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Clubbing Allowances With Basic Pay For PF Deduction

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Decks have been cleared for clubbing of allowances with basic pay for PF deductions under the EPFO scheme, a move that will increase savings but reduce take-home pay of over 5 crore subscribers.

A review committee, constituted to look into the nitty- gritty of clubbing of allowances with basic pay for PF deductions, has supported the idea for enhancing the social security benefit under the EPF scheme run by the Employees' Provident Fund Organisation (EPFO).

"The committee's suggestion would be vetted by the Labour Ministry and would be put before the EPFO's apex decision making body the Central Board of Trustees (CBT) for taking final call on it," a trustee and Secretary Bharatiya Mazdoor Sangh B.N. Rai told PTI.

"On the issue of clubbing of wages, even the employers' representatives supported the view that all such allowances which are regularly and uniformly paid to workers should form part of basic pay for PF deductions," said Rai, who was the member of the review panel.

The suggestions of the committee have been already sent to Labour Ministry for scrutiny, EPFO officials said. On 30 November, the outgoing Central Provident Fund Commissioner R.C. Mishra brought out a notification to club all allowances which are regular in nature, with basic pay.

The notification had said: "All such allowances which are ordinarily, necessarily and uniformly paid to the employees are to be treated as the basic wages". The notification was an effort to check the practice of splitting of wages by employers to reduce their provident fund obligations.

However, the notification was put in abeyance following reports which criticised the move of the retirement fund body. The government later constituted a committee to look into the matter.

On limiting the period to 7 years for initiating inquiry against employers for lapses in maintaining EPFO accounts, Rai said: "The Committee has favoured keeping such inquries open- ended if it is found that employers have not been depositing the PF contributions.

"You can put time-limitation for such inquries, but ensure that a worker's lawful right is not denied in case employers are found violating norms."

The norms, which were issued by Mishra on his last day in office (November 30), seek to modify the provisions that often result in harassment of employers and establishments.

According to the circular, the inquiry against employers can only be initiated after, "actionable and verifiable information," is placed for consideration before the compliance officers.

The EPFO would also not take action against employers who fail to deposit dues of unidentified workers into the PF accounts.

"There shall be no assessment without identifying individual members in whose account the fund is to be credited," the circular had said.

With regard to the time period for initiating inquiry, it said: "No inquiry or investigation shall ordinarily go beyond seven years, i.e., it shall cover the period of default not exceeding preceding seven years."

The open assessment, inquiries and investigations serve no real purpose the circular said adding, "such inquiries often don't result in identification of beneficiaries and only tend to harass the employers and establishments."

"This circular which has time-barred such inquiries is anti-worker," an EPFO trustee and Secretary Hind Mazoor Sabha A D Nagpal had said in December.