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Thread Started by #SoniaKohli

Dear Friends,
Please clarify if employer needs to deduct the PF on the notice pay that is given to the employee in lieu of the notice period.
Many thanks for your help and support.
Kind Regards,
Sonia
26th November 2008 From India
Hi, How can you deduct PF on notice pay, since it will consist of allowances other than basic and DA? PF is deduted only on Basic+DA. Regards, Harshad
26th November 2008 From India, Mumbai
Dear Harshad
I believe what is conveyed is that PF is deductable on the basic of the notice pay payable to an employee while they exit from the organisation.
I have another question to this -
In case, if we are claiming notice pay from a leaver in lieu of not serving the required notice period, and the notice pay is equivalent to one months gross salary and not simply Basic + DA, under such circumstances, the gross salary exluding the PF amount would be claimed from the leaver?
Looking forward for your thoughts.
Many thanks,
Sonia
26th November 2008 From India
Hi,
Any income through your salary, the employer will deduct PF. So as in this case as well.
Secondly Any notice pay in either side is purely decided then & there in the Letter of appointment. Again if notice pay has to be there, then pf must be deducted or recovered on it. In this case for the next notice period you can show the employee as on roll in pf challan as you have given a written clause in his appointment letter to pay him in case he leaves.
26th November 2008 From India, Madras
Dear Sonia,
What I meant was in Notice pay PF is not applicable as employee is not working in that period. It is applicable in both cases, in which we are paying notice pay or recovering it.
Regards,
Harshad
26th November 2008 From India, Mumbai
Hi Raul
Thanks for your response however it was not clear.
The employee would not make an income if the notice pay is claimed by the employer from the employee. Hence, I believe, the employer should claim gross salary excluding PF (if PF is part of the gross salary) while claiming the notice pay.
Please comment.
Many thanks.
Sonia
26th November 2008 From India
Dear Sonia,
The fact is in notice period in either case the particular employee is not in employment of the company. So no PF will be deducted. When we give or recover notice pay , we will pay or recover full gross.
Regards,
Harshad
26th November 2008 From India, Mumbai
Dear Harshad, Just to clarify - You mean to say that we pay / recover full gross salary and in either case do not submit anything to the PF Fund? Kind Regards, Sonia
26th November 2008 From India
Hi,
Please dont be confused. If its there in your appointment letter that the notice period has to be recovered from an employee if he desires to leave without serving notice period,then the Fixed components of the gross monthly salary has to be recovered from the employee including pf and the PF amount will be submitted to the PF department and vice versa.

26th November 2008 From India, Madras
sir
my name is srinu. i had some clarifications regarding PF, whether the employees who draws basic + DA 8000/-, he didn't wants to contribute PF whether he is exmpted from contribution. what type of declaration he should give to employer.
Because coverage of PF is Rs. 6500/- please clarify any one
26th November 2008 From India, Hyderabad
notice pay and PF are nt at all related to each other infact what is related is Basic & Leave encashment...one should not be deductng PF on notice pay..in PF Act nowhere it is mentioned...
26th November 2008 From India, Pune
Dear Sonia, Since the notice pay does not fall within the meaning of wages as per PF Act, therefore, the PF is not deducted. I think it’s clear now. Rgds, Madan Singh Gurgaon
27th November 2008 From India, Delhi
Dear Sonia,
PF deduction applicable only on workings period only, But Notice period is not a working days. Notice period is applicable as per the notice period clause according to appointment order.
Satya Reddi
27th November 2008 From India
Dear Sonia,
As per PF deduction rule, if any employee resign from the organization, his/her final settlement treated as Notice Pay or salary for the resigned month.
Hence, his/her PF will be deducted as earlier already deducted by the organization.
I hope it will clear ur doubts.
Rgds
Bhagwan Tolani
SR. HR
CM Group
New Delhi
9968737796

27th November 2008 From India, Mumbai
Dear All,

If we try and understand the concept behind Notice Pay; we'll get to know whether we have to contribute PF on the same or not.

In the Appointment letter we mention the clause of Notice pay to avoid employees to leave the company at his own wish; without assuming his accountability. To avoid the loss of loosing an employee out of the blue; company adds the clause of Notice pay. It means that if any employee wishes to resign he will serve a notice of 1 month(or whatever mentioned) such that in all such time the company shall find his replacement and train the new hire ,without any loss to the co.

If any employee disagrees to serve such period; then to penalise him or to force him to stay back for a month, such amount called 'Notice Pay' is claimed. On the other hand, if any company wishes to terminate an employee with immediate effect, in order to compensate to him the cost of him finding a new job, such an amount is paid called 'Notice Pay'.

