Understanding PF Deductions: Employee vs. Employer Contributions

Dear Seniors,

As per my Manager in HR, PF is deducted for those whose basic salary is less than 6500. Is that right? Furthermore, if any employee wants PF to be deducted with a basic salary above 6500, they have to submit a few documents, and there will be no deduction from the employer's part in that case. Is that correct? Additionally, if after an appraisal the basic salary exceeds 6500, will they not be covered under PF or what? Please reply soon.

Hi, this is Muthu,

There is no restriction like that; you can deduct all employees at the rate of 12%.

Dear,

Even after appraisal, if the basic salary of a certain employee increases beyond $6,500, it is still compulsory to deduct PF. We cannot discontinue it in between.

Hi Alfiya,

Q1) As per your HR Manager, it's right. If any employee's basic is below 6500/-, then PF is mandatory.

Q2) If the basic is above 6500/-, then it is optional. It is the understanding between the employee and employer. If the basic is above 6500/- and PF is being deducted, then the same contribution of 12% has to be made by the employer too. It will be a loss for the employer. Moreover, the employer has to pay 1.61% as administrative charges, once again, leading to a loss for the employer.

Q3) Once the employee has PF benefits when the basic is below 6500/-, due to promotion or increment, if the basic exceeds 6500/-, then PF should be continued. You cannot stop the PF benefit for the pay hike.

I hope you are clear now. If you have any doubts, feel free to contact me.

Cheers

Your HR Manager told you correctly that if an employee's basic salary is below 6500/-, then PF is mandatory; otherwise, it is optional.

Atul Somani
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Dear Mr. Jeevarathnam,

When a new employee joins, they need to fill out Form 11 (Self-declaration by the employee). If the employee is already a member of the EPF scheme, their membership should continue regardless of their salary. Membership is mandatory for salaries up to Rs. 6500 and optional for amounts above that.

If the employee is not currently an EPF member and has a basic salary exceeding Rs. 6500 upon joining, they may qualify as an exempted employee. Enrollment in EPF is optional for both scenarios.

Regards,
Anbu Loganathan,
Manager - HR

Hi all,

I have a doubt about whether the employer's and employee's PF is deducted from the employee's salary itself.

Absolutely not, only employees' contribution of 12% will be deducted. Employers' side contribution will be borne by the organization. It will not be deducted from employees' salaries.

Above Rs 6500/- of basic salary, there is no need to pay PF. However, if an employee possesses PF, then the employer should continue the contribution even if the basic salary is greater than Rs 6500/-.

Hi,

Your HR Manager is correct in this case. If any employee's basic salary is below 6500/-, then PF contribution is mandatory. There is no choice in this matter.

Regards,
Minesh Kumari

According to my knowledge, PF is mandatory. If the employee wants to contribute more to the PF account, that is his choice. The limit is now Rs. 6,950/-. The employer has to deposit the PF amount into the employees' PF account every month or year! Am I on the right track?

Ref: PF

If the employee is already a covered employee with an account number and has contributed to PF for some time, and he changes his employment or his salary (basic + DA + Retaining Allowance + Food concession) exceeds Rs. 6500/-, in such cases, PF has to be deducted compulsorily, and there is no escape on the ground that his salary exceeds Rs. 6500/-. On the other hand, if you have taken on an employee who was not a member of the PF earlier, the coverage under PF is optional and according to the wish of the company/employee.

With regards,

Sanagapalli

Dear Mr. Anbu Loganathan,

You are correct. If any employee is newly joining and even though his basic salary is above Rs. 6500 and he had EPF in an earlier company, then surely even in this organization, EPF contribution of up to Rs. 6500 is mandatory.

Regards,
Jeevarathnam P

Hi Jeena,

As per rules, only the employee's contribution of 12% on the basic will be deducted from the employee's wages. The remaining employer contribution of 12% and 1.61% of administrative charges are supposed to be contributed by the employer. However, nowadays, in a few IT industries, both employee and employer contributions are being deducted from employees' CTC. They clearly specify that both contributions are included in the CTC.

Regards,
Jeeva

If at joining the basic is more than 6500, then the employer is under no obligation to contribute 13.61% towards the PF account. However, the employee may opt for a contribution minimum of 12% and a maximum of 24%.

If the PF was already opted for when the basic was below 6500 and due to any reason, it crosses 6500, the employee and the employer have to contribute 12% and 13.61% respectively.

If the employer opted to contribute to the PF before the year 1997, and the number of employees was less than 20 as per the Factories Act 1952 and Provident Fund and Miscellaneous Provisions Act 1947, then the employer is allowed to pay a minimum of 10% contribution.

In the construction and catering industries, the direct laborers come and work for less than 60 days and are paid wages as per the Minimum Wages Act. However, the wages are paid on a daily basis, amounting to less than 6500/-. Has the company they work for deposited Provident Fund for them?

Please advise me.

Dear,

Once an employee joins EPF membership in the company, EPF deductions continue. The basic salary can be increased to ₹6,500.

Jitender Verma
09999470511

Mr. Asgokhale,

What's the ceiling Basic for PF? Is it Rs. 6500 or Rs. 6950? Could you please confirm that?

Sree

Hi Jeevarathnam,

Thank you for the reply. Will it be a problem for the company if any of the employees or previous employees raise an issue regarding the deduction of both side PF from the CTC? Is it the right thing to do from the company's part?

Hi,

It's not the right thing. In that case, if you see, the gross will be less. In gross pay, they won't show the employer's contribution in wages, but in CTC, they will show it. Initially, the employer drafts the appointment letter and declares that the CTC includes all the expenses for the employee as part of the CTC. They use this justification in that manner.

Dear Deverjsing,

Nice question. I am working in a construction company as an HR Manager. If the organization is covered under EPF, all the employees should be covered under the act irrespective of the wage pattern (daily, weekly, fortnightly, and monthly).

Since the workers engaged in it are casual, mobile, and migratory in nature, the turnover of employees is very high. Maintaining Form 9 details is found to be very difficult because the sites are away from the corporate office. Site assistance doesn't understand the importance of the data.

Is there any way to address these kinds of problems?

Anbu Loganathan
Manager HR
9962391925
anbu@ksv.co.in

Can anyone please provide me with a copy of the Court or PF Office document stating that PF deduction is optional for those who are earning more than Rs. 6500 per month?

Dear friends,

Please upgrade your knowledge. EDLI charges, EPF Admin charges, and EDLI Admin charges will be calculated on basic + VDA + food allowance. The limit is not applicable on 6500/-.

Have a good day.

Dear All,

The above suggestion is correct as per the provisions of the EPF & MP Act, 1952. Go ahead.

With regards,

Sanagapalli VR