Hi, my dear friends,
I have one doubt. I am thinking from the employer's side. One employee has joined our organization and has crossed the basic salary of more than Rs. 6500/- from the starting. Are we supposed to maintain PF or not? If we are not maintaining PF, will there be any problem?
Please suggest me.
Nagendra
Hyderabad
Executive - HR
From India, Hyderabad
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2I have one doubt. I am thinking from the employer's side. One employee has joined our organization and has crossed the basic salary of more than Rs. 6500/- from the starting. Are we supposed to maintain PF or not? If we are not maintaining PF, will there be any problem?
Please suggest me.
Nagendra
Hyderabad
Executive - HR
From India, Hyderabad
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Dear Mr. Nagendra,
Warm greetings!
You have to meet the penalty if you don't deduct PF. If you want to overcome the penalty, according to the Workmen's Compensation Act, you can take a mediclaim policy.
Warm regards,
John Jebaraj N
From India, Madras
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Warm greetings!
You have to meet the penalty if you don't deduct PF. If you want to overcome the penalty, according to the Workmen's Compensation Act, you can take a mediclaim policy.
Warm regards,
John Jebaraj N
From India, Madras
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Hi If basic crosses 6500 deducting PF is not mandatory. It is optional for the employer. Employer can pay upto Rs. 780/-.or 12% if they prefer to. Regards, AM
From India
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From India
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Dear Nagendra, AM, and friends,
As per a recent directive, the minimum basic salary slab for the deduction of PF has been increased to Rs. 10,000/- from the earlier Rs. 6,500/-. Anyone with a basic salary equal to or less than Rs. 10,000/- must be provided with PF coverage. Otherwise, penal charges will be applicable, as rightly pointed out by John.
If you choose not to offer coverage to your employees under the EPF trust, then you must either provide them with better coverage than what EPF offers or ensure that your employee count does not exceed 20.
Hope this clarifies your query.
Regards,
Samba Siva.
From India, Hyderabad
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As per a recent directive, the minimum basic salary slab for the deduction of PF has been increased to Rs. 10,000/- from the earlier Rs. 6,500/-. Anyone with a basic salary equal to or less than Rs. 10,000/- must be provided with PF coverage. Otherwise, penal charges will be applicable, as rightly pointed out by John.
If you choose not to offer coverage to your employees under the EPF trust, then you must either provide them with better coverage than what EPF offers or ensure that your employee count does not exceed 20.
Hope this clarifies your query.
Regards,
Samba Siva.
From India, Hyderabad
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Dear Mr. Nagendra and friends,
I am very new to this site. Basically, we are PF and ESI consultants for the past 10 years, and some of our clients have faced the same situation as yours.
In this regard, we have had several meetings with regional PF commissioners as well as with the Central PF Commissioner (CPFC), and they have interpreted the law. We were advised as follows:
There are a few things to keep in mind in this situation:
1. If the employee is currently a member of PF, he cannot be denied the PF benefits, i.e., he cannot be treated as an excluded employee even if the basic salary exceeds 6500/-. (One of my friends in this discussion, yajeetheh, mentioned that the slab has been increased to 10000/-. However, I would like to clarify that this increase is for ESIC, not for PF. The limit for PF contributions remains at 6500/-. Additionally, I would like to mention that the resolution has been presented in the parliament but has not yet been notified by the house. Therefore, currently, the limit remains at 6500/-. Hopefully, in the upcoming parliament session, it may be increased to 10000/-.)
2. If the employee is already a member of the PF, then you have the option to contribute a maximum of Rs. 780 per month (12% of 6500). However, in this case, this rule should also be followed for other employees.
3. If any other employee of yours is currently earning more than 6500 and you are contributing an equal amount (e.g., his basic salary is 10000 and you are making a PF contribution of 1200 in his case), then you must make an equal contribution for this employee as well. You cannot treat different employees differently.
4. Another option available to you is if any other employee is earning a basic salary of 10000 and you are contributing 1200 for him, you can pass a board resolution and contribute Rs. 780 per month for each employee (passing a resolution is applicable in the case of a limited company).
5. One more thing I forgot to mention: if you are not covered under the PF Act, then there is no need to make any contribution towards EPF as the employee will be considered an excluded employee.
I hope I have clarified your doubts.
Regards,
Kapil
From India, Delhi
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I am very new to this site. Basically, we are PF and ESI consultants for the past 10 years, and some of our clients have faced the same situation as yours.
In this regard, we have had several meetings with regional PF commissioners as well as with the Central PF Commissioner (CPFC), and they have interpreted the law. We were advised as follows:
There are a few things to keep in mind in this situation:
1. If the employee is currently a member of PF, he cannot be denied the PF benefits, i.e., he cannot be treated as an excluded employee even if the basic salary exceeds 6500/-. (One of my friends in this discussion, yajeetheh, mentioned that the slab has been increased to 10000/-. However, I would like to clarify that this increase is for ESIC, not for PF. The limit for PF contributions remains at 6500/-. Additionally, I would like to mention that the resolution has been presented in the parliament but has not yet been notified by the house. Therefore, currently, the limit remains at 6500/-. Hopefully, in the upcoming parliament session, it may be increased to 10000/-.)
