PF is deducted not only basic salary which includes of other components like /food/conveyance/other allowances except HRA up to maximum of 15000/- as per the PF rules. PF inspection has been done in our company and PF authority has directed us to follow the same rule which has been following thereafter.
The following extract from the webpage may answer the question:
"43. WC.7: What is the amount of wages to be considered for PF contributions?
PF Contribution is payable on all emoluments payable in cash to an employee during the month excluding the following:- (i) House Rent Allowance (ii) Over Time Allowance (iii) Bonus (iv) Commission or any other similar allowance; and (v) Any presents made by the employer"
You can avoid a lot of headaches with PF inspection, if you keep as many employees as possible above the PF ceiling of
Rs 15000/-. The agenda of the government is to turn PF into some kind of social security scheme by somehow including all citizen into its ambit. We cant fight the system too long. The best option is to include employer contribution into CTC. Also HR managers tend to help employees get income tax exemptions by showing as much HRA as possible in the salary breakup. That may help the employee, but not the employer. Let employees do their own tax planning.
Our salary structure contain the following
basic 40% of CTC
DA 10% of Basic
HRA 40% of Basic
Medical 1500 PM
Conveyance 1600 PM
Education Allowance 200 PM
And rest in other Allowance
Pls clarify on which above stated component the PF would be chargable
Hence, the SC decides the case we need not to pay the PF on the allowances. If any PF inspection authorities ask to pay on allowance. U can cite these judgement pending in the Supreme Court.
T. Mahendar Reddy
I have newly joined in one of the organization where we pay on consolidated scale to our employee. I want to reconfirm about my understanding on change in PF celing wage of 15000/- per month.
For a gross of 12000 per month we have the following structure :
Basic : 7800, HRA: 1800, CLA:1200, TA:1200. We are currently deducting pf of amount 936 (7800*12%)
Whereas to meet the PF celing wage requirement i am suggesting to make following structure to meet the requirement.
Basic : 12000 so that PF will be 1440 (12%*12000). Pl confirm is this correct.
The said proposal was in discussion with my PF consultant.
Whatever component of wage/salary you keep, the PF deduction cannot be on less than the amount of prevailing minimum wages as fixed by the appropriate government. Here is a circular of the PF department.
Deputy Labour Commissioner, Punjab (Retired)
Consultant (Labour Laws) &
Qualified External Member of ICC for Sexual Harassment........ Act, 2013
Agree, Circular is attached by you is older, Here, I am attaching circular which clearly states that the circular dated:23/05/2011 Splitting Minimum wages for the purpose of PF contribution not permissible KEPT IN ABEYANCE.
Circular attached is dated 02/12/2011 Which says that above circular dated :23/05/2011 is KEPT IN ABEYANCE.
If I am wrong somewhere please advise.
At the outset, the question whether the employer can split the minimum wages and whether pf contribution is payable on all allowances excluding HRA is yet to be decided by the Hon'ble Supreme Court.
Please refer to the attached note on the above issue.
The pending cases on the subject issue will come up for hearing during this month
You are liable to deduct PF contribution on the basis of current wage ceiling of Rs.15,000/- (Either Basic or Basic + DA as case may be)
Your query Suppose an employee is getting Rs.1500 as basic salary,is he eligible to be deducted for PF - YES
S. G. Management Services
(PAN INDIA Consultant – Labour Law Compliance,
PF, ESI, P Tax, Benefit Management &
POSH COMPLIANCE) - KOLKATA
You have to add components as
baisc is 50% of gross salary
hra is 50%of basic(in metro cities) and 40% of basic (in other states)
These two components are mandatory. You have to structure accordingly and if required you can add other allowance to balance the salary.
Employees’ Provident Fund is a small saving scheme that is offered to Indian workers as well as international workers through the EPFO of India. The scheme allows accumulation of funds as well as accrual of interest on the accumulated funds. The funds thus collected are made of contributions partly from employees and partly from their employers.
Contributions from employees as well as employers add to the EPF. However, unlike what is commonly thought to be, the entire portion of contribution from an employer doesn’t go exclusively towards the Employees Provident Fund.
Division of funds
1. 12% of Basic Salary and standard allowance of Employee goes directly towards Employees’ Provident Fund.
2. 13% of Basic Salary and standard allowance of Employer is divided as follows –
o 3.67% of contribution towards Employees’ Provident Fund
o 0.5% of contribution towards EPF Administration Charges
o 0.5% of contribution towards EDLI Administration Charges
o 8.33% of contribution towards Employees’ Pension Scheme
Minimum salary limits: Employees with monthly salaries less than or equal to INR 15,000 now have to contribute mandatory towards EPF. PF amount is calculated for the basic amount. PF will be calculated as 12% of the basic.
Provident Fund Calculator
12% of 15,000: ₹1,800.00
13% of 15,000: ₹1,950.00