In both the cases, we clearly observe that the employee was not the employee/or was not on the rolls of the co. Thus, in my view PF should not be deducted by way of wages. As 'Notice Pay' is not any wage being paid to any party rather a compensatory amount which us by default equal to one's salary.

I may not be 100% correct. But this was according to my knowledge. I hope that clears many doubts.

Thanks & Regards,
Parul Makkar
Manager - HR
27th November 2008 From India, Delhi
Dear Friend,
I have a question against yor question If A is working with a company with a basic salary of Rs. 5000/- pm and quits giving a notice of 1 month and quits on last day of the month what will be his basic salary in Full and Final settlement?
and If B is working with a company with a basic salary of Rs. 5000/- pm and quits without giving any notice what will be his basic salary in Full and Final settlement?
What ever you answer is you have to deduct pf on that amount.
Hope it is clear now.
With regards,
Nitin
27th November 2008 From India, Pune
I Agree with Satya Reddy, Arun Banerjee. PF is applicable if the Employee exists in the company. When employee is not going to be there in the company further why PF is required to pay for non working days. So its not applicable
Ravin
27th November 2008 From India, Hyderabad
Dear all It is very clear by law and by SCourt decision that NOTICE PAY is not your salary and therefor pf should not be deduct. If some one have contradictory rulling pls let me know.
27th November 2008 From India
Dear all It is very clear by law and by SCourt decision that NOTICE PAY is not your salary and therefor pf should not be deduct. If some one have contradictory rulling pls let me know.:confused:
27th November 2008 From India
Hi sonia,
let me try to explain you, Mr. Harshad is right, any notice pay (either payable or recoverable) is not comes under the definition of PF wage as per PF act, so there is no deduction.
The Notice pay is a part of contract made between employee & employer for employment, and notice pay amount is not comes under the preview of any act for comliances.
I think it will help you in your thought.
Regards
Khushbu
27th November 2008 From India, Delhi
Dear Sonia,
There is no need to deduct P.F. on notice pay being paid to an employee in lieu of the notice period.
Because P.F. deduction made on earned wages, since notice pay is not earned wages therefore no needs to consider wages for P.F. Deduction.
for more clarification go through the definition of wages under the Employee Provident Fund & Misce. Act 1952.
Thanks
Mohd.Arif Khan
27th November 2008
Dear Friends,
Thank you all for your views on the topic.
However, the point is still not clear as there are mixed opinions on whether PF is to be deducted / recovered on notice pay.
Kind Regards,
Sonia
27th November 2008 From India
To
Ms Sonia
as per appointment order every organization mention the notice peroid.
pf deduction will not occur in notice peroid amount, this amount directly deducted from the employee full & final settlement, and during the notice peroid how many days employee attended, how much salary prepared on particular amount pf will be calucated and deducted from his salary & send to PF contrubution along with all current employees.
Example:
Employee notice peroid 1 month,
his basic 5000,
he resinged 1 st nov, & asking relieveing 15 th nov.
PF deduction:
=5000/30*15=2500 (for 15 days basic)
=2500*12/100=300 (pf Contrubution)
& 2500 rupees directly deduct from his full & final settlement on behalf of noitce peroid.
Best Regards
James....
Dear Friends,
Please clarify if employer needs to deduct the PF on the notice pay that is given to the employee in lieu of the notice period.
Many thanks for your help and support.
Kind Regards,
Sonia[/quote]
27th November 2008 From India, Jammu
Hi All,

I think the SC has laid down clearly what constitutes wages for PF Contributions in the case of Manipal Academy of Higher Education V/s PF commissioner. Looking at it from that point of view, PF should not be applicable on Notice pay. I am attaching the details of the said SC judgement for reference.

Regards
Ravikiran
28th November 2008 From India, Mumbai

Attached Files
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File Type: doc Case - PF on leave encashment.doc (51.5 KB, 215 views)

If you are paying the amount under the salary head "Notice Pay" then no need to deduct PF contribution.
If you pay the notice pay amount under the salary head "Basic Salary", they yes, PF needs to be deducted.
Regards
Nitin Asalkar
28th November 2008
Dear Friends, It is a part of full and final settlement. PF SHULD NOT BE DEDUCTED. Regards Dabas
28th November 2008 From India, Delhi
Dear Friends, Thanks a lot for your expert guidance. The point is crystal clear along with proper reasoning. I am thankful to all who have contributed in this discussion. Kind Regards, Sonia
28th November 2008 From India
Dear All,

For the benefit of all, I hereby qoute the Bombay High Court Judgement in the matter of "India United Mills Ltd. v. RPFC" that a pyment made in lieu of notice by way of consideration for terminating the contract of employment of a permanent employee does not constitute "basic Wages" under section 2(b) of the PF Act.