2. If the employee is already a member of the PF, then you have the option to contribute a maximum of Rs. 780 per month (12% of 6500). However, in this case, this rule should also be followed for other employees.
3. If any other employee of yours is currently earning more than 6500 and you are contributing an equal amount (e.g., his basic salary is 10000 and you are making a PF contribution of 1200 in his case), then you must make an equal contribution for this employee as well. You cannot treat different employees differently.
4. Another option available to you is if any other employee is earning a basic salary of 10000 and you are contributing 1200 for him, you can pass a board resolution and contribute Rs. 780 per month for each employee (passing a resolution is applicable in the case of a limited company).
5. One more thing I forgot to mention: if you are not covered under the PF Act, then there is no need to make any contribution towards EPF as the employee will be considered an excluded employee.
I hope I have clarified your doubts.
Regards,
Kapil
From India, Delhi
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Hi Kapil,
Thank you for the correction on the PF slab being Rs. 6,500/- and not Rs. 10,000/- as earlier suggested by me. I stand corrected. I feel that even if the employee is a contributor to PF, despite drawing a basic salary over Rs. 6,500/-, it is not mandatory for the new company to continue his contributions to the PF account.
Warm Regards,
Samba Siva.
From India, Hyderabad
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Thank you for the correction on the PF slab being Rs. 6,500/- and not Rs. 10,000/- as earlier suggested by me. I stand corrected. I feel that even if the employee is a contributor to PF, despite drawing a basic salary over Rs. 6,500/-, it is not mandatory for the new company to continue his contributions to the PF account.
Warm Regards,
Samba Siva.
From India, Hyderabad
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Hi, Mr. Kapil is absolutely right. This is as per the law nothing more than this. Abhishek
From India, Delhi
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From India, Delhi
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Hi, Mr. Nagendra,
It is mandatory to deduct PF even if he has crossed the limit of Rs. 6500/-, but in case the employee doesn't want to deduct his PF, he has to give it in writing, which has to be submitted to the PF office.
Santosh Iyer
From India, Pune
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It is mandatory to deduct PF even if he has crossed the limit of Rs. 6500/-, but in case the employee doesn't want to deduct his PF, he has to give it in writing, which has to be submitted to the PF office.
Santosh Iyer
From India, Pune
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Hi,
I have joined the workplace on 1st December, and my salary is $8,000. I am in a dilemma as to whether to ask for PF because there is a case going on against the company in the PF court. Please advise.
Thank you,
Kavita
From India, Pune
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I have joined the workplace on 1st December, and my salary is $8,000. I am in a dilemma as to whether to ask for PF because there is a case going on against the company in the PF court. Please advise.
Thank you,
Kavita
From India, Pune
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Dear Siva,
Can you please send me or tell me the link from where we can download or see the notification that the PF slab has been increased to ₹10,000/-? There is a lot of confusion in this regard.
Thank you,
rolly
From India, New Delhi
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Can you please send me or tell me the link from where we can download or see the notification that the PF slab has been increased to ₹10,000/-? There is a lot of confusion in this regard.
Thank you,
rolly
From India, New Delhi
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Hi friends,
I want to know one thing: An establishment covered under EPF & MP Act, deducting PF and paying the Employer share on the full basic.
A new employee joins the establishment. He is not ready to become a member of the Employees Provident Fund. He has signed Form 11 under the Act and has even verified with his old employers that he had never been a member of the Act.
If the establishment doesn't deduct the EPF, will it be right (Box establishment deducting EPF for all the employees whether the basic is ₹5000, ₹10,000, or ₹50,000)?
Regards,
DABAS
From India, Delhi
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I want to know one thing: An establishment covered under EPF & MP Act, deducting PF and paying the Employer share on the full basic.
A new employee joins the establishment. He is not ready to become a member of the Employees Provident Fund. He has signed Form 11 under the Act and has even verified with his old employers that he had never been a member of the Act.
If the establishment doesn't deduct the EPF, will it be right (Box establishment deducting EPF for all the employees whether the basic is ₹5000, ₹10,000, or ₹50,000)?
Regards,
DABAS
From India, Delhi
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Thank you, Mr. Kapil. Can you clarify my doubt as to whether an educational institution that employs more than 20 employees, even though a few are in the probation period, can be exempted from the purview of the PF Act?
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Mr. Kapil's reply is on the line. Even if an employee joins a new employer and was previously covered under PF, they will remain under the scheme, even if their basic salary exceeds the prescribed limit for PF.
From India, Delhi
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From India, Delhi
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Hi Kapil,
I have recently joined a new call center company which started in October 2006. The company is currently only registered under firms formation but needs to undergo STPI registration.
My question is, at what stage is it necessary for us to have PF for the employees? When will it become mandatory for us, considering we currently have approximately 15-20 employees and expect an additional 10-25 employees by January 2007?
