Concept of Basic Wages for Provident Fund

I know there is many thing to write on this, but after giving number of workshop on this in last Two month I thought to present Basic Wages concept in a different way. For my blog reader shall like to establish the concept of Basic Wages, which I had elucidated earlier also. 

As expressed Basic Wages under Section 2(b) of The Employee Provident Funds and Miscellaneous Provisions Act 1958. Basic Wage is the sum of those earning components which have the capacity to attract PF u/s 6 of the said Act. 

BW = ∑ EC 

Where BW = Basic Wages, EC = Earning Components & EC means earning components which can attract PF contribution. 

To analysis capacity of earning components of salary structure can attract PF contributions, we need to follow the litmus test mechanism which is expressed in Hon'ble Supreme Court judgement in the case of Vivekananda Education Society and Ors. with respect to whether allowances are to be included or not for paying provident fund contribution. 

Principles laid down for allowances to be excluded:- 

1. Allowances which are variable in nature;
2. Allowances linked to any incentive for production resulting in greater output by an employee;
3. Allowances not paid across the board to all employees in a particular category;
4. Allowance paid especially to those who avail the opportunity.

To conclude shall like express that the verdict had not made any amendment or changes in the definition of Basic Wages it just express that 'its nature of earning components which attract PF contribution rather than name of earning components.' 

Kindly write your queries in comment section.