Ceiling limit of PF & its contribution to fund
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Ceiling limit of PF & its contribution to fund

anu840 Started The Discussion:

Hi every one

Hi I am a HR Specialist recently joined to Pharmaceutical Company in Bangalore. Now I have to handle statutory things (PF< ESI, Superannuation, Gratuity)

Can any one tell me what is the ceiling limit of PF. if employees basic salary exceeds the limit then what happens????? Opting a PF benefit is compulsory or not????

need a clear information on this plz.............awaiting

Anupama

Santosh Iyer - Member Since: Sep 2006
Hi Anu,
The PF ceiling limit is Rs. 6500/- i.e. if the (Basic+DA) of an employee exceeds Rs. 6500/-, it is not mandatory for him to avail the PF facility.

if the (Basic+DA) of an employee is less than Rs. 6500/- and it rises due to salary hike, increments, promotion etc in between the year, he has the option whether to continue his PF or stop it.

Hope the above would satisfy you.

Santosh Iyer

alexvalet - Member Since: Feb 2006
Dear Anu,
Let me give u a brief summary abt the Employees P.F Act,1952:
ELIGIBILITY:
Any worker who has secured employment in any establishment or who has secured employement through any contractor in connection with work in an establishment is eligible for PF.
Yes,its compulsory for an employer to bring every employer under the Act.

CONTRIBUTION

Under the PF Act, both the employee andemployer has to contribute 12% of the salary towards the PF.Here salary means basic pay+D.A,where the basic pay is subject to a maximum limit of rs.6500/-However,if the basic wages can be till rs.10000.

LIST OF OTHER BENEFITS
Apart from the PF,the employees are also entitled to receiving other benefits such as insurance and pension.For insurance,the employer has to contribute 0.5% and for the pension scheme,the emplyer has to contribute 8.33% and the Central Govt.would contribut 1.16%.

Sunil Joshi - Member Since: Jan 2007
Dear Anupama,

EPF Act applies to an organisation where the employee strength, including the contract employees is 20 or above.

As others have mentioned the PF is deducted on the basic + DA (here in after referred as PF Wages). The contribution is 12% by employee (deducted from his/ her salary) and 12% by employer.

Out of the employer contribution 8.33% or Rs. 541/- p.m. which ever is less goes to the pension fund and the rest (3.67%) goes to the employee's provident fund.

Apart from this there are charges and contribution to employee’s deposite link insurance (EDLI) scheme, the total of charges and contribution amounts to 1.61% and are paid by the employer.

The stated limit as per the latest amendment is Rs. 6500/- p.m. (PF Wages). I would like to clarify one thing that even if the PF Wages increased beyond this limit, no employee ceases to be the member of PF. In fact one cannot even withdraw the PF if s/he is moving to a company to which the PF act applies.

An employee is exempt of PF only and only if the organisation is not covered under the PF act or the first PF Wage of the employee is more than Rs. 6500/-.

If once an employee is covered under the act s/he cannot be pushed out of the PF just because her/ his PF Wages has gone beyond the limit as stated by the act.

However, the act does not force the employee and employer to contribute PF over the PF Wages. For e.g. if an employee was drawing 6500/- as PF Wages the total contribution would be Rs. 1665/- (25.61% of the PF Wages i.e. 12% employee contribution, 12% employer contribution and 1.61% towards EDLI and charges).

Now suppose the PF Wages exceeds 6500/- and is 7500/- the organisation may limit the contribution to 1665/- (25.61% of 6500/-) and not 1921/- (25.61% of 7500/-).

Even if the employer wants to contribute to the increased PF Wages, which is 7500/- in this case the contribution to the pension fund will be limited to 541/-.

I hope the underlying cases shall clarify this to you.

(A)Basic 6000/- 6500/- 7500/-

(B)PF Cont (24% of basic 940/- 1019/- 1259/-
Less pension cont)

(C)Pension Cont (8.33% or 541/- 500/- 541/- 541/-
Whichever is less)

(D)Charges 97/- 105/- 121/-


Total PF Cont (A x 25.61%) 1537/- 1665/- 1921/-
or B+C+D

Please feel free to have any further questions on this.

Best wishes,


Sunil Joshi

anu840 - Member Since: Jan 2007
Thank you to all for giving information.

Another query is of CTC.

Is PF a part of CTC?

If so then how many times PF will be deducted from employees salary. Is employer's contribution & employees contribution is deducted from employees salary only or only employees' contribution is deducted?