Also, is there a direct phone number or email where I can reach you?
Regards,
Saima
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I have recently joined a new call center company which started in October 2006. The company is currently only registered under firms formation but needs to undergo STPI registration.
My question is, at what stage is it necessary for us to have PF for the employees? When will it become mandatory for us, considering we currently have approximately 15-20 employees and expect an additional 10-25 employees by January 2007?
Also, is there a direct phone number or email where I can reach you?
Regards,
Saima
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Hi Nagendra,
I think you are talking about ESI and not PF. There is no limit for PF deduction. Any organization is exempt from filing PF returns if all its employees' BASIC salary is upwards of Rs. 8500 per month (I don't know if this has been revised). There has been a recent amendment to the ESIC Act where all employees earning up to Rs. 10000 per month will come under the purview of this Act. I'm attaching a notification which might be of some help.
Regards, Akanksha
From India, Pune
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I think you are talking about ESI and not PF. There is no limit for PF deduction. Any organization is exempt from filing PF returns if all its employees' BASIC salary is upwards of Rs. 8500 per month (I don't know if this has been revised). There has been a recent amendment to the ESIC Act where all employees earning up to Rs. 10000 per month will come under the purview of this Act. I'm attaching a notification which might be of some help.
Regards, Akanksha
From India, Pune
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Dear Mr. Nagendra and all Colleagues!
With reference to the question I remember from last time, one reply was given from this forum to Mr. YSN Murty of Vishakapatnam, AP.
Generally, the Provident Fund is a statutory, compulsory savings for the benefit of the members under the scheme, which refers to Social Security.
In case the member's wages exceed the Rs. 6500 ceiling, they still must be a member under the PF Act. However, most employers nowadays deduct PF based on the principle of equity, i.e., they deduct 12% of the total Basic + DA that is drawn each month, even if the wages exceed the Rs. 6500 ceiling.
For example: A deduction on Rs. 6500 wages (both employer 12% + employee 12% share) amounts to Rs. 541, which must be bifurcated to the Family Pension account (8.33%) and the remaining balance credited to the Provident Fund account (12% + 3.67%).
For wages above Rs. 6500, the pension is fixed at Rs. 541, and the entire remaining amount will be remitted to the member's PF account.
A new employee whose wages exceed Rs. 6500 is not required to become a PF member if they are not already holding PF membership. However, if both the employer and employee agree, the employee can become a PF subscriber/member by exercising the option.
I hope this clarifies any doubts you may have on the issue.
With regards,
Narayana Murty
Hyderabad.
Cell No: 9394712629
Office No: 040-23431552
From India, Visakhapatnam
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With reference to the question I remember from last time, one reply was given from this forum to Mr. YSN Murty of Vishakapatnam, AP.
Generally, the Provident Fund is a statutory, compulsory savings for the benefit of the members under the scheme, which refers to Social Security.
In case the member's wages exceed the Rs. 6500 ceiling, they still must be a member under the PF Act. However, most employers nowadays deduct PF based on the principle of equity, i.e., they deduct 12% of the total Basic + DA that is drawn each month, even if the wages exceed the Rs. 6500 ceiling.
For example: A deduction on Rs. 6500 wages (both employer 12% + employee 12% share) amounts to Rs. 541, which must be bifurcated to the Family Pension account (8.33%) and the remaining balance credited to the Provident Fund account (12% + 3.67%).
For wages above Rs. 6500, the pension is fixed at Rs. 541, and the entire remaining amount will be remitted to the member's PF account.
A new employee whose wages exceed Rs. 6500 is not required to become a PF member if they are not already holding PF membership. However, if both the employer and employee agree, the employee can become a PF subscriber/member by exercising the option.
I hope this clarifies any doubts you may have on the issue.
With regards,
Narayana Murty
Hyderabad.
Cell No: 9394712629
Office No: 040-23431552
From India, Visakhapatnam
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hi my dera friends thanking very much to one and alla & also to citehe. bze sharing of views and doubts and giveing suggestion. once again thankful to all from Nagendra
From India, Hyderabad
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From India, Hyderabad
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Dear Mr. Nagendra,
Considering your organization is covered under the EPF Act 1952, then:
1. The employee need not be covered under the said act if his PF salary crosses Rs. 6500.
2. However, if he is already a member of EPF and has an active PF account number (possibly with a previous organization) and submits proofs in this regard, the employee should be covered under the EPF Act even though his salary is above the aforementioned ceiling.
Best wishes,
Jaya Krishna
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Considering your organization is covered under the EPF Act 1952, then:
1. The employee need not be covered under the said act if his PF salary crosses Rs. 6500.
2. However, if he is already a member of EPF and has an active PF account number (possibly with a previous organization) and submits proofs in this regard, the employee should be covered under the EPF Act even though his salary is above the aforementioned ceiling.
Best wishes,
Jaya Krishna
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Hi All,
I would like to say that there are two different conditions for employee’s eligibility for PF contribution.
