Finally the employee’s
provident fund organization (EPFO) give attention to the basic wages definition
which in the rule of provident fund organization and employers get benefits of
it.
Earlier provident fund
is deducted on the basic wages which do not include any allowances. Employers
deduct PF only on the basic pay and not include allowance on the basic pay for
calculating the provident fund contribution.
In the new rule all such
allowances which are ordinary, necessarily or uniformly paid to employees by
the employer are to be treated as part of basic wages. However provident fund
does not include certain allowance like cash value for food concession or
dearness allowance. A complete list of allowable and non-allowable allowances
is yet to come from the provident fund organization.
The rule is to
contribute 12 percent of wages by the employer as well as by the employee to
the provident fund.
Impact of new rule
To employer- employer
needs to pay more. When allowances are added to the wages, the employer needs
to contribute more in the provident fund.
To employee- More
salary, less cash in cash. Employee will get more salary as more contribution
comes in the provident account from the employer. But he gets less cash in hand
as on allowances amount PF contribution will be deducted.
Provident fund department tries to cover more
and more employees in PF. However, the minimum drawings is 6500 Rs. With which
the employee cover under PF rule. Employer often show the amount in other
allowances such as House rent allowance or etc. to escape from PF contribution.
So this is the welcome step for the employees.
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