Pls refer this salary breakup of an employee

Basic - 7000
PF Contribution: 12% of basic
Gross: 17500
CTC: 220000.

Pls tell me for 220000 CTC how do you make fitment (Salary breakup) to an employee.
How much would be his take home salary?
Is gratuity is compulsory & is a part of CTC.

Pls..........

anupama

Santosh Iyer - Member Since: Sep 2006
Hi Anu,
If we consider his CTC Per annum Rs. 2,20,000/-, his monthly CTC would be 18,333/-. Now this Rs. 18,333/- would include the PF contribution done by the employer.

Regarding fitment of the breakup, I am not aware about your other allowances / components of the salary. It generally varies from company to company.

Regarding Gratuity adjustment in CTC, not every company considers gratuity as part of CTC.

As the term CTC itself suggests that it is "COST TO COMPANY" hence the PF contribution made by the employer will also be considered in CTC.

Hope this will satisfy you.

Santosh Iyer

sharmarkumar30 - Member Since: Jan 2007
Dear Anupama,

As per my under standing of PF Act 1952:-

Quarry :- Ceiling

Answer :- As per PF Act 1952, ceiling limit is Rs. 6500/M i.e. (Basic+DA) of an employee.

If the employee’s emoluments exceed Rs. 6,500/- per month, he has the option to join the Scheme(s) with the consent of employer.

Kindly see the details:-

Employee Status:-

If Employee is already member of PF Scheme.

Emoluments :-
1. Up to 6500/M (Basic +DA) -Mandatory @ 12% of Basic +DA.
2. 6501/- & above (Basic +DA)
A.Mandatory @12% up to 6500/M.
B.Above 6500/M it’s up the organization & its policy.

If Employee is not member of PF Scheme or New Entrant.

Emoluments :-
1. Up to 6500/M (Basic +DA) -Mandatory @ 12% of Basic +DA.
2. 6501/- & above (Basic +DA) - It’s not Mandatory, but general in the interest of employees organizations cover their employees under the scheme.

If you want to exempt your employee from the scheme.

Kindly refer: - CHAPTER IV - MEMBERSHIP OF THE FUND (27. Exemption of an employee) of PF Act 1952 for further clarification. Soft copy of PF Act 1952 enclosed for your reference.

I think, it will clear your quarry, if you get more clarification on this, please share it with me also.


With Regards
Rakesh Kumar Sharma
M.No.9810680048


Attached FilesProvided by community member sharmarkumar30. Join us to learn and grow with your peers.
File Type: doc pf_act_397.doc (544.5 KB, 2386 views)
sid_coz - Member Since: Feb 2009
Quote:
Originally Posted by alexvalet View Post
Dear Anu,
Let me give u a brief summary abt the Employees P.F Act,1952:
ELIGIBILITY:
Any worker who has secured employment in any establishment or who has secured employement through any contractor in connection with work in an establishment is eligible for PF.
Yes,its compulsory for an employer to bring every employer under the Act.

CONTRIBUTION

Under the PF Act, both the employee andemployer has to contribute 12% of the salary towards the PF.Here salary means basic pay+D.A,where the basic pay is subject to a maximum limit of rs.6500/-However,if the basic wages can be till rs.10000.
Dear Mr Alex,
Sir in this reply of yours above, you have written in "Contribution" that 'the basic wages can be till rs.10000'. Is Rs. 10,000/- a ceiling limit? Are there any different rules applying when basic wages are more than Rs. 10,000/-?
An employer whose employee started below Rs 6500/- and went to say Rs.50,000 in basic wages, would still be required to make a EPF contribution till Rs. 6500/- (ie Rs 780)? Or will it be more?
I would be grateful to anyone who can clear this doubt.
Sir, I tried your mobile number but it is switched off. If it is convinent please reply or call me at 09893235550.
Thanks
Shamit Verma

manish_dixit24 - Member Since: Dec 2006
I have a same querry like mr. Alex. If any one have the right answer with statuary proof then please send me on this mail Id. manish.dixit@gemsl.com Regards Manish Dixit - Sr.HR Exe

manish_dixit24 - Member Since: Dec 2006
Can be deduct the PF above 12% from employer contribution, suppose an employee have total ctc is rs. 20,000 his basic Salary +DA is 7500/- can be deduct the PF from Employer Side is above than 780/-

Regards
Manish Dixit - HR



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