1. Old Employee - If an employee is working at 6400/- p.m. but due to increment the salary increased up to 7200/- p.m., even then we have to comply with the provisions of P.F. at least up to the upper limit for contribution i.e. 6500/-p.m.
2. New Employee – If any employee joins your organisation and his basic salary is more than 6500/- p.m. and he/she doesn’t wish to be a member of PF Scheme, then you have to get a form filled by the Employee i.e. Form –11. A copy of the same is to be submitted with PF Commissioner.
If your company comes under the preview of PF Act then you have to comply with the above laws to avoid any penal action.
Hope it will clear your doubts regarding employee’s eligibility in respect to PF.
Regards,
Rajeev Chaudhary
From India, Chandigarh
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I would like to say that there are two different conditions for employee’s eligibility for PF contribution.
1. Old Employee - If an employee is working at 6400/- p.m. but due to increment the salary increased up to 7200/- p.m., even then we have to comply with the provisions of P.F. at least up to the upper limit for contribution i.e. 6500/-p.m.
2. New Employee – If any employee joins your organisation and his basic salary is more than 6500/- p.m. and he/she doesn’t wish to be a member of PF Scheme, then you have to get a form filled by the Employee i.e. Form –11. A copy of the same is to be submitted with PF Commissioner.
If your company comes under the preview of PF Act then you have to comply with the above laws to avoid any penal action.
Hope it will clear your doubts regarding employee’s eligibility in respect to PF.
Regards,
Rajeev Chaudhary
From India, Chandigarh
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Dear friends,
I am attaching the details from Guide to EPF Member that "who is eligible to become a PF member."
1. All employees include employees employed through contractors, daily-rated, piece-rated, temporary, casual, etc.
2. Excluded employees:
a. Apprentice
b. Employees drawing wages (Basic + DA only) beyond Rs. 6500/- as of the date of joining the Establishment. If an employee's wages increase beyond Rs. 6500 during employment and after becoming an EPF member, they are not considered excluded employees. In such cases, their contributions shall be restricted to wages up to Rs. 6500/-.
c. Employees whose EPF was fully settled after 55 years of age or upon permanent settlement abroad.
3. An individual PF member can seek exemption from EPF Scheme membership to join the company's PF. The member may apply to the Commissioner through the employer.
According to the above guidelines, membership is not optional; it is statutory.
Mangai
From India, Chennai
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I am attaching the details from Guide to EPF Member that "who is eligible to become a PF member."
1. All employees include employees employed through contractors, daily-rated, piece-rated, temporary, casual, etc.
2. Excluded employees:
a. Apprentice
b. Employees drawing wages (Basic + DA only) beyond Rs. 6500/- as of the date of joining the Establishment. If an employee's wages increase beyond Rs. 6500 during employment and after becoming an EPF member, they are not considered excluded employees. In such cases, their contributions shall be restricted to wages up to Rs. 6500/-.
c. Employees whose EPF was fully settled after 55 years of age or upon permanent settlement abroad.
3. An individual PF member can seek exemption from EPF Scheme membership to join the company's PF. The member may apply to the Commissioner through the employer.
According to the above guidelines, membership is not optional; it is statutory.
Mangai
From India, Chennai
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Dear friends
Few Points which covers all aspects under PF Act.
Employees covered under the scheme - As per section 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. It includes any person - (i) employed by or through a contractor in or in connection with the work of the establishment (ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 or under the standing orders of the establishment.
Thus, (a) Persons employed through contractor in connection with work of establishment are covered (b) Apprentices employed under Apprentices Act or under standing orders of establishment are excluded, i.e. they are not employees. [The model standing orders merely state that an ‘apprentice’ is a learner who is paid an allowance during the period of his training].
Non-Eligible employees under PF - * Employee whose ‘pay’ is more than Rs. 6,500 per month are not eligible. (It may be noted that limit of pay was Rs 5,000 upto 31.5.2001 and Rs. 3,500 upto 30th Sept., 94) * Apprentices as per certified standing orders or under Apprentices Act * Casual employees. However, employees employed through contractors have also to be covered under PF.
Employee to become member of Fund immediately on joining – Every employee employed in or in connection with work of a factory or establishment to which the Act applies is entitled and required to become member of Provident Fund, unless he is an excluded employee. [para 26(1) of EPF Scheme]. An employee who is drawing ‘pay’ above prescribed limit (presently Rs 6,500) can become member with permission of Assistant PF Commissioner, if he and his employer agree. [para 26(6) of EPF Scheme].
Contribution by employer and employee - As per section 2(c) “contribution” means a contribution payable in respect of a member under a Scheme or the contribution payable in respect of an employee to whom the Insurance Scheme applies.
As per section 6, contribution shall be paid by employer @ 10% of basic wages plus dearness allowance plus retaining allowance. This amount is defined as ‘pay’ as per explanation to para 2(f)(ii) of EPF Scheme.
Equal contribution is payable by employee also. This contribution can be increased to 12% by Central Government and in fact, has been increased to 12% in most of the cases.
