New Hire Earning More Than Others: Will They Still Get PF Coverage?

Hi,

If we recruit a new employee at a salary of Rs. 10,000 per month and all other employees are earning less than Rs. 6,500 and are covered under PF, will this new employee also be covered by PF?

When all the employees are covered under PF, the new employee also has to be covered under PF. However, when calculating the PF for an employee with a salary of more than 10,000, you need to calculate the PF on 6,500 only as it is the maximum slab.

It is not mandatory that a new employee whose salary at the time of joining exceeds Rs. 6500 should become a member of EPF. However, the existing members will continue to be members even when their salary increases beyond Rs. 6500.

Regards,
Madhu T.K

No, under the ESI Act, an employee ceases to be covered when his salary crosses Rs. 10,000. However, such a loss of coverage will only occur when the contribution period ends.

Regards,
Madhu.T.K

Dear Madhu,

The maximum limit in ESI is now ₹10,000 instead of ₹6,500 or ₹7,500. Therefore, don't mix up ESI and PF.

My dear friend, under PF, first, you need to create the breakdown of the CTC. Then, the Basic Salary will be subject to PF, not the full amount of the salary. Secondly, if any employee is not interested in having their PF deducted, you can take a declaration on paper, and they will not be included under the PF Act.

Feel free to ask anything about the PF.

Thank you.

Best Regards,
Brajesh Sharma
Contact: 9971054160

Hi All,

Well detailed.

Very true words said by Mr. Brijesh, as PF attracts basic & DA only. So, after the break-up of salary, only one can calculate the PF contribution. If an employee's basic salary is more than 6500/- per month, then based on his self-declaration, one may be exempted or not covered under the PF.

Regarding ESIC, it is based on the gross salary paid at the end of the month. The maximum ceiling is rupees 10,000/- gross salary. Once an employee is covered, they shall remain a member covered under ESIC for the same period, even if the salary exceeds rupees 10,000/- per month. In such cases, the ESIC contribution shall be made at the increased salary rate.

Regards,

Amit Seth.

Dear,

If the new employee has a basic salary more than Rs. 6500, then it is not mandatory to be a PF member. However, you have to obtain joint consent from the employee not to be a member of PF.

Thanks

Hi,

In my experience, all good companies have a provision for PF. If all other employees are covered under PF, then even the new employee is generally supposed to be covered as well. Companies typically do not change their policies for a single employee, although there can be exceptions.

PF is calculated based on the basic salary. The 'basic' slab is usually considered as half of the gross salary. For example, if an employee's salary is ₹10,000, then their basic would be ₹4,000, resulting in a PF deduction of 12% of the basic, i.e., ₹480.

With every salary increment, the salary slabs may change, and the HR department must consult with the PF officers regarding these changes.

Thanks,
Gunjan Sarojwal
Sr. HR Executive & Trainer

Dear Brijesh Sharma,

Please read the doubt asked by Madhu_abc63 and my reply to his post relating to ESI out of coverage. I did not mix the EPF with ESI, and I know very well what the ceilings of wages are under these two Acts.

Regards,
Madhu.T.K