In an organization, PF contribution is deducted from the actual basic salary since starting, i.e., 12% on 40,000/—, i.e. Rs. 4,800 per month.
To reduce the cost, now that the organization wants to deduct a PF contribution on Rs. 15,000/- i.e. Rs. 1,800/-
Is it possible to reduce the deduction amount for continuous employment?
From India, Kolkata
To reduce the cost, now that the organization wants to deduct a PF contribution on Rs. 15,000/- i.e. Rs. 1,800/-
Is it possible to reduce the deduction amount for continuous employment?
From India, Kolkata
Certainly YES.
Section 12 of the EPF and MP Act says that the employer should not reduce the salary on which PF is being contributed. This provision is meant to avoid the act of employers to reduce the salary just to reduce their burden of contribution. But this requirement will not be applicable to such cases where the contribution is made on Rs 15000. Yes, if the employer cannot make it on salary less than Rs 15000.
In Maratwada Gramin Bank case the Supreme Court ruled that the EPF Organisation cannot demand contribution on a salary above the threshold limit. Therefore, the employer can very well reduce the contribution from the actual salary to Rs 15000. The only thing to be borne in mind is that if the contribution of employer is one of the conditions of service, say included in the CTC, then changing the same would require consent of the employees, as mandated by section 9A of the Industrial Disputes Act.
From India, Kannur
4252Section 12 of the EPF and MP Act says that the employer should not reduce the salary on which PF is being contributed. This provision is meant to avoid the act of employers to reduce the salary just to reduce their burden of contribution. But this requirement will not be applicable to such cases where the contribution is made on Rs 15000. Yes, if the employer cannot make it on salary less than Rs 15000.
In Maratwada Gramin Bank case the Supreme Court ruled that the EPF Organisation cannot demand contribution on a salary above the threshold limit. Therefore, the employer can very well reduce the contribution from the actual salary to Rs 15000. The only thing to be borne in mind is that if the contribution of employer is one of the conditions of service, say included in the CTC, then changing the same would require consent of the employees, as mandated by section 9A of the Industrial Disputes Act.
From India, Kannur
Madhu Sir
If the contribution is reduced from actual (Basic+DA) to Rs.15000/-, will he become eligible for EPS contribution @8.33% on Rs.15000/-(ie.Rs.1250/-) now or not. Earlier he was not under EPS due to higher wages.
If not eligible for EPS will there be any possibilities of rejection of his online claim at future due to resignation or otherwise stating that " Employee salary is 15000/- and eligible for EPS contribution but no EPS contribution is made" from the EPFO Portal.
erv
From India, Madras
If the contribution is reduced from actual (Basic+DA) to Rs.15000/-, will he become eligible for EPS contribution @8.33% on Rs.15000/-(ie.Rs.1250/-) now or not. Earlier he was not under EPS due to higher wages.
If not eligible for EPS will there be any possibilities of rejection of his online claim at future due to resignation or otherwise stating that " Employee salary is 15000/- and eligible for EPS contribution but no EPS contribution is made" from the EPFO Portal.
erv
From India, Madras
An employee not covered by EPS due to the reason that his PF qualifying salary was above Rs 15000, but on change of employment, if his salary becomes less than Rs 15000, he shall be given EPS. In such scenario, in his future employments also he would become an employee covered under the Pension Schemes.
But it is again a question of law and I don't know if the EPFO which is currently working like a private financial company will come out with some argument. It is not necessary that an employee who started his career with salary of more than Rs 15000 should always work with the same salary. The opportunities and getting lesser and in such a scenario we can't say that we will continue to get the same salary always. Suppose an employee was not covered even under the EPF because his salary was above Rs 15000, and the employer was not interested to contribute to EPF in respect of employees whose wages exceeded Rs 15000. Now, if he changes his employment and accepts a job which offers him salary less than Rs 15000. Will the employer be able to say that he will not contribute to his PF because when he started his career he was not given PF by his previous employer? No. Will the EPFO say that he cannot be enrolled under EPF because in his previous company his salary was more than Rs 15000, and hence was excluded? No. If we apply the same theory in Pension Fund contribution, the employee should be given Pension scheme coverage if he subsequently choses to join an establishment with less than Rs 15000 as salary.
From India, Kannur
But it is again a question of law and I don't know if the EPFO which is currently working like a private financial company will come out with some argument. It is not necessary that an employee who started his career with salary of more than Rs 15000 should always work with the same salary. The opportunities and getting lesser and in such a scenario we can't say that we will continue to get the same salary always. Suppose an employee was not covered even under the EPF because his salary was above Rs 15000, and the employer was not interested to contribute to EPF in respect of employees whose wages exceeded Rs 15000. Now, if he changes his employment and accepts a job which offers him salary less than Rs 15000. Will the employer be able to say that he will not contribute to his PF because when he started his career he was not given PF by his previous employer? No. Will the EPFO say that he cannot be enrolled under EPF because in his previous company his salary was more than Rs 15000, and hence was excluded? No. If we apply the same theory in Pension Fund contribution, the employee should be given Pension scheme coverage if he subsequently choses to join an establishment with less than Rs 15000 as salary.