A person who is already a member continues to be a ‘member’ even if his ‘pay’ exceeds Rs 6,500. However, the contribution is limited to Rs 6,500 only. [para 26A(2) of EPF Scheme].
RPFC is liable under Consumer Protection Act - The Regional Provident Fund Commissioner is providing service under the Act and hence he is liable under Consumer Protection Act. - RPFC v. Shiv Kumar Joshi (1996) 4 CTJ 805 = 1996 LLR 641 (NCDRC 5 member bench) - confirmed in RPFC v. Shiv Kumar Joshi 1999 AIR SCW 4456 = 1999(7) SCALE 453 = 2000 LLR 217 = AIR 2000 SC 331 = 99 Comp Cas 347 = (2000) CLA-BL Supp 26 = 24 SCL 46 (SC).
Employees Provident Fund Scheme - This is the main scheme under the Act. Both employer and employee have to pay contribution to Provident Fund. The employer has to deduct contribution of employee from the salary of employee and has to pay both employees’ contribution as well as employer’s contribution by a challan in prescribed form. The amount has to be paid in approved bank.
Employee can pay higher contribution - Employee has to contribute 12/10% of his 'pay' as contribution. The employee can voluntarily pay higher contribution above the statutory rate. However, employer does not have to match the voluntary contribution, over and above the statutory rate. [para 26(2) of EPF Scheme].
Contribution payable under PF Scheme - The Principal Employer is liable to pay contribution of his own employees as well as employees employed through contractor. Principal Employer can recover from contractor the amount paid by him on behalf of contractor. The contribution is 12% of ‘pay’ i.e. basic wages, plus dearness allowance, cash value of food concession and retaining allowance. Contribution of both employer and employee is same i.e. 12% each. [para 29 of EPF Scheme].
Employer has to pay his contribution to EPF. He cannot deduct his contribution from wages of the employee. [Para 31 of EPF Scheme]. However, he has to deduct employee’s share from his salary and pay the same in EPF scheme. This deduction can be only from the wages pertaining to period for which contribution is paid. However, if there is accidental omission, the amount can be recovered later. Amount deducted from salary of employees is held in trust by the employer or contractor. [Para 32 of EPF Scheme].
Out of employer’s contribution of 12/10%, the Employer’s contribution of 8.33% will be diverted to Employees’ Pension Scheme. The balance will be retained in the EPF scheme. Thus, on retirement, the employee will get his full share plus the balance of Employer’s share retained to his credit in EPF account. [This diversion is only w.e.f. 16th November, 95. Earlier Employer’s contribution to their credit will continue to remain to their credit].
Lower contribution in certain cases - The employer's and employee’s contribution is 12% each. This is applicable to many of industries and establishments. However, this contribution is not applicable to - * any establishment employing less than 20 persons * any establishment registered with Board for Industrial and Financial Reconstruction (BIFR) as a sick company - the lower rate of contribution continues till its net worth is positive * any other establishment which has accumulated loss equal to or more than its assets and has also suffered cash loss in last two years. * Jute industry * Beedi industry * Brick industry * Coir industry other than the spinning sector * Guar gum factories. In these cases, the contribution is 10%.
Interest on account – PF Commissioner shall maintain account of each member of EPF scheme. [Para 59 of Scheme]. Interest is credited to the account of employee. The Interest is calculated on monthly running balance basis. Amount standing to credit at end of the month is considered for calculation of interest for the following month. The interest rate is declared every year by Central Government in consultation with Central Board of Trustees of Provident Fund. [Para 60 of EPF Scheme].
Employees’ Pension Scheme - This scheme has been introduced w.e.f. 16th November, 95. The Scheme is applicable to all subscribers of Employers’ Provident Fund. It is also compulsory to persons who were subscribers as on 16.11.95.
Contribution - The employer’s contribution of 8.33% will be diverted to the fund of Pension Scheme. Employee does not have to make any contribution. Employer’s contribution is 12%/ 10%. In such cases, 8.33% is diverted to Pension scheme and balance 1.67%/3.67% as the case may be, will be in credit of employee’s name in Provident Fund account. The 8.33% is on maximum salary of Rs. 6,500. If some employers are paying contribution on salary in excess of Rs. 6,500, the excess contribution will be credited to Provident Fund account and not to Pension scheme.
No separate administration charges or inspection charges are payable, as these are already paid along with Provident Fund contribution.
Benefits under the scheme - Members will get pension on superannuation or retirement from service and upon disablement during employment. Family pension will be available to widow/widower for life or till he/she remarries. In addition, children will be entitled to pension, upto 25 years of their age. In case of orphans, pension at enhanced rate is available upon death of widow/widower or ceasing payment of widow pension. Benefit of pension to children or orphan is only restricted for two children/orphans.
If the person is unmarried or has no family, pension is available to nominee for a specified period.
Commutation of Pension - The member can commute 33.33% of the pension, so as to receive hundred times the monthly pension so commuted as commuted value of pension. Balance will be paid on monthly basis.
