How Can We Set a Maximum PF Contribution That Aligns with Employee Preferences?

Dear All,

Please help in capturing an idea for setting the maximum PF contribution that an organization can consider for their employees based on their wishes. Kindly suggest the various ways we can consider, such as adjusting the employee's Basic Salary or exploring other options.

Thank you in advance!

Hi,

The maximum PF that an organization can pay to its employees should not be more than 12% of an employee's basic salary + DA. However, as per the PF Act, an organization is bound to contribute 12% of the basic salary to a maximum of Rs. 6500/- per month, which is equal to 12% x Rs. 6500 = Rs. 780/-.

Any contribution beyond Rs. 780/- towards PF is completely optional at the will of an organization. You may increase the basic salary of the employees for the purpose of giving more PF in the employees' pocket.

Seniors, please correct me if I am wrong.

Regards,
Kriti

12% of Rs 6500 is the mandatory contribution payable by the employer. However, if the employer is willing to contribute based on a higher salary, there is no limit for that. Similarly, an employee is free to contribute any percentage higher than 12%, with the maximum limit being up to 100% of their salary.

Regards, Madhu.T.K

Hi, I have a query related to the contribution regarding PF. Is it possible that the employer is ready to contribute the employer's part of PF (13.61%) over more than the ₹6,500 Basic+DA, but the employee wants to deduct the contribution (12%) only over ₹6,500 Basic+DA, not more than ₹6,500 Basic+DA? Is it possible? Seniors, please suggest...

Many of us have seen a reversal of the case, i.e., an employee willing to contribute a higher amount than Rs 6500 while the employer restricts the contribution to Rs 6500. In the present case, there is no illegality, and the employee can write to the employer that their contribution shall be restricted to Rs 780, whereas the employer is free to contribute based on the actual salary.

Regards,
Madhu.T.K

One of our employees has been given an increment of Rs. 2000/- from July onwards. Now, he wants to deposit this amount as his PF contribution, i.e., more than 12%. Can anyone increase his employee share in the mid-time? Please suggest.

Regards,
M. Rajesh

We can increase the contribution in the mid-period, no problem. Though the Payment of Wages Act, 1936, restricts that the total deduction in any wage period should not exceed 50% of the total wage payable to him for that period, section 7(4) of the Act says that nothing in this section (section 7 pertaining to deductions from salary) prevents an employer from recovering or contributing from the salary under any law in force. The Provident Fund Act has not put any restriction on contributions, and as such, one can contribute any amount, and his act of contributing is purely at his own will and interest. Moreover, if section 7(3)(ii), which tells about the maximum of 50% deduction, is taken for granted, then the employer may not be able to deduct more than 50% even if the employee has not attended the office or is on leave without pay for the full month. Therefore, that section is to be read along with other counter sections of other laws in force.

Regards,
Madhu.T.K