Industry bodies oppose plan to club perks for PF calculation

Aditi Nigam Amiti Sen New Delhi | Updated on May 28, 2013 Published on May 28, 2013

While industry lobbies CII and FICCI have opposed the Employees Provident Fund Organisation’s (EPFO) proposed move to club allowances with basic pay for calculating the employers’ contribution to provident fund (PF), unions and even a section of employers feel this is no big deal as it will apply only to those earning less than Rs 6,500 a month.

The Labour Ministry is, however, disappointed with industry bodies that have come out against the move, as they had given their nod to the proposal as part of the tripartite sub-committee set up to look into the issue.


“They submitted a unanimous recommendation endorsing the contents of the circular that included the clarification on ‘compensation’. It is indeed ironical that after having agreed in the Group, different voices are being raised now,” a senior EPFO official told Business Line.

The proposal is an effort by the EPFO to check the practice of employers splitting wages to reduce their PF obligation.

The Federation of Indian Chambers of Commerce and Industry warned that the proposal could go against the interests of the EPFO as many organisations may opt out of the scheme. “The reported proposal to re-notify the definition of ‘basic wages’ is fraught with huge financial implications for industry and Government. It may even be counter-productive to the EPFO as organisations extending coverage to employees receiving salaries above Rs 6,500 may choose to opt out,” FICCI said in a statement.

The Confederation of Indian Industry’s Senior Adviser, S. Sen, said: “The proposal is not advisable. In any case, the matter is in the court.” If companies’ salary bills go up, many may opt out of contributing to those earning over Rs 6,500, he added.


However, others feel employers are overreacting. “I don’t understand why some employers are crying hoarse, as this will apply to only those earning up to Rs 6,500 a month. In Delhi, even minimum wages are higher than this,” Ravi Wig, President, Confederation of Indian Employers, said.

Wig was part of the tripartite sub-committee that looked into a circular issued last year, which was put on hold after protests from employers. Both trade union and employer representatives in the sub-committee confirmed they had endorsed the circular, with some tinkering on 3-4 listed allowances that may not be considered part of the wages.

“We are in support of such a move as many employers do not pay PF to those getting minimum wages,” said A. K. Padmanabhan, President, Centre of Indian Trade Unions.

In fact, trade unions have asked for a ceiling of Rs 15,000 a month. “The matter is under the Finance Ministry’s consideration and may require amendments to the PF Act,” said D. L. Sachdeva, Secretary-General, AITUC.

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Published on May 28, 2013
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