Understanding PF Deductions: Does Absenteeism Affect Employee Contributions?

Hi HR Experts,

Suppose one employee has a monthly salary of Rs 8000, but due to absenteeism, he only came to work for 20 days. As a result, his net paid amount (Rs 5500) will be below the PF limit (Rs 6500).

My question is, does this employee have to pay the PF amount?

Please reply to me as soon as possible.

I hope the month in question is the month during which he joined, or he is an excluded employee with a salary at his joining of Rs 8000 (more than Rs 6500). If so, if for 20 days he has earned only Rs 5500, he need not be covered.

Regards,
Madhu.T.K

No, PF is not deducted from the earned salary. Exemption of PF is applicable when the basic salary rate of an employee is greater than 6500/-. Even if he earns less than 6500/- due to any leave, his PF will not be deducted.

Hi Chirag,

PF is deducted on BASIC. Again, the basic depends on the Minimum Wages Act.

On a Gross salary of 8000/-, if 40% is Basic, it amounts to 3200/-, and PF at 12% is Rs 384/-. However, the individual has only worked for 20 days.

Hence, with a daily rate of 8000/30*20, the Gross salary is 5333. Therefore, Basic would be 5333*40% = 2133, and PF = 2133 * 12% = 260.

Professional Tax (PT) in Maharashtra would be 175. ESI would be 5333*1.75% = 93.

If the company provides Sick Leave (SL) from the Date of Joining (DOJ), and the employee can avail 6 SL by providing a Doctor's Certificate, then the paid days would be 26.

Based on the above calculations, you can determine the Gross and Net pay.

I hope I have made it simple and clear with the example provided.

Dear Gaurav,

Since he is already an excluded employee, there is no need to cover him just because he earned less than Rs 6500 during a particular month.

There is no ruling stating that 30%, 40%, or any other percentage should be treated as basic salary. While it may be a practice in your establishment, it may not be the same in all establishments, and there is no rigid rule regarding this.

Regards,
Madhu.T.K

Hi HR Experts,

Could anyone please send me instructions on how to submit PF returns in Excel format? Please send them as soon as possible.

Regards,
Rao

If the monthly salary is $8000, then his 20-day salary will be $5333. Now, 30% of $5333 is $1599. He will have to pay $32 for PF and $94 for ESI.

Sanjeev

Hi,

I agree with Gaurav. The PF calculation is based on BASIC & DA at 12%. The maximum PF deduction is ₹780 as per the PF Act. If any employee works for even one day, PF should be deducted as per the PF Act on Basic & DA.

Regards,
Dashrath

Let me once again say that if an excluded employee's salary for any month is short of Rs. 6500 due to Loss of Pay, please do not include him in the coverage because once covered, he will be covered for the rest of the service.

I also do not agree with 30% of the salary. There is no such calculation.

Regards,
Madhu.T.K

Hi.

Suppose one employee has a monthly salary of Rs. 8000, but due to his paid time off, he is present for only 20 days. So, his net earnings for that month will be around Rs. 5500, which is less than the PF limit of Rs. 6500.

My question is, does this employee have to pay PF?