Ficci opposes changes in basic wage structure for PF deduction

NEW DELHI: Business chamber Ficci has opposed the proposed changes to the definition of 'basic wages' under the Employees Provident Fund & Miscellaneous Provisions Act (EPF and MP Act) 1952.

The government had introduction a triple test - 'Ordinarily, Necessarily and Uniformly' - to define basic wages for provident fund deduction through a circular issued in November last year, but had later stayed its implementation.

Ficci warned that the proposal will have 'huge financial implications both for industry and government and may even be counterproductive to the EPFO, as organisations who are extending coverage to employees receiving salaries above 6,500 may choose to opt out, depriving the employees coverage under a globally renowned social security scheme'.

Under the current rules, an organised sector worker is not required to mandatorily join the provident fund scheme of the EPFO if his basic salary exceeds 6,500 a month.

“Most of the employees today join an organisation above this statutory limit and they are voluntarily covered by the industry,” the industry chamber said in a statement. It has argued that PF deduction should be on the full amount of ‘minimum wages’ where such wages are being paid under the Minimum Wages Act, 1948. “For employees who are on a higher salary bracket and receiving allowances as incentives to promote business, the PF contribution should be restricted to basic salary,” it said.