Unwillingness For EPF Account - CiteHR
Saswatabanerjee
Partner - Risk Management
Pramodthakar
Taxation And Hr
S. Krishnamoorthy
Director Of Private Ltd. Companies
+1 Other

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Dear Friends,
As you all know, the Wage Ceiling for EPF has been raised from Rs. 6500 to Rs. 15000 w.e.f Sept 01, 2014. Some of our employees who were not covered earlier (whose basic salary is between Rs. 6500 and Rs. 15000) are to be enrolled for EPF, are not willing for EPF Contribution. They have their personal Savings.
Now, please let me know if there is any wayout for not compelling them for EPF contribution.
Thanks,
Dhananjay.

Hi Dhananjay,
I understood you issue, and this wage ceiling enhancement decision has been in pending since 2012. So you would have conveyed this earlier to employees and moreover there is no rule in EPF Act that an employee cannot be given exception form EPF Contribution because of his wage is in between 6500-15000.
My advise is to convince them towards the EPF Contribution by explaining the benefits. At the same time convince the management to contribute the Employer's Contribution separately(Which should not be deducted from Employee as a part of CTC).
Thanks and Regards
Ravichandra Paanem.

The entire HRA is exempt. There is no norm for fixing the percentage of HRA with reference to Basic Pay+DA. It may be 50%, or 60% or even 100%. The EPF authorities cannot interfere with the managerial discretion to fix the percentage of HRA. The increase in the percentage of HRA will, to an extent, as take-home pay will not hit much.
Views are solicited.
S. Krishnamoorthy

I have a feeling the department is not going to take kindly towards any manipulation of salary structures at this stage.
If you try to manipulate the break up, reducing basic, they are definitely going to issue a show cause or even take the matter to court. The court is likely to rule against you. Even if not, the matter will prove very costly for you in terms of litigation cost as this will drag on for ages.
While the management is free to decide the salary structure, it can not reduce the basic to reduce the pf component. It is one thing to put the salary structure in a particular way, it is another matter to change it to decide PF.
Field officers have already been briefed on how to check these things in audit.
Circulars have been used internally for catching such cases.

I agree. But department can not insist about how to design the salary structure. If employer pays basic + Da as per minimum wages act of the State. Now suppose if any establishment redesign their salary structure by keeping basic+DA as per minimum wages act, whether department can have the objection ? Or even any other act like labour act / minimum wages act can take the objection ? What the legal standing for that ?
Kindly give opinion
Regards
Pramod Thakar
Pune

The department can not dictate what the salary structure should be.
That's fine
However, if the changes are made for manipulation, of there is prima facie evidence of it being malafide, them yes, they can take action against you. Even if you do win the legal battle, it will be a hige cost and after a long time. In the other hand, if you lose (as you are likely to), you will have a massive cost to face.

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