Finally the employee’s provident fundorganization (EPFO) give attention tothe basic wages definition which in the rule of provident fundorganization and employers getbenefits of it.
Earlier provident fund is deducted onthe basic wages which do not include any allowances. Employers deduct PF only on the basic pay and not include allowance on the basicpay for calculating the provident fundcontribution.
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 forfood 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. Whenallowances 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 allowancesamount 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.
This Articles About Good News for Employees, but I Think This is Bad News., Since Employers No Whre Going to Pay More , Employer Will Deduct The Same from Total Salary Indirectly.
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