Navigating PF Deductions: How Should We Transition to Employee Contributions?

Dear Seniors,

I seek your help and expert suggestions on the following query:

Ours is a company that started with just 3 employees. Today, we have 130 employees. When the company started, as it was not covered under the PF Act, PF deductions were not made. Later, upon PF registration, the company began deducting PF from newly hired staff but paid both the employee and employer contributions. Now, the company wishes to discontinue this practice and implement a common policy for all employees, deducting the employee's share of PF from their salaries.

Please provide the best solution for this situation:

1. Can we immediately start deducting PF from employee salaries as it is a statutory deduction?
2. Can employees claim that they have received full salaries without PF deductions till date and are unwilling to have PF deducted now?
3. Can the company make an ex-gratia payment and then request employees to pay their own share of PF?

Your valuable suggestions are greatly appreciated.

Many thanks.

Kind Regards,
Sonia

When you were expected to deduct employees' share of contribution, you did not do so. Why? Was it due to ignorance of the law or to pamper your employees? Now, if you go for deduction, that will lead to taking away the privilege given. Any privilege given always becomes a right later on. In your case, this has also happened. To manage the situation, you have either to admit that you were not deducting employees' share due to my mistake/ omission/ ignorance. Try issuing a circular stating that henceforth the employees' share of contribution will not be borne by the employer, and the employer will deduct the employees' share from the salary as per the provisions of the EPF Act. There will be negative responses to the circular. However, when you add that the employer will not recover any employees' share already contributed in the past, the gravity of opposition can be reduced.

Regards,

Madhu.T.K

Dear Senior,

Thank you so much for your kind attention. It was due to ignorance that the PF was not deducted from the employees' salaries, as there was no HR personnel to guide the management. Your advice to issue a circular is helpful.

Many thanks.

Kind Regards,
Sonia