Employees Deposit Linked Insurance Scheme - The purpose of the scheme is to provide life insurance benefits to employees who are already covered under PF/FPF. The employer has pay contribution equal to 0.50% of the total wages of employees In addition, administrative charges of 0.1% of total wages. [Notification No. AO 503(E) dated 28-7-1976 issued u/s 6C(2) of PF Act].
The employee does not contribute any amount to the scheme. The salary limit for coverage of employees is same as that of Provident Fund.
Exemption from the scheme can be obtained from RPFC if LIC Group Gratuity scheme is adopted by employer. If exemption is granted, only inspection charges @ 0.005% are payable to PF authorities.
Benefit to nominee of employee - If an employee dies during employment, his nominee or family member gets an amount equal to average balance in the Provident Fund Account of the deceased employee during last 12 months. If such balance is more than Rs. 35,000, the insurance amount payable is Rs. 35,000 plus 25% of the amount in excess of Rs. 35,000, subject to overall limit of Rs. 60,000. If the employees are covered under another life insurance scheme whose benefits are better than this scheme, an exemption from this scheme can be obtained. [Increased to 35,000 and 60,000 w.e.f. 13.6.2000]
Regards
Arun K Mishra[/quote]
From India, Bahadurgarh
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Few Points which covers all aspects under PF Act.
Employees covered under the scheme - As per section 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. It includes any person - (i) employed by or through a contractor in or in connection with the work of the establishment (ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 or under the standing orders of the establishment.
Thus, (a) Persons employed through contractor in connection with work of establishment are covered (b) Apprentices employed under Apprentices Act or under standing orders of establishment are excluded, i.e. they are not employees. [The model standing orders merely state that an ‘apprentice’ is a learner who is paid an allowance during the period of his training].
Non-Eligible employees under PF - * Employee whose ‘pay’ is more than Rs. 6,500 per month are not eligible. (It may be noted that limit of pay was Rs 5,000 upto 31.5.2001 and Rs. 3,500 upto 30th Sept., 94) * Apprentices as per certified standing orders or under Apprentices Act * Casual employees. However, employees employed through contractors have also to be covered under PF.
Employee to become member of Fund immediately on joining – Every employee employed in or in connection with work of a factory or establishment to which the Act applies is entitled and required to become member of Provident Fund, unless he is an excluded employee. [para 26(1) of EPF Scheme]. An employee who is drawing ‘pay’ above prescribed limit (presently Rs 6,500) can become member with permission of Assistant PF Commissioner, if he and his employer agree. [para 26(6) of EPF Scheme].
Contribution by employer and employee - As per section 2(c) “contribution” means a contribution payable in respect of a member under a Scheme or the contribution payable in respect of an employee to whom the Insurance Scheme applies.
As per section 6, contribution shall be paid by employer @ 10% of basic wages plus dearness allowance plus retaining allowance. This amount is defined as ‘pay’ as per explanation to para 2(f)(ii) of EPF Scheme.
Equal contribution is payable by employee also. This contribution can be increased to 12% by Central Government and in fact, has been increased to 12% in most of the cases.
A person who is already a member continues to be a ‘member’ even if his ‘pay’ exceeds Rs 6,500. However, the contribution is limited to Rs 6,500 only. [para 26A(2) of EPF Scheme].
RPFC is liable under Consumer Protection Act - The Regional Provident Fund Commissioner is providing service under the Act and hence he is liable under Consumer Protection Act. - RPFC v. Shiv Kumar Joshi (1996) 4 CTJ 805 = 1996 LLR 641 (NCDRC 5 member bench) - confirmed in RPFC v. Shiv Kumar Joshi 1999 AIR SCW 4456 = 1999(7) SCALE 453 = 2000 LLR 217 = AIR 2000 SC 331 = 99 Comp Cas 347 = (2000) CLA-BL Supp 26 = 24 SCL 46 (SC).
Employees Provident Fund Scheme - This is the main scheme under the Act. Both employer and employee have to pay contribution to Provident Fund. The employer has to deduct contribution of employee from the salary of employee and has to pay both employees’ contribution as well as employer’s contribution by a challan in prescribed form. The amount has to be paid in approved bank.
Employee can pay higher contribution - Employee has to contribute 12/10% of his 'pay' as contribution. The employee can voluntarily pay higher contribution above the statutory rate. However, employer does not have to match the voluntary contribution, over and above the statutory rate. [para 26(2) of EPF Scheme].
Contribution payable under PF Scheme - The Principal Employer is liable to pay contribution of his own employees as well as employees employed through contractor. Principal Employer can recover from contractor the amount paid by him on behalf of contractor. The contribution is 12% of ‘pay’ i.e. basic wages, plus dearness allowance, cash value of food concession and retaining allowance. Contribution of both employer and employee is same i.e. 12% each. [para 29 of EPF Scheme].
