Can IT Employees Choose to Opt Out of PF Under the Shops & Establishments Act?

Hi,

Can employees have the option to opt out of PF, especially in IT companies that are under the Shops & Establishments Act? Please let me know.

Thanks!

Yes, they can. Both the employee and the employer should agree to this, and they can proceed with PF enrollment.

I doubt. Actually, PF applicability organization cannot opt for PF contribution from either side: employee and employer. It's an Act under Social Security of employees, whether employed directly as employees or indirectly as contract workers. *Go through the Act.*

Yeah, I agree.

I meant if the basic salary is more than 6500 PM, then they can opt for the enrollment with mutual consent.

Hi,

What if the employee is okay to opt out, but the employer doesn't want the employees to opt out? There has been a situation wherein we had a PF audit, and the PF commissioner said not to entertain employees to be given an option of opting out. So, in that case, we would have to justify it to our employees. Do we have any such proof or evidence as per the act? Please let me know about this.

Thanks in advance!

Regards,
Anithaa

An establishment covered by the PF Act will not go out of coverage at any cost. Similarly, an employee once covered cannot opt out of coverage. Certainly, an establishment employing fewer than 20 (it is going to be 10) will not be covered, and similarly, an employee whose basic salary + DA at the time of joining or when the coverage is made applicable to the establishment is more than Rs 6500 shall be excluded from coverage.

On the other hand, an employee once covered will remain covered as long as he is within that establishment. These provisions are applicable to any scheduled employment for which there is no exemption.

Regards,
Madhu.T.K

Dear Madhu, please help me with a query. I have all the employees covered under PF. Now, to increase the take-home pay, management has decided to offer individuals who join certain departments from now on, whose basic salary is more than 6500, without PF.

Query on Employee PF Options

My doubt is, can I have both types of employees? For the same CTC, one employee without PF and one employee with PF. However, the act states that an employee can opt out of PF if their basic salary is more than 6500. This choice is dependent on the consent of both the employer and the employee. Therefore, if any employee wishes to opt out, we must provide them with a structure without PF. Conversely, if an employee wants PF, then we must provide a structure with PF. Am I correct in my understanding?

This is urgent. Thank you.

You are complicating your work, and you will face lots of trouble if the option is given out to employees. For example, if 100 employees join in a month and 60 want PF while 40 don't, how will you track it? It's better to have the management decide only for those who have crossed the limit (newly joined employees) and not for the existing ones. Another complication arises here: if your newly joined employee feels that the benefit is not being given to them, it creates a problem.

Why Consider Opting Out of PF?

My question here is, why do you think of opting out of PF? Nowadays, PF is the only saving option for many people as market prices are going up. So, please consider this and never think of opting out of PF.

If you have made a decision, there should be mutual concern from both the employer and employee regarding opting out of PF, and you can remove the PF component from your pay structure.

I am facing several complications here. Employees with the same CTC will have two different take-homes. However, I cannot make any changes for the employees who are already contributing to PF. So, if after the revision their basic salary exceeds 6500, I must continue deducting the PF. This will result in their take-home pay being lower than those who have recently joined and opted out of PF.

The difference in take-home pay is Rs. 1000, which will now help me in hiring new people.