Supreme court ruiling on PF
With regards to the Supreme court ruling in relation to special allowances to be part of Basic wages
1) What will be the impact in the books of account of the employer?
2) Is there any time horizon for applying the retrospective effect? more
SC judgement is referring to max ceiling of Rs. 15,000 PM only. EPFO is accepting pension contribution 8.33% of 15,000 PM i.e. Rs. 1250.00 though employer contribute 12% of total PF salary. For example, My basic salary is 80,000 and other allowances 20,000. My Employer contribute PF @12% on 80,000 i.e 9,600.00. Out of which, 8.33% of 15,000 i.e 1,250 is transferred to EPFO and rest 8,350(9600 - 1250) is credited to my PF a/c. Now in changed scenario after SC judgement, employer PF contribution will remain same i.e 12% of 80,000, 9,600, but amount transferred to EPFO will be 8.33% of 80,000 i.g. 6,664 and balance amount of 2936 (9600 - 6664) is credited to my PF account. more
Keeping in mind the judgement of SC on the point the employer need to restructure their compensation package in consonance with the judgement . the compensation structure can be redesigned to be divided into BAsic, HRA and special allowances that are not paid to all and are variable also depending on the extra effort of the employee to earn.
Secondly the time horizon is not clear in the judgement but best is from the date of joining of employee whose basic wags below rs. 15000/- pm. if the employee period is very long then u can discussed the matter with PF inspector or PF Commissioner Directly. more
Recently EPFO has issued clarification guidance to regional PF offices not to insist to employer to consider CTC for PF deduction. Only PF able salary is to be considered PF deduction. Other allowance and CTC is not to be considered for PF deduction. There no need to restructure compensation package by employer. In SC judgement only limit of 15,000 PF' able salary is removed and not changed to definition of salary. more
SC delivered the Judgement on Feb'18, but it is applicable to PF contributions of Individual employee from the date of joining into company till current month liability, if his current PF wages are below Rs.15000 but his gross wages excluding HRA and Bonus etc are more than his PF wages. As SC has given clarity on what is PF wages includes and hence its applicability is retrospective. more