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Hi All,

I work in an IT company registered in india, located in Chennai. I am here for 2 years. I have a question regarding PF deduction. In my company I bare both the employee and employers contribution of PF plus some administrartion charges everymonth if at all I opt for PF. I hear the same is being followed by many small or mid level companies.

I enquired the same with people I know who work in small companies and they say that the PF policies are changed now, company can avoid contributing towards PF and the same can be deducted from the employees salary, reason being its included in the CTC.

Is it legal that the oraganization does not contribute its part and deduct both from the employee's salary? Is the same practice is followed by all or many companies.

I was with different company till 2010, till that time i did not face any issues with PF, cos X amount was deducted from my salary and the same amount was contributed by the company. After which i joined this company. I am not on contract role, i am a permanent employee.

Even my payslip shows two PF deductions as employee contribution and employers contribution plus admin charges(the employer's contribution is more than that of employee's contribution, when asked the HR told me that its for administration charges). Which comes more than I could claim on tax benefits. I am actually not benefitting on PF concept also tax benefits.

Could you please give me some inputs whether this practice is legal and are being fair to the employees.

Regards,

Dolly

*Cite.Co Support Sponsors - Talentedge / Kredily

Dear Ms. Dolly,
As per the Satute Laws, Employer has to contribute it's part from the employer only and not from the employee. We have discussed the same a couple of days back. Please click on the following link to understand the matter at its best.
CiteHR Attribution: https://www.citehr.com/455791-force-...ml#post2041731
From India, Visakhapatnam
Thank you Sharmila,

I have a question, in your reply you have mentioned that if the basic is more than RS.6500 Then the employee must pay PF. But in my company the employee can opt either to go for PF or not even the basic is higher than Rs.6500.

One of my collegues opted for no PF and she has opened PPF in a bank for the same amount and her basic is around Rs.17000.

If its illegal not contributing towards PF, how the company still runs. I mean these are very basic employee benefits and can the company deviate from basic benefits and still be in business? Is not there some kind of audit runs by government every year on companies to check they follow the basic things?

What bothers me is that not only my company there are many company in India follows the same policy on PF. And the public started to talk like its also legal for companies not contributing towards PF. Cos I had many arguments with my own company staff when I asked them to join me to go talk to the management about it. Cant be something done on this issue nation wide?

Even my other friends in other companies have the same issue and they say that its all legal now. How this situation came and how the companies are doing such illegal things very boldly(by mentioning both the deductions on the pay-slip).

Once again thank you so much for your reply, i dint post it to hurt anyone, just to clarify things which are bothering for many months.

Regards,

Dolly

Ans - You haven't read the point clearly have you? Let me reframe once again, If the employee has not withdrawn his PF from the previous employer and his salary is </= 6500/- there, he would still remain a member of PF.
Ans - If the employee has no previous EPF account or has joined services, he/she is still exempted.
Ans - If the company has 20 or more than 20 employees the employer is subjected to contribute towards PF.
Are you sure that th employer is filing for Monthly/ Annual returns?
- PF monthly Return - for employees tomonthly remmitance of contribution.
- PF Annual Returns - for the Accounting year starts from March to Febraury of your employees. The employer may get the contributory slips given at the time of on or before the end of May, for the employees to know their balance in their respected amounts.
Please check with the HR department, if they're filing such returns & all the mentioned contribution sent to the EPFO. (For your information); A copy of those returns are filed for audit purposes.
Ans - The real predicament starts when the employee faces a difficulty at a level contributing towards the PF. You and your company staff (if felt) should ingress towards your area Labour Comissioner and bestow a complaint for been inflated by employer-employee conribution borne by the employee.
Ans - As per the above mentioned procedure, you may consult a conciliation officer to get your answer at its best from the employer.
Ans - Here there is nothing to hurt or feel good about any one. This forum gives its best people to help each other serve their obligations. Members in this group discuss and remember they dont get hurt.
Cheers..................!
From India, Visakhapatnam
Thanks once again Sharmila.
As far as I have enquired, from the entry level employees who does not have previous PF account and the most experienced employee who worked previously, had PF and joined here, all have to go through the same PF structure in my company that is either they can opt for it or can avoid paying PF.
My company's strength is 500+ and they should be filing returns cos they do deduct the money from our account and may show it on audits that they do contribute towards PF with the money they deduct from us, but i dont know how exactly they do it. I did check with my HR many times, but they are not transparent in any information like about annual returns and many other things.
I posted my query to know how exactly the PF works and any changes made recently on PF policy. Your post have answered all doubts I had.
Thank you so much once again Sharmila.
Regards,
Dolly

