The Employees Provident Fund Organisation vide notification dated 28.08.2019 has issued a clarification to establishment with respect to inspection of records regarding wage structure to find out if any allowance which were part of basic wages have been omitted for the purpose of compliance.
In a recent judgement in the case of RPFC vs. Vivekananda Vidyamandir and others & Surya Roshni Ltd & Ors. vs. The State of Madhya Pradesh EPF RPFC and Ors. 2019 LLR 339 (SC), the Hon’ble Supreme Court have held that allowances other than those of the undermentioned types are to be considered as part of the basic wages u/s 2(b) of the EPF & MP Act, 1952 for the purpose of determination of PF Contribution:
- Allowances which are variable in nature;
- Allowances which are linked to any incentive for production resulting in greater output by an employee; or
- Allowances which are not paid across the board to all employees in a particular category; or
- Allowances which are paid especially to those who avail the opportunity
Accordingly, the allowances like special allowances, conveyance/travelling allowances, education allowances, and other similar allowances in the cases of the respective petitioners, have been held as part of the basic wages, liable for deduction of PF contribution.
On the above judgment, a review petition has been filed by the aggrieved parties and is pending for adjudication. Based on the above judgment, several field offices have issued notice to employers proposing inspection of records for past 3-5 years.
It has been clarified that the inspection shall be carried out only after taking prior permission from Central Analysis Intelligence Unit (CAIU) and by following the administrative guidelines and policy only in those cases where credible basis is available for forming a view that the employer has prima facie indulged in illegal practice of avoiding EPF liability by splitting the basic wages.
Therefore until the review petition is disposed, no coercive action shall be taken for recovery of dues.
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