Is There a Rule Limiting Employer PF Contributions for All Employees? Seeking Clarity

Hi All,

I have been made to understand that there is a rule that states if a company has a policy to pay a maximum of 780 as employers' contribution to PF, then it must be applied to all employees without exceptions. The issue arises when we hire new employees who prefer a higher amount to be deposited as it helps them save on taxes. I would like to present this case to my MD and determine if such a provision is mentioned in the PF Rulebook. If so, could you please provide me with the section that contains this notification?

Thank you all, and I hope for a prompt reply.

Vinit

As per the norms of the PF rules, the employer need not contribute over and above the limit of Rs. 780. Out of this amount, Rs. 541 goes to A/C No.10, and the rest goes to the employee's account. For employees on a CTC basis, this difference is not significant. You can suggest to management to hire people on a CTC basis so that both the employer's and employee's shares are included in the agreed-upon package.

Additionally, there is a provision in the act that allows employees to increase their contribution above 12%. To do this, a letter in the prescribed format must be submitted to the PF office. This way, the employee can benefit from tax exemption without affecting the employer's contribution.

Regards,
Prabhakar Rao.M

Dear Mr. Prabhakar,

Thank you for the valuable information. The issue here pertains to old employees. The new ones are being recruited on a CTC basis, so there are no issues with their PF. However, can we continue the 780/- contribution for the old employees without any compliance issues, right?

Regards,
Vinit

Dear Vinit,

In case the employer is paying over and above ₹780, they can stop paying beyond the ceiling of ₹6,500 (i.e., 12% or ₹780). It cannot be a compulsion from the employer's point of view to contribute more. Regarding the old employees, they can pay more to avoid the tax issue, but the employer won't be under any obligation to pay more.

Best regards,
Prabhakar Rao.M
Mgr-HR