Hi Dolly,

When it comes to EPF or Employee PF, we two side contributions -

1. Employee's Side: This is deducted from your salary i.e from your monthly gross. The minimum contribution as per PF Act is 12% and you can voluntarily scale it up to a maximum of 20%.

2. Employer's Side: This is not deducted from your salary. This is included in your CTC to show the transaction. (I shall explain how should it be refelcted). As per the PF Act, the employer is supposed to contribute a 12% of your Basic + DA to your PF&Pension Account. Out of this 12%, 8.33% goes to Pension Account and only 3.67% goes to the PF Account.

In addition to the 12% contribution made by the Employer, he is also liable to pay -

Administrative Charges - Handling for PF/Pension account

Employee Insurance Charge

Employee Insurance Handling Charge

However if the company provides some better insurance scheme, they can opt out of insurance scheme in PF act.

Now to see how the PFs should be reflected in your CTC-

Basic

DA

HRA

Conveyance

Medical Allowance

Other Allowances (if any)

=========================

GROSS

==========================

Gratuity (Calculated as 15/26 * 1 * Last drawn salary i.e basic + da and this amount is contributed to the gratuity account that the company has with some LIC or related firm)

PF (This is the employer's contribution)

ESIC (if applicable - again employer's contribution)

Annual Bonus

LTA (if provided by your company)

=============================

CTC (i.e. cost to company)

Now from your monthly gross -

Gross (basic +da + hra + conveyance + medical allowance + other allowances)

(less) PF (This is employee contribution)

(less) Professional Tax

(less) TDS

===================

MONTHLY IN-HAND

===================

So if you see that PF contribution can be deducted only once from your gross.

The PF that was mentioned in you CTC is very much correct as that amount is also deposited in your PF account.

I hope if this was the doubt it was cleared.

================================================== ====

Again as mentioned by the Act,

1. A firm becomes eligible to PF Act only when it had more than 20 employees. Once the firm has more than 20 employees and is covered under PF Act, then even if the employment reduces to below 20, the firm still has to go on contributing to PF account

2. A person is eligible to be covered under PF Act only if his Basic + DA is less than or equal to 6500

3. If a person is in the firm and was appointed at a basic + da less than or equal to 6500 and hence was covered under PF Act, and if this worker is say for example given an increment so that now his basic + da is more than 6500, the person continues to be applicable under PF Act. The contributions to be made 12% on 6500 ceiling amount. If contribution is made on the actual basic + da, any excess amount over 12% of 6500 is taxed.

4. If you are covered under PF Act in this firm. Now you change your employment. Your new employer too is covered under PF Act. But because of change in employment, your salary is revised and now your basic + da is more than 6500 and hence in the new employment you do not become eligible for the PF contribution.

Yet I would want seniors to clarify this point as from Ms. Sharmila's post it seems that if I am covered under PF, even if I change my employer I continue to be covered and my employer is obliged to contribute for my PF.

