Dear Seniors, I am in confusion, Can basic be 100% ? If so then will it be problematic in some aspect for our organisation.? Regards, Khushi
From India, Pune
1From India, Pune
Dear J. N Modi Sir,
As such to be in safer and made pf exempted our organisation is thinking to made basic as 100 %. can it be?? Sir what is the criteria for basic for all the staff ??
Regards,
Khushi
From India, Pune
As such to be in safer and made pf exempted our organisation is thinking to made basic as 100 %. can it be?? Sir what is the criteria for basic for all the staff ??
Regards,
Khushi
From India, Pune
PF will be calculated on Basic,D.A.,Retaining Allowance if it is ,Cash paid food concession
From India, Vadodara
From India, Vadodara
Hi Khushi,
As per my knowledge in any law there is not spcified particular % of basic to be decided. However it is the sole discretion of the organization to have certain % of the basic in salary or wages. Its minimum limit is being defined by the fixation of Minimum Wages and hence we could pay below than that. But as far as 100% basic is considered, again you need to verify that the other components like PF, PTax, HRA, OT (if applicable), leave pay etc. All such factors are to be considered on 100% basic, which will increase your indirect expenses on every employee. Also take note that if you are thinking for going to 100% basic may be suitable for exemption of PF, then according to me it is not at allo possible. Whatever % of basic it may be, PF contributions has to be carried out at the specified %.
Please review your decision,
Regards,
Atul S Malve
From India, Sholapur
As per my knowledge in any law there is not spcified particular % of basic to be decided. However it is the sole discretion of the organization to have certain % of the basic in salary or wages. Its minimum limit is being defined by the fixation of Minimum Wages and hence we could pay below than that. But as far as 100% basic is considered, again you need to verify that the other components like PF, PTax, HRA, OT (if applicable), leave pay etc. All such factors are to be considered on 100% basic, which will increase your indirect expenses on every employee. Also take note that if you are thinking for going to 100% basic may be suitable for exemption of PF, then according to me it is not at allo possible. Whatever % of basic it may be, PF contributions has to be carried out at the specified %.
Please review your decision,
Regards,
Atul S Malve
From India, Sholapur
Dear Khushi, As per my knowledge most of the organizations deduct 12% of basic for PF from Employee and Employers contribution.
From India, Bangalore
From India, Bangalore
Hi Khushi,
An interesting question you have raised. My answers are below. Dear Seniors , Please let me know if im wrong.
As far as my knowledge is concerned, there is no company that will have employees salary as 100% Basic. Because, if they do, obviously there will not be any more components like HRA, Conveyance, Other Allowance. If there is going to be 100 % basic, the, the indirect expenses for the employer goes up heavily. For e.g Basic is generally between 30%-50% of Gross salary. Bonus, Gratuity and various other for employees will be calculated based on Basic. So, if you are going to have 100% Basic, then your expenses are going to shoot up which could've been avoided if you had followed the normal break up pattern.
Let me know if this helped.
Thanks
Sethu
From India, Madras
An interesting question you have raised. My answers are below. Dear Seniors , Please let me know if im wrong.
As far as my knowledge is concerned, there is no company that will have employees salary as 100% Basic. Because, if they do, obviously there will not be any more components like HRA, Conveyance, Other Allowance. If there is going to be 100 % basic, the, the indirect expenses for the employer goes up heavily. For e.g Basic is generally between 30%-50% of Gross salary. Bonus, Gratuity and various other for employees will be calculated based on Basic. So, if you are going to have 100% Basic, then your expenses are going to shoot up which could've been avoided if you had followed the normal break up pattern.
Let me know if this helped.
Thanks
Sethu
From India, Madras
Dear Khushi,
There is no bar on the percentage of Basic. But logically if the salary of your Employee is equal to the minimum wage then obviously the basic of that employee shall be 100 % of his gross salary. The simple FUNDA behind all this is that the Basic can not be less than the Minimum Wages as is clear by the latest circulation of the EPF Deptt. Also mentioned in this circulation is that Minimum Wages cannot be bifurcated. You can download the above said circulation leter from this site very easily.
But otherwise if the salary of the staff is more than the Minimum Wages then it is always better to fix the basic as 60% of the Gross and the rest 40% can be the other Allowances. Having 100% Basic for the staff getting the salary more than the Minimum wages is definitely going to create problems for your organisation. All the deductions and benefits on the salary are calculated as per the Basic. In this way the contributions of your organisation shall be huge like anything.
Thanks and Regards.
Amarjeet Sijngh
From India, Mumbai
There is no bar on the percentage of Basic. But logically if the salary of your Employee is equal to the minimum wage then obviously the basic of that employee shall be 100 % of his gross salary. The simple FUNDA behind all this is that the Basic can not be less than the Minimum Wages as is clear by the latest circulation of the EPF Deptt. Also mentioned in this circulation is that Minimum Wages cannot be bifurcated. You can download the above said circulation leter from this site very easily.
But otherwise if the salary of the staff is more than the Minimum Wages then it is always better to fix the basic as 60% of the Gross and the rest 40% can be the other Allowances. Having 100% Basic for the staff getting the salary more than the Minimum wages is definitely going to create problems for your organisation. All the deductions and benefits on the salary are calculated as per the Basic. In this way the contributions of your organisation shall be huge like anything.
Thanks and Regards.
