Dear HR Colleagues:

Please advise whether PF is payable in incentives earned by the employee. We are aware that ESI is applicable on incentives but not clear about PF applicability. 

Please help out.

Ronald

It depends upon your incentive scheme. PF can be applicable on incentives also.

There are many judments on this issue. Likewise ESI also depends on the nature and intention of the incentive payments.

regds,

dipankar

ESI is definately applicable on Incentives but so far PF is concerned it depends whether the incentive is being paid on regular basis or fixed one then it would form part of wages/monthly remuneration on which PF would attract.  But if incentive is of kind for extra efforts eg. that if someone has to give output for 20 pieces  in 8 hrs/ one month but he gives 30 pieces in this specified time of 8 hrs / one month and this product output  generally changes on monthl to month basis or even in a particular month there is no extra output in which no incentive becomes payable, then PF does not attract.   The differencre is to see whether incentive is regular or fixed kind of payment or it fluctuates on product output within a specified period of work employment is the criteria to decide for PF applicablity.  This is based on various judgements evolved by Courts.

Thanks

According to Madras High Court case -  applicability of Provident Fund contributions on certain allowances. Looking forward for views / impact on organisations on the same.

"
The Madras High Court in the case of Reynolds Pens India Pvt Ltd and other petitioners (‘Petitioners’) vs Regional Provident Fund Commissioner (‘RPFC’) has held that certain allowances such as Conveyance, Educational Allowances, Food concession, Medical, Special Holidays, Night Shift Incentive, City Compensatory Allowances etc. should be treated as part of Basic wages under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (‘EPF Act’). Accordingly, provident fund (‘PF’) contributions should be remitted on such allowances. "
The Employees’ Provident Fund Organisation (‘EPFO’) has in a recent internal communication1 forwarded the aforesaid judgment to its officers and directed them to utilise this judgement as per the merits of each case.

In additional if your incentive is a regualr nature payment  than PF will be applicable.