Hope this helped to clarify your doubts.
From India, Mumbai
Hi,,
Ms. Ankita has covered various facets of ctc and Epf provisions. Now to add -
A) when a person becomes member under EPF & MP Act he continues to be member till withdrawal of the contribution due to separation from service on various grounds. In such a case, the contribution alongwith employer contribution & administrative charges irrespective of his salary being less or more than Rs.6500 is to be remitted.
B) The instance of recovery of employer contribution & adm. charges may be brought to the notice of EPFO with proof of pay slip. This is violation of provisions of the Act on the part of employer. You can later on file an RTI application with EPFO seeking infn. on action taken on your complaint against employer. This way you can discipline the employer as well as EPFO officials.
Further, regarding remittance of contributions, you may visit EPFO site and get the infn. by registering.
From India, Mumbai
A good discussion is taking place regarding PF. Can anyone clarify whether casual staffs are eligible for PF
From India, Kolkata
Yes Ankita The exemption is available only to those whose starting salary in the company is above 6500 and who do not have an existing PF account at the time of joining the new company.
From India, Mumbai
PF is applicable to every employee, whether permanent, contract or temporary.
The only exemption is for apprentices who are not considered as employee. But for that, they must be apprentices under the apprentice act or specified in the standing orders

From India, Mumbai
I am still unclear. Please do not mind. Kindly correct me if I misunderstood.

A person had his first job where he was covered under PF and had basic + da less than 6500.

Now he has serviced for 1 year and his salary is increased so that his basic + da is more than 6500 and is in same employment.

But he would still be covered under PF act and contributions is mandatory at the same 12% rate which can be reduced to 780 (12% of 6500).

Now if he changed to a new employment (obviously with salary hike) the new employer still will have to contribute 780 pm only because he had once been covered and so he continues to be covered for a life time???

============================

I have a doubt here sir, if it could be cleared.

A person was working with some firm for some years and was covered under PF Act.

He quit that job and joined us few years back.

We are not covered under PF Act.

In this case, should the person who has a PF account be given contribution for PF? Or he should close his PF account?

==============================

As per the rule, actually an employee is supposed to transfer the PF account when he changes employment.

Meaning to say that suppose I am covered under PF Act in my current firm.

Now when I join another firm for better prospets, I should be submitting some form in my this office so that they initiate some process and my account is transferred to the new employment.

But it is a common practice that many employees just withdraw their PF amount and close the PF Account.

Is this benefitting?

Is this not tracked?

Looking forward to further guidance. Thank you in advance for patience and knowledge shared.
From India, Mumbai
Yes, he will be covered in the new company with the max statutory amount of 780 per month (he can opt for higher amount, but that is not mandatory). This new employer will be required to contribute same amount of 780 per month.

He can withdraw his PF amount.

However, if he does not do that, he will earn interest for the next 3 years after which it will stop. So, the answer to your question depends on what his long term aims are. If he is going to join another company in 3 years which has PF, then probably he can keep it and transfer when he joins. He will get 8.5% tax free income in the mean while plus increased savings. If he does not want to wait or does not know his future plans, he may withdraw it.

Most employees are short sighted and want to draw the amount as quickly as possible

They do not look at long term impact.

In order to do that,,they give a false declaration to the old company and to PF that they are not working any more. And to the new company a declaration that they do not have existing PF account.

A different point of view that was posted earlier in the forum was that after 10 years of PF contribution, the amount in pension fund gets activated, if you withdraw before 10 years are over, you get the full amount of your and your employers contribution back. That money properly invested will give you more than the pension under fpf. That is IF you invest it :)

So, it's a complex thing that each one needs to decide on.

It is not currently tracked.

However, the PF department has already asked companies to,put in the Adhar I'd of the employee in the PF application and they will track it from there. I expect the tracking mechanism will be effective in 2 years time.
From India, Mumbai
Thank you SaswataBanerjee,
I had not known this.
I was told by this employee that when they withdrew their PF account, they had got 100% full money. I thought it must only be the 12% employee contribution and 3.67% of employer's contrinution (which goes to PF account) and the 8.33% og employer's contribution that goes to pension fund perhaps would not be handed over.
Thank you for the insight and clearing the doubts :-)
From India, Mumbai
Wait !
Before we confuse each other.
If the amount is withdrawn before completing 10 years of PF contribution, then they get 100% back. If they withdraw after 10 years of contribution, then they get as you just said.
The 10 years includes multiple companies you have worked for and if you have multiple accounts that have been transferred to the latest account.

