The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is a legislation enacted by the Parliament to provide social security benefits to the workers .The Act and the Schemes framed there under provides for three types of benefits -Contributory Provident Fund , Pensionary benefits to the employees/ family members and the insurance cover to the members of the Provident Fund.
Section 2(b) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 defines basic wages. It says that ‘Basic Wages’ means all emoluments which are earned by an employee while on duty or on leave or 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;
The scope and ambit of the phrase ‘Basic Wages’ has been explained through various judgments. Basic wages are amounts paid under a settlement between employer and employees as wages, for a period when the employees were deemed to be on duty were held to be basic wages within the meaning of Sec 2(b). The term basic wages does not include bonus and therefore, inam, production incentive is not covered by the definition. Adhoc payments in terms of settlement is not ‘Basic wages’ Emoluments to constitute basic wages must be earned by an employee while on duty. Basic wages are those which are paid to all employees of a concern and are generally paid to employees of all concerns. What may be paid to some of the employees of a concern and to all employees of some concern may be emoluments but may not have the characteristics essential for being described as ‘basic wages’. Incentive wage is not a basic wage. Earned Leave encashment is included as a part of basic wages. Various Judicial pronouncements has laid down what all are to be excluded and what all are to be included in Basic Wages.
The basic wage excludes:-
o Ad-hoc allowance paid under agreement by which it is excluded from wage.
o Ad-hoc payment made under agreement for the exclusion of the same from the wage.
o Ad-hoc payment which is in the nature of non-gratuitous present in unconventional sense.
o All kinds of bonus.
o Back wages.
o Bonus paid under production incentive scheme.
o Compensation for overtime work.
o Inam paid under incentive scheme as part of the settlement.
o Incentive which is paid for doing extra work.
o Interim relief treated as a special allowance as per settlement.
o Overtime allowance paid paid for the additional working hours.
o Payment by way of consideration for terminating the contract of employment of a permanent employee without notice.
o Permanent in lieu of to an employee for termination under the standing orders
o Payment made under Section 33(2)(b) of the I D Act.
o Special allowance paid out of management’s will and not under contract of contract of employment.
o Special allowance paid out of management’s will.
o Special allowance paid under agreement regarding exclusion of same from the wage.
The basic wages includes:-
o Fixed Commission payable to each employee.
o Interim advance and settlement benefit given to the employees.
o Lump sum paid under settlement with reference to increase in wage.
o Payment made for extra work done in duty hours.
o Revised pay scale paid retrospectively as per award.
o Reward for good work.
o Special allowance paid indefinitely paid for extra work.
o Subsistence allowance.
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