The Supreme Court has held that variable earning which may vary from individual to individual according to their efficiency and diligence will stand excluded from the term “Basic Wages” under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (Provident Fund Act)..However, in order that the amount goes beyond the basic wages, it has to be shown that the workman concerned had become eligible to get this extra amount beyond the normal work which he was otherwise, a Bench of Justices Arun Mishra and Navin Sinha held..The judgment was delivered by the Court in a batch of appeals involving a common question. The question was as follows:.“Whether special allowances paid by an establishment to its employees would fall within the expression “basic wages” under Section 2(b)(ii) read with Section 6 of the Act for computation of deduction towards Provident Fund.” .Additional Solicitor General, Vikramajit Banerjee and Sanjay Kumar Jain appeared for the Regional Provident Fund Commissioner. Senior Counsel Ranjit Kumar made lead arguments on behalf of the Establishments..Vikramajit Banerjee submitted that the special allowance paid to the teaching and non-teaching staff of the respondent school was nothing but camouflaged dearness allowance liable to deduction as part of Basic Wage. Section 2(b)(ii) defined dearness allowance as all cash payment by whatever name called paid to an employee on account of a rise in the cost of living..The allowance shall, therefore, fall within the term dearness allowance, irrespective of the nomenclature, since it was being paid to all employees on account of rise in the cost of living, Banerjee had submitted..Therefore, under Section 6 of the Act, the Establishments were liable to pay contribution to the provident fund on basic wages, dearness allowance, and retaining allowance. Thus, it was Banerjee’s case that to exclude any incentive wage from basic wage, it should have a direct nexus and linkage with the amount of extra output..The common submission on behalf of the Establishments in the remaining appeals was that basic wages defined under Section 2(b) contains exceptions and will not include what would ordinarily not be earned in accordance with the terms of the contract of employment..It is only those emoluments earned by an employee in accordance with the terms of employment which would qualify as Basic Wage. Discretionary allowances not earned in accordance with the terms of employment would not be covered by basic wage, the Establishments had argued..The Court after considering the submissions of the parties held that the test adopted to determine if any payment was to be excluded from basic wage is that the payment under the scheme must have direct access and linkage to the payment of such special allowance as not being common to all. The crucial test is one of universality, the Court stated..The Court placed reliance on the judgments in Bridge and Roof Co. (India) Ltd. vs. Union of India [(1963) 3 SCR 978], Muir Mills Co. Ltd., Kanpur v. Its Workmen [AIR 1960 SC 985] and Manipal Academy of Higher Education vs. Provident Fund Commissioner [(2008) 5 SCC 428]..The basic principles as laid down in Bridge and Roof’s case as summarised in Manipal case as follows:.(a) Where the wage is universally, necessarily and ordinarily paid to all across the board such emoluments are basic wages..(b) Where the payment is available to be specially paid to those who avail of the opportunity is not basic wages. By way of example, it was held that overtime allowance, though it is generally in force in all concerns is not earned by all employees of a concern. It is also earned in accordance with the terms of the contract of employment but because it may not be earned by all employees of a concern, it is excluded from basic wages..(c) Conversely, any payment by way of a special incentive or work is not basic wages.”.In the instant case, the Court noted that no material had been placed by the establishments to demonstrate that the allowances in question being paid to its employees were either variable or were linked to any incentive for production resulting in greater output by an employee. There was nothing to show that the allowances in question were not paid across the board to all employees in a particular category..The Court made it clear that in order that the amount goes beyond the basic wages, it has to be shown that the workman concerned had become eligible to get this extra amount beyond the normal work which he was otherwise required to put in..Since there was no material or data to that effect in the instant case, the appeal filed by the Regional Provident Fund Commissioner was allowed while the appeals by the Establishments were dismissed..Read the judgment below.