Madhu.T.K
Industrial Relations And Labour Laws
Saswatabanerjee
Partner - Risk Management
Dixonjose02
Sr. Hr Manager
+3 Others

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We have a few employees whose salary is above Rs. 6,500/- & employee as well as employer are contributing @ 12% on the full salary.
Almost all employees whose salary is above Rs. 6,500/- have made a representation to freeze the PF contribution on the salary as per March 2013 salary & they do not wish to contribute more than the current level, in view of the severe inflationary pressure.
For example, current salary is Rs. 10,000/- pm & the contribution is Rs. 1,200/-
Revised salary is Rs., 12,000/- pm but the salary for contribution is Rs. 10,000/-
Since the salary is anyway above the statutory limit, is this permitted & what is the procedure for obtaining consent from the staff as well as EPFO. Forms JD-I & JD-II do not have facility for any such declaration.

The scheme provides for it with rhe permission of APFC.But it do not specify whether contribution on an amount between actual and statutory limit is possible. Varghese Mathew 9961266966
Since PFable salary cannot be reduced as per provisions of the EPF Act, u may have have to deduct & contribute PF on the new basis salary only.
U cannot give salary of 12000/- & deduct 1,200 PF, that would be treated as short deduction & punishable under the provisions of Act. Since it is a statutory deduction, the opinion of employees about the % or quantum of deduction does not have any locus standi. The employer has to follow the law, whatever the employees might say or demand.

Thanks for the clarification.
In that case is it possible to classify the payment under some other category, so that it does not become coverable for PF contribution. Is it possible for us to classify the payment as INCENTIVE/PRODUCTIVITY BONUS or any other name.
Thanks
Powercube

You can limit your contribution on RS 6500/pm.Refer the SC decision in case of North Malabar Gramin bank Varghese Mathew 9961266966.
Dixon

Your contention is completely wrong.

The PF rules provide for payment of PF at 12% on basic + da of up to rs. 6500

Anyone getting salary beyond that, the contribution required for both employer and employee is limited to rs. 780 per month (12% of 6500)

Anyone drawing more than 6500 per month and wanting to have deduction beyond the statutory limit would need to have to give a letter to the company asking for voluntarily higher contributions. The employer is not required to pay higher PF for the voluntary contribution portion.

So if the employed want to freeze their PF contribution at a current levels, nothing stops them from doing it as the salary is anyway above statutory limits.

Wrt the reduction of salary, nothing being done by the employer here is amounting to reduction of salary. In any case the rules do not for it reduction of salary. It talks specifically of reducing salary to adjust for payment of PF when it is started for the first time. Further, in this case, the salary is well above statutory limit.


Powercube,
Please do not do any such thing. It is not necessary and also any such manipulation of salary only creates problems later.
It is perfectly allowable for the employee and employer to freeze the contribution limit to current levels as long as it is above the statutory limit. Let each employee give a letter specifying that they want their voluntary contribution limited to xxxx amount from this time onwards. The company is not required to match the contributions beyond the limit of 780 per month
I am glad to hear that your Company is paying voluntarily higher than statutory rules. There are very few employers today willing to do that.try and convince the employees to take advantage and keep contribution of higher amount. They will benefit at a later day when they retire. Such forced savings, specially that earning a good interest rate is always a good idea.
Also, I hope you realise that PF is computed n basic and da and not on the full salary.

Dear Saswata Banerjee,

I am grateful for your valuable insight. The decision to fix the contribution on the entire salary was also taken after taking the employees in confidence & as a measure of goodwill & incentive to retain skilled & experienced employees.

Unfortunately, the inflation is causing havoc with the budgets. Frankly, we will also be happy to limit the contribution at statutory limit, because we cannot increase salaries in line with runaway inflation & have to keep in mind the affordability.

Our consultant has advised us to seek request letter from each & every employee drawing higher salary & also execute fresh JD-1 form for submission to PF office.

We are not sure as whether we should officially intimate EPFO separately about the change or the next monthly return & JD-1 will be good enough.

The consultants have also hinted to be prepared for 7A enquiry. According to them, at regional office levels, personal judgments rather than law plays significant role.

I am attaching the supreme court judgment in case of Marathwada Gramin Bank for immediate reference.


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File Type: pdf SC JUDGMENT EPF Marathwada Gramin Bank.pdf (126.0 KB, 87 views)

It is not mandatory that employer's contribution should be restricted to 12% of Rs 6500. Similarly, if the employees contribute 12% on Basic +DA which is higher than Rs 6500, the same is not termed as 'voluntary contribution' as some of the members stated but it is only normal contribution. Voluntary contribution is that which is contributed at a higher percentage than 12%.

The Maratwada Gramin Bank's case was centred on the act of the management withdrawing the contribution on amount higher than 6500 and thus restricting their contribution to 12% on 6500. That means, the Bank (employer) reduced the PF qualifying salary from a higher amount to Rs 6500 after giving due notice to the employees following section 9A of the Industrial Disputes Act which provides that 21 days notice should be given to the employees whenever any change in service conditions is required to be made. This being a change in service conditions by way of reduction in contribution by employer, the employer had complied with the statutory requirements. However, PF authorities objected the move saying that employer can not reduce the PF qualifying salary as per section 12 of the EPF & MP Act. That was rejected by the Apex court saying that PF organisation can not ask the employer to contribute any amount which is more than 12% of 6500.

If you relate the above with the service conditions of new generation establishments which expressly state in its CTC statements supplied to the employees, you will find that PF contribution is shown as a part of remuneration agreed by the employer and employer and as such the employer is bound to contribute it.

Madhu.T.K

Dear Madhu,
There is absolutely no problem if the CTC statement clearly shows the amount on which the PF contribution will be made. In new generation establishments, the basic salary is generally low & most of the amount is paid as perks.
In our case, none of the employees are willing to contribute at higher percentage. The whole issue came up only because of amount received in hand is supposedly insufficient to meet household expenditure. This appears to be the only way other than increasing salaries, to put more amount in their hands. We intend to structure salary, such that the difference in employer's contribution on the higher salary & Rs. 6,500/- will also be included.


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