Is Provident Fund Included in Notice Pay? Seeking Clarity on Salary Deductions

Hi all, I need help. Following is my salary structure:

- Gross: 8125
- In hand: 7383
- PF employer: 371
- PF employee: 371

Now comes the question. I have left the company by paying 1 month's salary (notice pay). They recovered the gross salary from my side, which is 8125. Now, my question is: Is PF also to be included in the notice pay?

Please help.

Regards, Ronny23

Dear Ronny,

Greetings for the day! Normally, basic pay is considered as notice period pay. I can't understand why they are calculating based on gross pay. Could you please confirm whether it is written in your appointment letter?

Also, PF is not included in notice period pay.

Kind regards

What if the appointment letter is vague, i.e., it states "3 months salary in lieu..." without mentioning Gross or Basic?

Dear Ms. Shikha,

It will be 3 months basic pay as allowances are only payable to you when you are working, not in other cases. There is no need to mention gross or basic in the appointment letter; it is always presumed as basic pay.

Hi,

PF is not included in this case. Suppose your date of leaving service (last day) is 31/01/2010 and you are paying 1 month salary Rs. 8125/- (i.e., notice pay, they are not deducting the PF from your salary).

Regards,
Murthy

Well, today I called HR and discussed this matter. I said that you have taken the gross salary from me, which includes the PF. Will you submit the same to my PF account? She said no. I left the company on 11th Feb, which makes my 11-day salary pending that I have to recover from the company. As I was discussing the matter about PF, she said that your PF would not be submitted but PF would be given for the 11 days' salary.

Further, I came to know that annually each employee gets a Form 3A, which tells the details about the PF amount credited to the PF account by the employer. I asked about this to my HR; she said we never provide any such detail to the employee. Isn't it strange?

Regarding my appointment letter, it's not mentioned in my appointment letter about the PF stuff.

Thanks

Hi Ronny,

The notice period recovery is only the basic salary plus any tax components as applicable. However, it will absorb PF because PF is a part of the basic salary, i.e., 12% of your basic salary is PF contribution.

Regards,
Bharath

I didn't get you. Are you saying that it's right to take PF as a part of notice pay? So, my company did right by recovering gross salary from me.

Furthermore, what about Form 3A that the employer provides to the employee annually, which has the PF details as I mentioned in my previous reply.

The expression 'emoluments' which are earned by the employee while on duty, occurring in section 2(b) of the Act, represents the amount actually earned by an employee during the period of his employment while he is actually on duty. The payment made in lieu of notice could not in any sense be regarded as expressing 'emoluments earned while on duty' and would constitute 'basic wages' within the meaning of the definition given in section 2(b) of the Employees' Provident Fund and Miscellaneous Provisions Act.

Reference:

India United Mills vs. Regional Provident Fund Commissioner, Bombay AIR 1960 Bombay 203; 1969 2 LLJ 733.

Hope the above is sufficient.

Thanks and Regards

Hi, it's not a matter of PF because PF is deducted on basic pay plus DA. If your gross salary is 8125, then PF should not be deducted because the limit for PF is either 10,000 or above. You had mentioned your PF deduction, but it depends on company policies.

Hi,

As per my knowledge, apart from PF, they also deduct ESI from your salary during the notice period. Now, it is the company's responsibility to deposit the payment of PF & ESI with the government into your account.

Rgds Yashwant

Thanks for informing us about the PF limit. Additionally, you mentioned the following:

"You had mentioned your PF deduction, but it depends on company policies."

What does this mean? Are you suggesting that some companies may not have a policy of deducting the notice pay along with PF? Is this your implication? In simple terms, do they have the legal right to include PF in the notice pay? Can they establish a policy that includes PF in the notice pay? By referencing PF, are they creating a connection with the government? That is the essence of my question.

Thanks, Yash. I share the same opinion that if they are entitled, they must deposit it. They cannot unilaterally dictate terms regarding PF. This is also my understanding, and that is why I am here seeking clarification.

Regards