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Principle of universality to be applied in determining the basic wage for calculating the Provident Fund Contribution

MONTAGE ENTERPRISES PVT. LTD v EMPLOYEES PROVIDENT FUND (Madhya Pradesh High Court) - Principle of universality to be applied in determining the basic wage for calculating the Provident Fund Contribution Decided on : 24/03/ 2011 The Paintiff Company ("Montage Enterprises Pvt Ltd”) was remitting the provident fund contribution of eligible employees in accordance with the EPF Act, 1952  and the EPF Scheme, 1952 and was deducting provident fund contribution on two components of salary i.e. Basic + Variable Dearness Allowance (VDA). However it has not been deducting provident fund contribution on other components  i.e. HRA + Special Allowance + Managemnet Allowance and Conveyance Allowance. The Assistant Provident Fund Commisioner noticed that the petitioner Company was paying wages to its workers in guise of allowances to avoid the EPF liability. In aforesaid case, the Madhya Pradesh High Court contended that;
  • Conveyance allowance is included in the definition of basic wage because it is universally, necessarily and ordinarily paid to all across the board.
  • Special allowance is included in the basic wages since it is paid to all the workers and there is no specific criteria to determine the amount of special allowance.
The Hon’ble Court has held the principle of universality to be applied in determining the components of basic wage  and laid down a principle for treatment of certain allowances like Conveyance/Transportation allowance, Special Allowance etc. as component of “Basic Wages” for the purpose of Provident Fund liabilities if the same are being paid uniformly, necessarily and ordinarily to all employees.
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