Employer has to pay his contribution to EPF. He cannot deduct his contribution from wages of the employee. [Para 31 of EPF Scheme]. However, he has to deduct employee’s share from his salary and pay the same in EPF scheme. This deduction can be only from the wages pertaining to period for which contribution is paid. However, if there is accidental omission, the amount can be recovered later. Amount deducted from salary of employees is held in trust by the employer or contractor. [Para 32 of EPF Scheme].
Out of employer’s contribution of 12/10%, the Employer’s contribution of 8.33% will be diverted to Employees’ Pension Scheme. The balance will be retained in the EPF scheme. Thus, on retirement, the employee will get his full share plus the balance of Employer’s share retained to his credit in EPF account. [This diversion is only w.e.f. 16th November, 95. Earlier Employer’s contribution to their credit will continue to remain to their credit].
Lower contribution in certain cases - The employer's and employee’s contribution is 12% each. This is applicable to many of industries and establishments. However, this contribution is not applicable to - * any establishment employing less than 20 persons * any establishment registered with Board for Industrial and Financial Reconstruction (BIFR) as a sick company - the lower rate of contribution continues till its net worth is positive * any other establishment which has accumulated loss equal to or more than its assets and has also suffered cash loss in last two years. * Jute industry * Beedi industry * Brick industry * Coir industry other than the spinning sector * Guar gum factories. In these cases, the contribution is 10%.
Interest on account – PF Commissioner shall maintain account of each member of EPF scheme. [Para 59 of Scheme]. Interest is credited to the account of employee. The Interest is calculated on monthly running balance basis. Amount standing to credit at end of the month is considered for calculation of interest for the following month. The interest rate is declared every year by Central Government in consultation with Central Board of Trustees of Provident Fund. [Para 60 of EPF Scheme].
Employees’ Pension Scheme - This scheme has been introduced w.e.f. 16th November, 95. The Scheme is applicable to all subscribers of Employers’ Provident Fund. It is also compulsory to persons who were subscribers as on 16.11.95.
Contribution - The employer’s contribution of 8.33% will be diverted to the fund of Pension Scheme. Employee does not have to make any contribution. Employer’s contribution is 12%/ 10%. In such cases, 8.33% is diverted to Pension scheme and balance 1.67%/3.67% as the case may be, will be in credit of employee’s name in Provident Fund account. The 8.33% is on maximum salary of Rs. 6,500. If some employers are paying contribution on salary in excess of Rs. 6,500, the excess contribution will be credited to Provident Fund account and not to Pension scheme.
No separate administration charges or inspection charges are payable, as these are already paid along with Provident Fund contribution.
Benefits under the scheme - Members will get pension on superannuation or retirement from service and upon disablement during employment. Family pension will be available to widow/widower for life or till he/she remarries. In addition, children will be entitled to pension, upto 25 years of their age. In case of orphans, pension at enhanced rate is available upon death of widow/widower or ceasing payment of widow pension. Benefit of pension to children or orphan is only restricted for two children/orphans.
If the person is unmarried or has no family, pension is available to nominee for a specified period.
Commutation of Pension - The member can commute 33.33% of the pension, so as to receive hundred times the monthly pension so commuted as commuted value of pension. Balance will be paid on monthly basis.
Employees Deposit Linked Insurance Scheme - The purpose of the scheme is to provide life insurance benefits to employees who are already covered under PF/FPF. The employer has pay contribution equal to 0.50% of the total wages of employees In addition, administrative charges of 0.1% of total wages. [Notification No. AO 503(E) dated 28-7-1976 issued u/s 6C(2) of PF Act].
The employee does not contribute any amount to the scheme. The salary limit for coverage of employees is same as that of Provident Fund.
Exemption from the scheme can be obtained from RPFC if LIC Group Gratuity scheme is adopted by employer. If exemption is granted, only inspection charges @ 0.005% are payable to PF authorities.
Benefit to nominee of employee - If an employee dies during employment, his nominee or family member gets an amount equal to average balance in the Provident Fund Account of the deceased employee during last 12 months. If such balance is more than Rs. 35,000, the insurance amount payable is Rs. 35,000 plus 25% of the amount in excess of Rs. 35,000, subject to overall limit of Rs. 60,000. If the employees are covered under another life insurance scheme whose benefits are better than this scheme, an exemption from this scheme can be obtained. [Increased to 35,000 and 60,000 w.e.f. 13.6.2000]
Regards
Arun K Mishra[/quote]
From India, Bahadurgarh
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Dear All,
Warm Regards and best wishes for Christmas and the New Year. The topic was whether to deduct the PF if the basic is above 6500/-. According to the PF Act, if the employee is receiving a salary or wages above 6500/-, the employer's contribution towards the PF will be 6500/- per month.
For example, Mr. X has a package of Rs. 100,000/-, out of which the basic is 60,000 and the D.A is 10,000/-.
In the above case, if we calculate 12% of Basic + D.A, it will be 12% of 70,000, amounting to 8400/-. However, the employer is only liable to pay 6500/-. Therefore, even if the salary increases, the employer's liability is limited to Rs. 6500 per month.
