : Normally, this facility is given by the employer to its employees with monitory concession to visit their home town or any other place for leisure or relaxation. It is never given on monthly basis along with wages. Hence, such an allowance cannot be treated as part of basic wages.
iii) Medical Allowance : Since it is given to all staff members, it would be treated as a part of basic pay/wages.
iv) Basic salary : It attracts EPF contribution as per applicability.
v) Shift Allowance : This allowance is not paid to all the employees working in the shifts other than night shift. Hence, as per law settled in ‘Bridge and Roof’ case, such allowance shall not constitute a part of basic wages.
vi) Special Allowance : This allowance, paid by the employer/appellant, is not given to the employees as a part of any contract of employment or settlement. Therefore, it cannot be said that it is earned by the employees as a part of salary.
vii) Tribal Allowance : This allowance is not payable to all the employees who are working in the non-tribal or tribal area. It is paid purely at the sweet will of the employer and not under any contract of employment or settlement. It is payable only to a particular category of employees. Therefore, it cannot constitute wages earned by the employees while in service.
viii) Conveyance Allowance : This allowance is paid purely at the sweet will of the employer and not under any contract of employment or settlement. It is not payable to all the employees. Therefore, it cannot be said to have been earned by the employees as a part of their basic wage.
ix) Education Allowance : As it is given to all the employees, it would be a part of basic wages.
x) Dearness Allowance : In the instant case, the wages payable to the employees is over and above the minimum wages admissible to them, therefore, it should not be considered as a part of basic wage.
xi) Good Work Reward : To treat good work reward as a part of basic wages is wrong and not sustainable and the reliance of the EPE Authority upon the case of DCL Shriram Consolidate Ltd. vs RPFC, 1998 LLR 532 (Raj. H.C.) 396 is not appropriate in view of the fact that this case was not decided by the Hon’ble High Court of Rajasthan on merits.
Accordingly, the allowances which are not paid universally, necessarily, ordinarily and to all the employees would not attract the contributions as per provisions of the Act. Hence, the appeal is allowed by the Appellate Tribunal directing the EPF Authority to make calculations of the payable contribution in accordance to section 6 of the Employees’ Provident Funds & Misc. Provisions Act.