Do special allowances come under ‘basic wages’?

NEW DELHI: The Supreme Court ruling is unlikely to impact those with basic salary and special allowances above Rs 15,000 a month, former PF commissioners and consultants said.

The question placed before the bench for adjudication was whether special allowances paid by an establishment to its employees will fall within the expression ‘basic wages’ under Section 2(b)(ii) read with Section 6 of the PF Act for computation of deduction towards PF.

Writing the judgment for the bench, Justice Sinha said, “The wage structure and the components of salary have been examined on facts, both by the authority and the appellate authority under the Act, which have arrived at a factual conclusion that allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the PF account of the employees.

“There is no occasion for us to interfere with the concurrent conclusions of facts. The appeals by the establishments therefore merit no interference. Conversely, for the same reason, the appeal preferred by the Regional Provident Fund Commissioner deserves to be allowed.”

Explaining the logic behind the verdict, the bench of Justices Mishra and Sinha said, “No material has been placed by the establishments to demonstrate that the allowances in question (special allowance) being paid to its employees were either variable or were linked to any incentive for production resulting in greater output by an employee and that the allowances in question were not paid across the board to all employees in a particular category or were being paid especially to those who avail of the opportunity.

“In order that the amount goes beyond the basic wages, it has to be shown that the workman concerned had become eligible to get this extra amount beyond the normal work which he was otherwise required to put in,” he added.