Please revert back if I am wrong or if you have any suggestions.
Regards,
B.R. Misra
M.B.A, M.H.R.M, ADCHN
Email: biswaranjan81@gmail.com
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Warm Regards and best wishes for Christmas and the New Year. The topic was whether to deduct the PF if the basic is above 6500/-. According to the PF Act, if the employee is receiving a salary or wages above 6500/-, the employer's contribution towards the PF will be 6500/- per month.
For example, Mr. X has a package of Rs. 100,000/-, out of which the basic is 60,000 and the D.A is 10,000/-.
In the above case, if we calculate 12% of Basic + D.A, it will be 12% of 70,000, amounting to 8400/-. However, the employer is only liable to pay 6500/-. Therefore, even if the salary increases, the employer's liability is limited to Rs. 6500 per month.
Please revert back if I am wrong or if you have any suggestions.
Regards,
B.R. Misra
M.B.A, M.H.R.M, ADCHN
Email: biswaranjan81@gmail.com
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Dear Nagendra,
Once the employee is covered by the PF Act, they are covered as long as they continue in employment. If the employee's basic salary crosses the set limit of Rs. 6,500, the employer must deduct up to the maximum limit of Rs. 6,500, which amounts to Rs. 780 (employer's share); this is a legal obligation. If the employer ceases to deduct and contribute to the PF fund, they are violating the law. This is my understanding.
I assume you have gathered all the relevant information on this topic. What are your thoughts on this? Please email me the details at bibhutosh@hotmail.com.
Thanks and regards,
Bibhutosh Bhadauria
1/206 White Horse Road,
Balwyn 3103, Melbourne
Victoria, Australia
From Australia, Balwyn
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Once the employee is covered by the PF Act, they are covered as long as they continue in employment. If the employee's basic salary crosses the set limit of Rs. 6,500, the employer must deduct up to the maximum limit of Rs. 6,500, which amounts to Rs. 780 (employer's share); this is a legal obligation. If the employer ceases to deduct and contribute to the PF fund, they are violating the law. This is my understanding.
I assume you have gathered all the relevant information on this topic. What are your thoughts on this? Please email me the details at bibhutosh@hotmail.com.
Thanks and regards,
Bibhutosh Bhadauria
1/206 White Horse Road,
Balwyn 3103, Melbourne
Victoria, Australia
From Australia, Balwyn
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Dear Mr. Samba Siva,
In your post, you mentioned that the PF coverage limit has been raised to Rs. 10,000. This issue has been pending for years. Has the notification been issued on this matter, and has it been implemented or is it still in progress?
I would be grateful if you could provide me with detailed information on this. My email is bibhutosh@hotmail.com.
Thanks and regards,
Bibhutosh Bhadauria
1/206 Whitehorse Road,
Balwyn 3103 Victoria,
Melbourne, Australia
From Australia, Balwyn
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In your post, you mentioned that the PF coverage limit has been raised to Rs. 10,000. This issue has been pending for years. Has the notification been issued on this matter, and has it been implemented or is it still in progress?
I would be grateful if you could provide me with detailed information on this. My email is bibhutosh@hotmail.com.
Thanks and regards,
Bibhutosh Bhadauria
1/206 Whitehorse Road,
Balwyn 3103 Victoria,
Melbourne, Australia
From Australia, Balwyn
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Dear Nagendra,
An employer cannot stop deducting PF from a covered employee, regardless of any salary hike. The employer can limit the contribution to 12% of Rs 6500 and is not required to contribute 12% of the increased salary, but maintaining coverage is obligatory.
From India, Kota
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An employer cannot stop deducting PF from a covered employee, regardless of any salary hike. The employer can limit the contribution to 12% of Rs 6500 and is not required to contribute 12% of the increased salary, but maintaining coverage is obligatory.
From India, Kota
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heloooooooooooooo sir i am kamal please clarify me Is the employer bound to pay his share of PF if the basic salary of an emplloyee exceeds 6500/- p.m.? What else, if it exceeds 6500/-p.m?
From India, New+Delhi
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From India, New+Delhi
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Dear Friends,
Please clarify my doubt with regard to EPF Employer contribution being treated as an expense that appears on the Profit and Loss account under the expenses side. Is this the correct method for finalizing the accounts? Can anyone provide evidence regarding my doubt with an EPFO notification, if available in the EPF act?
Please do the needful and feel free to contact me via email at jjyprakash@yahoo.com.
Thanks & Regards,
J. Jayaprakash
From India, Chennai
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Please clarify my doubt with regard to EPF Employer contribution being treated as an expense that appears on the Profit and Loss account under the expenses side. Is this the correct method for finalizing the accounts? Can anyone provide evidence regarding my doubt with an EPFO notification, if available in the EPF act?
Please do the needful and feel free to contact me via email at jjyprakash@yahoo.com.
Thanks & Regards,
J. Jayaprakash
From India, Chennai
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SALARY with out PF Deduction.xls
PF Limit 6500 Act Note.pdf