From India, Kannur
Madhu Sir,
Can there be two sets of employees one contributing at (Actual higher Basic and DA) and another set of employees contributing at Rs.15000/- in the same organisation or there should be uniformity ie. either actuals or ceiling for all employees.
Can we show PF qualifying salary a little above Rs.15000/- say 15500 or 16000 and exclude him from EPS contribution as before. Will there be any query from EPFO for this. The employee wants his take home to be increased due to financial commitments every month. The impact of employer contribution will not be there since the employer contribution is restricted to 15000/- even for higher wages before also.
erv
From India, Madras
Can there be two sets of employees one contributing at (Actual higher Basic and DA) and another set of employees contributing at Rs.15000/- in the same organisation or there should be uniformity ie. either actuals or ceiling for all employees.
Can we show PF qualifying salary a little above Rs.15000/- say 15500 or 16000 and exclude him from EPS contribution as before. Will there be any query from EPFO for this. The employee wants his take home to be increased due to financial commitments every month. The impact of employer contribution will not be there since the employer contribution is restricted to 15000/- even for higher wages before also.
erv
From India, Madras
There is legally no issue if you have two sets of employees, one set contributing on actual salary and another who contribute on Rs 15000. It will depend on the employer's decision only.
You can keep the salary of employees who join for the first time at a level of more than Rs 15000. But the question is what happens if the PF qualifying salary is made as Rs 25000 or Rs 30000 by the EPFO? Already discussions are on to revise the threshold limit from Rs 15000 to Rs 30000. It is expected that both under ESI and EPF it will be increased to Rs 25000. This is mainly because in almost all states, the statutory minimum wages is more than Rs 15000.
Even at keeping the salary at Rs 15500 or Rs 16000 so as to exclude them from the coverage of PF, the basic thing is that whether there would be any bifurcation of salary like basic wages, HRA, conveyance, etc? If you are contributing on basic pay alone, then in order to exclude the new employees from the ambit of PF you should make the basic pay at more than Rs 15000 right? Then will it be higher than the basic pay of existing employees? In compensation restructuring I have come across with such issues also. Therefore, fixing the salary with a view to avoiding statutory coverage is not a wise decision.
From India, Kannur
You can keep the salary of employees who join for the first time at a level of more than Rs 15000. But the question is what happens if the PF qualifying salary is made as Rs 25000 or Rs 30000 by the EPFO? Already discussions are on to revise the threshold limit from Rs 15000 to Rs 30000. It is expected that both under ESI and EPF it will be increased to Rs 25000. This is mainly because in almost all states, the statutory minimum wages is more than Rs 15000.
Even at keeping the salary at Rs 15500 or Rs 16000 so as to exclude them from the coverage of PF, the basic thing is that whether there would be any bifurcation of salary like basic wages, HRA, conveyance, etc? If you are contributing on basic pay alone, then in order to exclude the new employees from the ambit of PF you should make the basic pay at more than Rs 15000 right? Then will it be higher than the basic pay of existing employees? In compensation restructuring I have come across with such issues also. Therefore, fixing the salary with a view to avoiding statutory coverage is not a wise decision.
From India, Kannur
Thanks Madhu Sir
The employee is still in continuous employment with the same company. If we restrict PF contribution on Rs.15000/- now onwards and enroll in Pension Fund by contributing 1250/- from Employer Share, will the EPFO ask us to pay the Pension Fund Contributions Rs,1250/- per month for earlier months also wherein this was diverted to his EPF account and nil in Pension Fund due to higher wages ie actual basic+DA or they will transfer the fund from EPF to Pension Fund for the earlier months also internally where he is still continuing the employment.
erv
From India, Madras
The employee is still in continuous employment with the same company. If we restrict PF contribution on Rs.15000/- now onwards and enroll in Pension Fund by contributing 1250/- from Employer Share, will the EPFO ask us to pay the Pension Fund Contributions Rs,1250/- per month for earlier months also wherein this was diverted to his EPF account and nil in Pension Fund due to higher wages ie actual basic+DA or they will transfer the fund from EPF to Pension Fund for the earlier months also internally where he is still continuing the employment.
erv
From India, Madras
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
EPF - Pension contribution is zero WHY.jpg
Analysis on SC's judgment on EPF Contribution on Spl.Allow.docx
EPF-Circular-da ted-23-May-2011 -Splitting-of-M inimum-Wages-fo r-the-Purpose-o f-PF-Contributi on-Not.pdf