Much awaited Judgement in the subject matter has been given by Hon’ble Supreme Court of India on 28th February 2019.
According to the Judgment any allowances which are paid as special incentive or production bonus given to more meritorious workmen who put in extra output and which has a direct nexus and linkage with the output by the eligible workmen and which is beyond the base or standard wage than it will fall outside the purview of basic wages. In general terminology we can call this as Variable Incentive Component which is linked to the performance of the employee and which he/she may earn or may not earn.
It has been further observed that allowances, whatever being termed as, in question were essentially a part of the basic wages camouflaged as part of an allowance so as to avoid deduction and contribution to the provident fund of the employee.
In summary Basic wages would include all allowances, except for allowances which has been carved out as exceptions, while Basic wages has been defined under Section 2(b) of The Employee Provident Fund & Miscellaneous Act 1952
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