How Should We Handle PF Deductions in CTC: Fixed Amount or Percentage of Salary?

Hello everyone,

We deduct 12% of the basic salary, and if employees are absent, their salaries are deducted, resulting in the basic salary decreasing every month. The Provident Fund (PF) contribution varies monthly.

Our company wants to implement a rule that includes both the employee and employer contributions in the Cost to Company (CTC) and aims to deduct double PF from the CTC. This means deducting both the employee and employer contributions. The question is how the PF should be deducted – whether a fixed amount should be deducted every month (comprising both contributions) or 24% of the basic salary each month.

Please reply.

Thanks and regards,
Meenu

If the PF deduction of both employee and employer is part of the CTC, then the deduction will also depend upon the monthly payment of Basic + DA + Retention Allowance, if any. You cannot fix it at 24%. (Exactly, it should be 25.67%).

You will show the deductions from salary in the heads of employee and employer separately and independently. It does not depend on whether you are deducting solely from the employee's salary or the employer is contributing its part.

Regards

In continuation of this discussion, I want to know that the employee should contribute 12%, and the employer should make the same contribution, both of which should be shown in our CTC. The remaining 1.67% (admin and EDLI charges) – where should this be adjusted? As it also contributes to the company's costs, why is it not shown in the CTC?

Regards

Understanding PF Contribution Variability

No, the PF amount will not be fixed; it varies each month. There is no specific rule or formula to fix the monthly contribution for the same amount.

Regards.