Amarjeet Sijngh
From India, Mumbai
Hi Kushi,
Generally there would be specific limit in fixing the Basic.
Such as in Metro cities basic is fixed for 40% & in Non Metro cities basic is fixed for 60%.
Ques:You raised a query that why can't basic be 100% of his salary?
Ans: When basic is 100% of his salary then what will you show amount in other components such as HRA, Spl Allowances, transport allowances, medical allowances, educational fee,LTA, Gross Salary.There is no rule to get exempted from PF or ESI. This is no-a-days mandatory & more useful for all employees. But you can get exempted from PF when an new entrants basic is more or equal to 6500. Apart from this there is another idea where you can get exempted from PF that is you can pay employees salary as consultant(part time basis) where only TDS(10% of whole amount) is deducted.
Inorder to benefit employee you(employer) need not to get into trouble. You can also try out this way, if any employees salary is 5500CTC then you enter as 7000CTC & show as 22 present & rest of 8 days as absent. So, with this you can show that minimum wages are maintained in your organization & simultanesously you can pay a very less amount for PF & ESIC.
I Hope you find a best solution with this ideas.
And let me know 1thng wht is company into.
Regards,
Vinay Kumar.
From India, Hyderabad
Generally there would be specific limit in fixing the Basic.
Such as in Metro cities basic is fixed for 40% & in Non Metro cities basic is fixed for 60%.
Ques:You raised a query that why can't basic be 100% of his salary?
Ans: When basic is 100% of his salary then what will you show amount in other components such as HRA, Spl Allowances, transport allowances, medical allowances, educational fee,LTA, Gross Salary.There is no rule to get exempted from PF or ESI. This is no-a-days mandatory & more useful for all employees. But you can get exempted from PF when an new entrants basic is more or equal to 6500. Apart from this there is another idea where you can get exempted from PF that is you can pay employees salary as consultant(part time basis) where only TDS(10% of whole amount) is deducted.
Inorder to benefit employee you(employer) need not to get into trouble. You can also try out this way, if any employees salary is 5500CTC then you enter as 7000CTC & show as 22 present & rest of 8 days as absent. So, with this you can show that minimum wages are maintained in your organization & simultanesously you can pay a very less amount for PF & ESIC.
I Hope you find a best solution with this ideas.
And let me know 1thng wht is company into.
Regards,
Vinay Kumar.
From India, Hyderabad
Dear
Firstly you have to pay minimum wages to the employees or workmen of your organisation
The definition of Basic wages has been defined under section 2(b) of the EPF & MP Act, 1952 as below:
Section 2(b) "Basic wages" means all emoluments which are earned by an employee while on duty or on leave on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include
i. the cash value of any food concession
ii. any dearness allowance ( that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
iii. any presents made by the employer
But First Bench Madras high court has stayed the order of a single judge passed in the Management of Reynolds pens India Pvt. ltd., Kancheepuram and others vs. the regional PF Commissioner-II, Chennai, 2011 LLR 876, holding that the employees' provident fund contributions were payable on various allowances like conveyance allowance, education allowance,special allowances, Food concessions, Medical allowance, Special holidays, night shift Incentive and City compensatory allowance. The stay order was passed in the presence of the counsel for provident fund dept. No next date has been fixed for final hearing of the appeal.
However it is better to have wage components as mentioned below: Basic, DA and HRA and deduct PF only for Basic. Since Minimum wages also includes HRA you can befurcate the minimum wages as mentioned below:
i. Retain the minimum wages Basic as Basic wages
ii. you can split the DA into Two parts. one is DA and another is HRA. This is more safe.
From India, Madras
Firstly you have to pay minimum wages to the employees or workmen of your organisation
The definition of Basic wages has been defined under section 2(b) of the EPF & MP Act, 1952 as below:
Section 2(b) "Basic wages" means all emoluments which are earned by an employee while on duty or on leave on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include
i. the cash value of any food concession
ii. any dearness allowance ( that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
iii. any presents made by the employer
But First Bench Madras high court has stayed the order of a single judge passed in the Management of Reynolds pens India Pvt. ltd., Kancheepuram and others vs. the regional PF Commissioner-II, Chennai, 2011 LLR 876, holding that the employees' provident fund contributions were payable on various allowances like conveyance allowance, education allowance,special allowances, Food concessions, Medical allowance, Special holidays, night shift Incentive and City compensatory allowance. The stay order was passed in the presence of the counsel for provident fund dept. No next date has been fixed for final hearing of the appeal.
However it is better to have wage components as mentioned below: Basic, DA and HRA and deduct PF only for Basic. Since Minimum wages also includes HRA you can befurcate the minimum wages as mentioned below:
i. Retain the minimum wages Basic as Basic wages
ii. you can split the DA into Two parts. one is DA and another is HRA. This is more safe.
From India, Madras
what is the strength of organization and basic salary
(minimum 20 employee's is required. as per the act who are getting the basic below 6500 have to pay EPF is mandatory) from the basic 12% we have to deduct. if someone basic more than 6500 it is not mandatory to pay PF
Regards
Ashok
From India, Madras
(minimum 20 employee's is required. as per the act who are getting the basic below 6500 have to pay EPF is mandatory) from the basic 12% we have to deduct. if someone basic more than 6500 it is not mandatory to pay PF
Regards
Ashok
From India, Madras
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Salary Sheet & PF PT Calculation & Challan Nov 2010.xls