Canteen Allowance Part of Basic Wages for PF Deduction: High Court

Canteen allowance paid by the employer to employees is part of basic wages and is required to be taken into account while computing the provident fund (PF) contribution, the Delhi High Court has said in a ruling.

The court said this in its recent judgement on a petition filed by Whirlpool Of India Ltd against an order of Regional Provident Fund Commissioner asking the company to pay PF contribution on canteen allowance provided to workers.

“..petitioner is liable to compute and pay the provident fund contribution by taking into account the ‘canteen allowance’ — being paid to the employees in terms of the binding settlement with effect from October 1, 1995,” said Justice Vipin Sanghi in an order on July 22 this year.

The retirement fund body, EPFO, circulated this order in its Web site on Monday for reference for its field staff.

“The said liability arises, even if the petitioner’s submission that the canteen allowance cannot be construed as ‘the cash value of any food concession’ is accepted, because the canteen allowance is a part of the ‘basic wages’ itself. Consequently, I find no merit in this petition and dismiss the same..,” the order said.

According to a unionist, the issue of splitting of wages by employers has surfaced many time and discussed.

Earlier, the retirement fund body, Employees’ Provident Fund Organisation, had even brought out a circular in November last year that sought to club allowances with basic wages for computing PF contribution.

The circular had redefined the meaning of ‘basic wages’ for the purpose of provident fund deductions. It said: “All such allowances which are ordinarily, necessarily and uniformly paid to the employees are to be treated as the basic wages.”

However, later the circular was put in abeyance. Later, a review committee, constituted to look into the nitty-gritty of clubbing of allowances with basic pay for PF deductions, had supported this idea for enhancing the social security benefit under the EPF scheme run by EPFO.

“Employers split wages to reduce their PF and other tax liabilities. This is an anti-worker and against the social security scheme. The Government should implement the held back notification for clubbing of allowance with basic wages at the earliest,” Hind Mazdoor Sabha Secretary and EPFO trustee, A D Nagpal, said.

Business Line, New Delhi, 18-09-2013