From India, Mumbai
I am totally confused. I think I should abreast my knowledge first. Till such time I must keep quite.
From India, Mumbai
Hello SaswataBanerjee,

Sorry but again I read something contrdicting what you mentioned yesterday.

you mentioned that -

However, what I read today is -

You might not get 100% of your EPF money

Imagine your contribution + employer contribution has been total Rs 3,50,000 till date. Out of this 3,50,000 , suppose 2,50,000 has gone in EPF , and rest 1,00,000 has gone in EPS (for pension) . Now if you quit your job in 6th year of employment and opt for withdrawal of your EPF money (EPF + EPS actually) , then do you think you will get total 3,50,000. NO!

Thats because you always get 100% of your EPF part, but for EPS there is separate rule . There is something called Table D‟ , under which its mentioned how much you get at the time of exit from your job, there is a slab for each completed year and you get n times of your last drawn salary (depending on the completed year of service) subject to maximum to Rs 6,500 per month. So if your salary in this case was Rs 30,000 per month, still you will be given only 6,500 * 6.40 = Rs 41,600. Note that the table D is upto 9 yrs only, because if 10 yrs are crossed, then you are liable for pension.

Source - Attachment "10 facts you may not know about PF" on post no.5 by loginmiracle on https://www.citehr.com/456226-pf-ded...ml#post2043209

Can there be some better explanation as it is just increasing the confusion. It may sound that I am asking too much, but honestly, I have 0 idea on it and would like to know.

Thanks in advance and sorry for all troubles.
From India, Mumbai
thank you Saswat for the information. The staffs generally leave within 6 months only so i thought it will not be applicable but thnx again for answering my query
From India, Kolkata
I need to check on this and come back to you.
I do not have the full answer.
I also learned this morning during a discussion that in the first 6 months if you leave a company, your EPF amount is not returned or transferable to the new company.
I need Time to figure out and get back to you, as I will now need to read the full PF scheme document effort I open my mouth again.

From India, Mumbai
Nishi,
I cross checked this matter this morning when I was in a compliance review.
Many people seem to have a confusion or misinformation that PF is not payable for the first 6 months. That is completely wrong. PF is payable from the first day an employee joins. If someone leaves within 6 months, he can get his PF withdrawn or transferred to another PF account but he will lose his EPF amount. EPF is 8.33% of employers contribution. PF amount therefore is 12% of employees contribution and 3.67% of employer contribution.

From India, Mumbai
Just wish to correct a minor mistake, I guess it was just due to confusion.
As rightly said by Saswata,
12% of the employer's contribution is splitted into two -
1) Employee PF - (EPF) - 3.67%
2) Employee Pension - (EPS) - 8.33%
So when we withdraw the amount, we can get full PF (EPF) amount but the pension (EPS) amount can't be withdrawn.
I hope Saswata you meant this but confused with the EPF/EPS i guess.
From India, Mumbai
On 21st and 22nd of this month, National Academy for Training & Research in Social Security (NATRSS) conducted workshop in Mumbai on EPF&MP.
NATRSS is conducting workshops on EPF&MP in Delhi on regular basis. There is a need for us to attend such type of workshops.
From India, Mumbai
Hi Saswat,
Just want to add on to the information here,
- the PF Contribution from both employee and employer begins after the first month itself of the employee's joining.
- However if the employee resigns before completing his 3 months he does not get the PF Contribution,
- If the employee leaves after completion of 3 months but before completing 6 months of his employment, he can claim for only his contribution.
- Only after completion of 6 months, will the employee be entitled to both employee and employer's PF contribution.
From India, Pune
It is said to note that educated youth has so many basic queries regarding various labour aspects in this age of internet yet they refrain from visting the gvernment labour web site where each & every aspect is explained explicitely. Armed with the available information , lodge a complaint with the nearest labour authorites and protest as well as protect your rights.
From India, Bangalore
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