The Hon'ble court stated that the expression 'emoluments which are earned by an emplyee while on duty' represents the amounts actually earned by by an employee kduring the period of his employment while he is actually on duty. The payment in question is not a payment earned for duty done. It is not a payment earned while on duty. It is a payment by way of consideration for terminating the contract of employment of a permanent employee without notice. The payments made cannot in any sence be regarded as representing 'emoluments earned while on duty and are not and do not consitute 'basic wages' within the meaning of the definition given in the Employees' Provident Funds Act, 1952, and no percentage thereof is payable by way of provident fund contribution.

Therefore the emoluments towards notce pay do notattract pf.

Hope the above clarification will close the matter for further discussion.

Regards

anwar
28th November 2008
Dear Sonia, Mr. Harshad is correct. PF is not to be deducted from Notice Pay. best wishes krk rao
1st December 2008 From India, Jaipur
Hi Sonia,

Notice pay paid to an employee will not attract PF deductions on his basic salary. The premises taken is that for any earnings by an employee "on duty", PF (if covered) is deductible and payable to the RPFC/PF Trust. Notice pay is not construed as serving on duty and hence is not "wages" in the strictest of definitions for the purposes of PF.

If notice pay is recovered from an employee either since he has not served the notice period or has served a short notice, he is obligated to as per terms of his employment, it can be recovered on the basic pay or gross pay as specified in his letter of employment. Normally, it is basic pay.
However, if it is gross pay, he needs to pay back to the Company the basic salary and all allowances. PF does not come into play since he has earned nothing; it is just the opposite. Clearly deductibles of PF, ESI (if applicable), Gratuity, etc are not recoverable.

Calculations for recovery are done accordingly.The Company can insist on the recovery or still waive it off, as deemed appropriate by the Management/HR department.

In short, no notice pay would attract deduction of PF or recovery in lieu thereof.

Hope the clarification helps.

Regards,

Rahul Kumar
9th December 2008 From India, New Delhi
Dear All,
Please consider the fact,
firstly we are paying x amount against notice (in case of employer fire the employee) and we are recovering x amount in case employee leaves the organisation.
such amount does not come under the defination of SALARY /WAGES.
No pf to be deducted.
Secondly calculation of notice pay it can be one month to three months depending upon the strength of organisation.
Regards
Dabas
10th December 2008 From India, Delhi
Dear All, Can i get the Mumbai high court Judgement copy regarding this discussion. Regards Amar
8th October 2009 From India, Mumbai
Dear Senior, Please help me to in this matter as our management is asking for the mumbai high court judgement for "pf deduction on notice pay" Regards Amar
10th October 2009 From India, Mumbai
Dear Sonia,
No need to deduct PF on notice pay. The EPF contribution attract only on the earned wages, not on such ex-gratia payments. Such payments are not earned but being paid as per the contract of service or terms of emplyment.
Therefore, PF will not be deducted on Notice Pay. Moreover, please read the definition of wages in section 2 (b) under The EPF & Misc. Provisions Act-1952. It is clearly stated on earned wages while on duty or on leave.
Notice period payment does not qualify as a wages or earned wages.
So, Never deduct PF on notice pay.
Thanks
Arif Khan
9891578605
1st October 2012
Dear All,
Please clarify above mentioned subject issue. In one of our Client Organization employer had Terminated the employee with a Three Months Notice period and with Basic Pay for Three Months luie. For this three months Period Basic salary we have to deduct Provident Fund Contribution of employee or not ?
If we deduct the Contribution from employee how we can show the last working day (for theree months termination period) as per provident fund act.
Resards
Sudheer
20th December 2012 From India, Bangalore
Dear Friends,
As per EPF Act-1952, Sec-2(f) “employee” means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment and who gets his wages directly or indirectly from the employer.
Above section clearly specify that employee getting wages directly or indirectly from employer, why PF will nit Deduct from Notice Pay.
Thanks & Regards,
Manas Ranjan Pal
HYDERABAD
Mob: 9052800665
19th May 2017 From India, Hyderabad
Dear Srinu,
If your Basic+DA is above 15,000/- then you can be exempted from PF contribution otherwise it's mandatory to contribute the 12% of your Earned (Basic +DA) .
Regards,
Vipin Singh
9923570399
27th June 2017 From India, Mumbai
Please share PF should deducted on Gross salary or wages instead of Basic +DA . can dept. demanding short for the same.
29th June 2017 From India, Kolkata
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