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Key legal definitions under the Code on Social Security, 2020 governing EPF & ESI contribution computation.
"Employee" means any person (other than an apprentice engaged under the Apprentices Act, 1961) employed on wages by an establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government; but does not include any member of the Armed Forces of the Union.
"Wages" means all remuneration whether by way of salary, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes —
(i)
Basic Pay;
(ii)
Dearness Allowance;
(iii)
Retaining Allowance (if any).
Under the Code, wages for EPF & ESI purposes
= Basic + DA + Retaining Allowance ONLY.
The total of excluded allowances must
NOT exceed 50%
of total wages. If they do, the excess is included back into wages for contribution purposes.
The total quantum of excluded allowances (HRA, conveyance, special allowance, etc.) shall
NOT exceed 50%
of the total wages/remuneration payable to an employee.
If such excluded allowances together exceed 50% of total remuneration, the amount in excess of 50% shall be deemed as
"wages"
and shall be included for the purpose of computation of EPF/ESI contributions and other statutory dues.
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