Yes. The term 'basic wages' is defined in section 2(b) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 meaning 'all emoluments which are earned by an employee while on duty or on leave with wages in accordance with the terms of the contract of emolument'. It clearly states 'in accordance' with the terms of the 'contract of employment.' Therefore, if in accordance with the terms of the contract of employment, the parties agree that a particular sum should be excluded, it cannot be held that it should be treated as 'basic wages’. In one case, terms of settlement entered into between the employer and the workman, a flat ad hoc allowance of Rs. 15 per month was extended to each workman. It was also provided that such allowance shall 'not be reckoned for purposes of provident fund, bonus, gratuity and E.S.I. etc. Therefore, such ad hoc allowance cannot be treated as falling within the term 'basic wages' for the purposes of the Act.
Reference
E.I.D. Parry (
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