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Even i have the same query..also to add in details :-
If an employee is having a monthly gross above 25000/- but his basic is below 15000/- but above 6500/- (as per earlier slab of deduction) and he has been working with the organisation for 4 years and is not willing to get the PF deduction.Can his basic be raised to 15001/- or more so that he does not fall under the PF slab.
10th September 2014 From India, Vapi
1. After new amendment if any employee basic+Da was below 15,000(employee present or existing) then Pf contribution is mandatory, more than 15,000 that's optional.
Earlier she was not covered under PF so there was no deduction for that. But now we need to deduct PF from her salary.She has been with the company past 2 years.
Yes, it will apply existing employee also. you need to deduct her PF contribution from 1st of September.
10th September 2014 From India, Mumbai
So, you can nt deduct employers contribution from the salary of the employee.
Please remember that CTC as a concept has no legal standing and is not recognised in law. You can write anything, but what the law recognises is gross wages. Gross wages can not be reduced. If you try to deduct PF contribution of employer from the employees CTC, either you will be making illegal deduction (if you are showing in pay slip) or you will be reducing gross salary. Both are not allowed
10th September 2014 From India, Mumbai
Related to the PF deduction the comments along the thread,completely clarifies that both deduction is not possible from the employees monthly wage,only 12% can be deducted from his current basic for the employee contribution.
Apart from the above query can any one explain why an employee who is attaining superannuation next year,but as his basic is less than 15000/- will be liable for pf deduction.
How is it going to help the employee? and Why should he/she bear this burden at this point?
11th September 2014 From India, Vapi
12 %( Employee share) on Basic has to be paid to EPFO from the Employee side whose basic is 15000 & below. And another 12%Employer share also has to give it to EPFO means total 24% whether the employer share 12% will be calculated in the CTC or extra burden taken by the employer that’s depends upon the employee & employer job agreement.
This is a compulsory Indian social security act obligation to those employees who work in India. No one will get out of it (for excluding refer EPFO Act).
CTC calculation is a pay agreement between individual employee & Employer it’s not a statutory obligation by the government. Only the minimum wage is the obligation by the Government.
Scenario 1: (CTC increased) 12% of Employee share will be detected form the employee that much of take home will be deducted from the employee another 12% share will be given by the employer which is add on burden to employer means the CTC got increased(happy to employees)
Scenario 2: (CTC not increased) CTC will get adjusted to the entire 24% EPF means both employee & employer share will get deducted from the employee’s CTC & it will be paid to EPFO whose basic is below 15000. That means on employees take home 24% will be deducted. (Gov will not interfere in this it make sure the minimum wage is (Basic) paid or not)
Note: EPFO will pay 8.75% Annual Interest on your EPF Money. It’s the best interest rate which you get in the present day be happy with this change.
11th September 2014 From India, Hyderabad
There is a very clear and specific provision in the act that says the salary of an employee can not be reduced to pay part or whole of the PF dues. CTC is not recognised under any indian law. So you need to ensure that the gross salary is not reduced. So under no circumstance can the entire 24% burden get loaded on the employee.
At the next salary hike / increment, adjustment can be made to the CTC but at the moment, it is not possible.
In case you are doing that, the pf department has the right to recover the 12% from you. Besides it will be an offence under payment of wages act as being an illegal deduction.
11th September 2014 From India, Mumbai
For Your kind information Myself & my organisations both are not doing as like Scenario 2. we are not at all following the CTC system. we are paying Employer PF on the Actual Basic to all employees form the Employer pocket.
But many companies are following this CTC system. before these 2 Scenarios i quoted that the CTC was just an agreement between company & employee. under legality shadow all these Companies are giving Minimum wages which is an government obligation. apart form that nothing is illegal.
in the CTC concept CTC means = Cost to the Company means all the cost made by the company on the employee will be calculated in this CTC (Coffee drunk by employee also an expenses/cost to company so that one also calculated in this CTC Ex-Meal passes)
in this Scenario they obviously calculate the employer Share 12% also as a Cost to the Company. In this situation according to the Scenario 2 is an Legal thing & with this the present Take home are going to reduce for those employees who comes in the Scenario 2.
Again I am saying CTC is a mutual agreement between company & individual employee. according to the act they are paying minimum wages & the Employer contributions too. My intention to say that if any one comes under Scenario 2 their Take home pay is going to affect.
12th September 2014 From India, Hyderabad
12. Employer not to reduce wages, etc.
No employer in relation to an establishment to which any Scheme or the Insurance Scheme applies shall, by reason only of his liability for the payment of any contribution to the Fund or the Insurance Fund or any charges under this Act or the Scheme or the Insurance Scheme reduce whether directly or indirectly, the wages of any employee to whom the Scheme or the Insurance Scheme applies or the total quantum of benefits in the nature of old age pension, gratuity, provident fund or life insurance to which the employee is entitled under the terms of his employment, express or implied.
So, since wages is gross wages, you can not bring it down directly or indirectly for payment of PF, or for any change in amount of PF payable.
Anyone who does that under the guise of CTC, is doing an illegal deduction, irrespective of whether the employee agreed to the concept of CTC.
12th September 2014 From India, Mumbai
CTC prior to enhancement of PF coverage limit CTC after enhancement of PF coverage limit
Basic 10000 10000
HRA 6000 6000
TOTAL MNLY Gross 16000 16000
PF DEDUCTION EMPLOYEE 780 1200
NET TAKE HOME SAL 15220 14800
EMPLOYER'S PORTION OF PF 890 1361
CTC 16890 17361
Therefor take home salary will be less and CTC will increase.(Calculation has been made considering PF deduction only on statutory limit).
S K Bandyopadhyay
15th September 2014 From India, New Delhi
As recommended by some of my frienda that CTC has not any legal stand is absolutely right. But now a days many organizations are even designing their pay package on CTC basis. It is also correct that employer contribution of PF and ESI cannot be deducted from employee gross salary.
Let us take one example : Monthly gross 14,000/- ( Basic - 8000/-, HRA- 3000/- and other allowances - 3000/-). Yearly Gross = 14,000/- x 12 = 1,68,000/-. ESI employer contribution = 7980/- per annum, Bonus as per act (20%) = 8400/- annually, Welfare (canteen subsidy, tea, coffee etc.) = 15,520/- per annum. No PF deduction as excluded employee. Total CTC before Sept,2014 ( Before PF amendment) = 2,00,000/- per annum. From September 2014 after PF amendment , the employee is covered under PF and employer contribution to PF will be 13,065/- per annum. Therefore, the new CTC will be 2,13,065/- from September,2014. Earlier take home salary of the employee was monthly gross - ESI employee contribution - PTAX if applicable. Now the take home salary will be monthly gross - ESI employee contribution - PF employee contribution - PTAX if applicable.
Now a days it is really complicated to make scientific pay structure considering Minimum wage, PF gross, ESI gross, ITAX rebate pocket, Variable pay etc.
Thanks and Regds.,
S K Bandyopadhyay
USD HR Solutions
14th October 2014 From India, New Delhi
#AnonymousIf fixed CTC is 6.3lpa, employer contribution of PF is 1800rs . Their is no talks about employee pf in salary break up. So just wanted to check in fixed CTC both employer pf and employee pf contribution is deducted with tax ? Or only employer pf is deducted? Once we leave organisation are we eligible to claim both employer and employee contribution of PF ?
19th May 2017 From India, undefined