Can We Offer New Employees a Choice on PF Deductions for Salaries Above Rs. 6500?

We are an education organization. We have been deducting PF for all employees from the day of joining. Now, we are considering providing new joiners with a basic salary above Rs. 6500/- per month the option to decide whether they want PF deductions or not. Can we implement this for a portion of the employees?

PF Deduction for New Joiners

If the new joiners are not interested in deducting PF (those who are drawing a basic salary of more than Rs 6500 ONLY), you can request a letter from them asking not to be covered under PF as they are drawing ________ salary per month. Based on that, you need not deduct PF for them. However, keep in mind that for existing employees, even though they are earning above 6500, PF deduction should not be stopped.

Yes, we also deduct the PF of employees who exceed the basic limit, i.e., ₹6500/-. This basically depends on the employer whether they deduct the PF of employees who exceed the PF limit or not.

On the other hand, if an employee doesn't want to deduct their PF (in case they are exceeding the PF limit - for new joiners only, not for existing employees), they have the option not to deduct their PF. They have to fill a Form 11 or submit an application to declare that they do not want the PF to be deducted to the company's HR Department at the time of joining.

For existing employees, if an employee crosses the PF limit, it is not withdrawn, as already mentioned by Mr. P. Ramachandran.

Regards,
Nandan Singh Negi
New Delhi

Dear Thakur,

The reply sent by Mr. Nandan Singh Negi and Mr. Ramachandran is very clear. Please feel free to seek further clarifications if needed. Cite HR members are always ready to help.

Regards,
A. Elangovan

These types of behaviors should be cracked down by the government of India. It has become a trend in industries to "play" with people's money. One of the major issues is the attitude of not putting India in its required place. Respect.

According to me, each and every employee MUST be covered under the PF Scheme if the organization is already covered under it. The only discretion you can exercise is that the Employer's contribution could be restricted to the maximum salary limit of Rs. 6500/- per month. There is no question of giving an 'Option' to the employees (drawing a salary more than Rs. 6500/- per month), whether they want to join the PF Scheme or not.

The information mentioned below is okay, but I just have confusion about the line: "BUT KEEP IT IN MIND THAT FOR EXISTING EMPLOYEES, THOUGH THEY ARE CROSSING 6500, PF DEDUCTION SHOULD NOT BE WITHDRAWN."

It means that if a company is registered under the PF scheme after the initial date, then existing employees whose basic salary is above Rs 6500 are mandatorily required to have PF deducted.

I think this is not the case. If they fill out Form 11 and declare that they were not a member of PF in the past and currently draw a basic salary above Rs 6500, then they do not need to be a member of PF.

Regards,
HR