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Regarding EPFO: If an employee joins mid-month and/or has absenteeism leading to loss of pay, then while calculating EPF for Employee and Employer should it be on the basis of CTC or on Fixed Gross?

For example, suppose an employee has 30k per month as CTC, and the Employee EPF amount is fixed at a statutory ceiling of Rs 1800 per month leading to a fixed gross of Rs 28,200. Then the total EPF Deduction (Employee+Employer) is Rs 3600.

If they have attended for only 50% of the payroll period, then if CTC becomes Rs 15k per month and Employee EPF becomes Rs 1692 per month leading to a fixed gross of Rs 14,100, the Employer EPF becomes Rs 900 which does not match the Employee EPF.

If the Employer EPF has to increase, then the Fixed Gross will be reduced keeping CTC constant. So in this situation, what should be done?

My scenarios are:

1. Employer pays only Rs 900

2. The CTC is kept fixed and a recalculation is done to ensure Employee and Employer contribution matches leading to 50% CTC but <50% fixed gross

3. Employer pays the extra EPF from out of their own pocket as an additional cost

Which is the proper recourse out of these three scenarios?

From India, Bengaluru

Epf contribution is calculated usually on basic and DA.
And max limit of this basic and DA is is to say employees having basic wage up to or less than 15k are covered under epf.
As regards to calculation,
The basic wages/26 or total work days in a month will give a days wages which is multiplied by actual present days to arrive at monthly earned basic wage.This monthly wage x 12% gives employee contribution.
And monthly earned basic wage x 13 % gives employers contribution.
Apart from this as per supreme court rules in epf calculation,
It is also said that allowances which are paid regularly,mandatorily and universally is to be inculded in the basic wages for epf calculations.

From India, Vadodara

Dear friend,

Needless to explain the concept of CTC which you are well aware of. I am of the humble opinion that now a days, some members of the HR fraternity has an obsession with CTC which certainly makes simple issues complicated apparantly.

In my opinion, CTC can remain fixed for a particular year only if and if only no material changes occur as admitted in the contract of employment during the year.

Gross salary or wages is what is payable to the employee at the end of the wage period as determined in the contract of employment.

EPF subscription is calculated on the basis of the sum total of the components of the gross salary which are payable to all employees alike including allowances other than HRA.

When the gross salary of an employee falls below the monthly salary due to reasons like joining the employment or exit in the middle of the month, absence for certain no of days in the month resulting in LOP, whatever gross salary payable proportionately has to be taken into account for determining the actual amounts of both the employer's and employee's contributions accordingly.

Then what is the necessity of bringing in the CTC into this?

If I were wrong, please correct me with a convincing answer.

From India, Salem

@ if salary is reduced (for any reason) then all the components would be reduced by 50% uniform, under CTC practice, hence the gross would be 15000/- and not 14100/-


There is no need to do a reverse engineering to find the EPF contribution on the basis of a fixed CTC. In deed the actual monthly salary is to be calculated on the basis of the attendance recorded for the month and based on it the employee share and an equal employer share of EPFO are to be reckoned, then the cumulative value is the CTC and not the other way round.
From India, Mumbai
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