Understanding PF Rules: Can Companies Stop Contributions for Salaries Above 6500 Without Resignation?

Respected All,

What is the rule if any company wants to discontinue the PF contribution of employees whose basic salary is above 6500? Is it to take resignation and then rejoin them, or is there any other form for that?

Thanks & Regards,

Deepak Awasthi

Employees' Provident Funds and Miscellaneous Provisions Act, 1952

SECTION HEADING

PROVISION

2.1
Scope
To all establishments with 20 or more employees. Employees' contribution up to a Salary (Basic + DA) less than or equal to Rs. 6500/-; Salary (Basic + DA) <= 6500

2.2
Contribution
*Employer's share
8.33% - Pension; 3.67% - PF; 0.5% - EDLI.
1.10% or Rs. 5, whichever is higher, for the administration of PF;
0.01% or Rs. 2, whichever is higher, for the administration of EDLI;
*Employee's share
12% - PF
*Contribution to be deposited within 15 days through challan

2.3
Returns
*Monthly - within 25 days (Form 3A)
*Annual - within 30 days (Form 6A)
*Return of membership, showing addition/deletion in members with details within 15 days of the close of every month (Form 9 / 5)

2.4
Registers
*Eligibility Register: to record the particulars of every employee eligible to become a member of PF and the number of working days during each month
*PF Register: in the form of contribution cards for each employee
*PF Ledger: this ledger contains the total monthly contributions, withdrawals from the account, repayment of loans, and the balance at the end of each month
*Inspection Book: to record the observations of an Inspector on his visit to the establishment

Mr. Deepak,

Kindly Note: The above information is given by taking wages up to a maximum of Rs. 6500 towards wage (basic + DA). Since an excluded employee, i.e., drawing wages more than Rs. 6500, can also become a member of the Fund and the Schemes on joint request. For instance, if such an employee is getting Rs. 10,000 per month, his share towards provident fund contribution will be Rs. 1200 (e.g., 12%), and the employer's share towards provident fund contribution will be Rs. 659 and Rs. 541 towards Employees' Pension Fund.

Hope this will work for you.

Thanks & Regards,
C. Bhushan Sharma

Dear All,

My query is: Can our company stop the PF contribution if, during a certain period, the (basic+DA) exceeds 6500?

Thanks & Regards,
Deepak Awasthi

Dear Deepak,

Once he becomes a member of PF and now his basic has increased from 6500, then also you cannot stop his contribution. He has to be a member of PF as long as he is working with you.

As you mentioned about taking resignation and asking for rejoining, if you ask legally, then you should continue to deduct his PF on the same number after rejoining.

Dear, what is Form 11 of PF? It is the form on which we take a declaration from a new employee at the time of joining that he was not a member of PF in the previous organization. So, what will be the condition here?

Thanks,
JS Malik

As rightly mentioned by Mr. Malik, once an employee becomes a member of PF, the contribution has to be continued even when the basic salary increases to more than Rs. 6,500. Your suggestion of resigning the employee and then showing it as a new joining will only be necessary if the employee remains idle for 2 months. Form 11 specifies that the employee has not been a member of PF in their previous organization.

Regards,
Hiral