SC ruling will slash your take home pay if your basic salary is less than Rs 15000 pm

The recent Supreme Court decision on what constitutes wages for the purpose of Provident Fund (PF) contributions has far reaching consequences on the industry at large as well on your take home pay.

The Supreme Court has ruled on 28 February, 2019 in favour of the Regional Provident Fund Commissioners by concluding that allowances in question such as special, conveyance, education, canteen, medical, etc, paid to employees, are required to be treated as wages for the purpose of PF such payments are:

"Variable in nature, or are linked to incentives for production resulting in greater output by the employee;
"Not paid across the board to all employees in a particular category;
"Being paid especially to those who avail the opportunity.

Now that the SC has defined the meaning of wages for the purpose of calculating PF contribution from your salary as well as matching contribution from the employer's side, the question arises how thisdecision is going to impact your take home salary. This decision is likely to impact only those domestic workers whose basic salary is or was (at an earlier point in time) less than Rs 15,000.