SC: Earned leave cash is not ‘basic wage’
New Delhi
March 24, 2008
The Supreme Court has held that the amount received by encashing the earned leave is not a part of the “basic wage” under Section 2(b) of the Employees’ Provident Fund & Miscellaneous Provisions Act requiring pro rata employer’s contribution. There were some differences in the views of various high courts on this point.
Therefore, the Supreme Court settled the issue in Manipal Academy vs Provident Fund Commissioner. The Supreme Court explained that the term ‘basic wage’ included all emolument which are earned by an employee while on duty or on leave or on holidays with wages. It can only mean weekly holidays, national holidays and festival holidays.
In many cases the employees do not take leave and encash it at the time of retirement, or the same is encashed after his death which can be said to be uncertainties and contingencies.
Though provisions have been made for the employer for such contingencies, unless the contingency of encashing the leave is there, the question of actual payment to the workman does not take place. Therefore the term ‘basic wages’ was never intended to include amounts received for leave encashment.
[Source: The Business Standard]
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