Notice Pay Dilemma: Should Employers Deduct PF Contributions When Terminating?

Dear Senior, In any given situation where an employer is terminating an employee by providing notice pay, my query is whether the employer should deduct the PF employer contribution from the notice pay.

Employer Contribution to EPF During Notice Period

The first and simple thing to understand is that the employer will contribute to the EPF for every single working day of an employee. For example, if you are employed or working for 5 days in a month, it doesn't matter whether you are on a notice period or not; it will be counted for the deduction of EPF from both sides (employer and employee contribution).

Even though on notice pay, his Basic + D.A. salary will attract P.F. (Employer + Employee) in case the employee is a member and his contribution is remitted.

Regards,
Anil

The definition of basic wages under Sec. 2(b) of the P.F Act 1952 covers only those emoluments that are earned by an employee while on duty. Wages paid in lieu of notice of termination do not fall under the purview of basic wages, and hence, in my opinion, P.F need not be deducted on notice pay. There are e-books to address such doubts.

Regards,
B. Sai Kumar
Labour Law Consultant
Chipinbiz Consultancy Pvt. Ltd.

Here, two sets of thoughts are contradicting on the above-mentioned issue. Mr. Anil Kumar Arora and Mr. Anil are saying PF should be deducted on notice pay, but Mr. B. Sai Kumar is of the opinion that PF should not be deducted during the notice period.

Request for Guidance on PF Deduction During Notice Period

I am unable to come to a conclusion on this debatable issue. I request your help in reaching a common conclusion. Regards,

[QUOTE=saurav1314;1739367]Dear Senior, please help me to arrive at a common conclusion. Hmm, okay. Now, you just need to visit the links posted below because we have already discussed the same topic. You'd have gotten it yourself if you had tried to search by using the "Research" option located on our site page. You can also find the relevant discussed threads/posts on the sidebar of this page under "Similar Topics".

https://www.citehr.com/61096-pf-dedu...-urgent-2.html
https://www.citehr.com/134072-notice...duction-3.html

Notice pay is a kind of compensation for a stipulated period, so it should not attract EPF. However, the notice period from either side will attract EPF contribution.
Jimmii

If an employer terminates an employee by giving one month's notice, let's consider an example: if an employee is currently in the month of September, and the employer issues a letter terminating them with one month's notice, around October. During this one month, the employee remains on the company's payroll, continues working, and is considered an employee of the organization until October. Therefore, the employee is entitled to receive their salary for that period, and the employer must also deduct PF contributions.

In contrast, if an employer terminates an employee without a notice period in September, only the deductions for September are calculated.