Government rejects proposal to club allowances with basic pay

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With the government rejecting a proposal to club allowances with basic pay for provident fund deductions, the EPFO will soon issue a notification in this regard, a setback for over 5 crore subscribers.

"EPFO has got a letter from the Labour Ministry asking it not to go ahead with clubbing of allowances with basic pay. The Employees' Provident Fund Organisation (EPFO) will soon issue a notification," a source said.

According to experts, the move would have increased the savings of organised sector workers under schemes run by the EPFO. It would also have reduced the take-home pay of the subscribers and increased the financial burden on employers.

The EPFO had issued a circular on November 30, 2012, redefining the meaning of "basic wages" for the purpose of PF deductions and said, "All such allowances which are ordinarily, necessarily and uniformly paid to the employees are to be treated as the basic wages."

The EPFO also proposed to limit enquiries into PF deposits made by companies to a period of seven years.

However, the notification was put in abeyance and the EPFO set up a committee to look into the matter and recommend further action to the Labour Ministry. The committee had supported the idea of enhancing social security benefits under the EPF scheme run by the EPFO.

Putting the 2012 circular in cold storage would also mean that the EPFO can seek information from employers about PF deposits made on behalf of workers without a time limit.

The circular had said, "No inquiry or investigation shall ordinarily go beyond seven years, i.E., it shall cover the period of default not exceeding preceding seven years."

According to the circular, the inquiry against employers can be initiated only after "actionable and verifiable information" is placed for consideration before compliance officers.

The employer, it had said, would be required to make available online the complete history of the establishment for the benefit of compliance officers.

The open assessment, inquiries and investigations serve no real purpose, the circular had said, adding, "Such inquiries often don't result in identification of beneficiaries and only tend to harass the employers and establishments."


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