Understanding PF Deductions: How to Handle Adjustments for Approved Leave?

Hi all,

I have a typical scenario:

An employee with Basic + DA = 6500. His PF deduction in the month of January was 780, and the employer contribution was 541.

In the month of February, he had 5 days of leave without pay. So, his Basic + DA = 5417, and PF deduction was 650. Employer contribution was 451.

Now in the month of March, his last month's 5 days of leave without pay got approved, and he received the money for that. This means his Basic + DA for the month of March was 7583. What will be the ER.PF deduction in this case?

Also, should the employer contribution in the month of March be limited to 541 or not?

Please help.

Regards,
Aman

Dear Mr. Aman,

Normally, the deduction of salary on account of LWP should not be granted again afterwards. Salary is prepared based on an employee's attendance marked in the muster roll. If it is sanctioned afterward, it will create problems in salary preparation. Either you have to tamper with the muster roll or the salary master data in the payroll package. Please keep in mind that once the attendance for a particular month is frozen, it should not be tampered with. Moreover, you cannot justify an increase in basic or DA for a particular month. Therefore, this is not legally acceptable.

However, you can show the increased figure in Form-3A since you have already paid extra salary for 5 days in March.

Regards,
Manoranjan

If an employee's salary is Rs 6500 and his contribution to PF is Rs 780, the employer's contribution should also be Rs 780, but of this, Rs 541 will go to the Pension Fund and the remaining Rs 239 will go to PF.

Now, if in any month leave is not approved and there is a loss of pay for 5 days, the salary paid will be less and accordingly, the contribution will also be less. In the instant case, it is Rs 650. If the leave is later regularized (there is no illegality in paying the withheld salary for want of approval or explanation from the employee in the subsequent month) and the salary paid crosses the limit, the employer can deduct PF on such increased salary (i.e., salary + arrears of salary), and there is nothing wrong in depositing the contribution as follows:

EPF - 910 (12% of 7583) + 278
EPS - 632 (8.33% of 7583)

In the annual return, the EPS account will tally with the figure taken at the rate of Rs 6500.

If you do not think that the Pension fund should exceed Rs 541 at any cost (I do not think that in any month there will be any problem since on reconciliation the amount will tally), then you can deposit as follows:

EPF - 910 + 369 (difference between EPS and total contribution) EPS 541.

Regards,

Madhu.T.K