Is PF Mandatory for Contractors if Basic + DA Exceeds 6500? Seeking Advice

Dear all,

Hi,

My query is one of our contractors is not paying PF and says that the consolidated pay of his labor is more than 6500/- per month, whereby he says that he is going to show the same as Basic + DA. He asks me if there is any rule which states that he needs to compulsorily pay PF even if the basic + DA is more than 6500.

Kindly suggest and give me your valuable advice.

Waiting for your valuable replies.

Thanks & Regards,
Siva

Dear all,

Hi,

My query is: One of our contractors is not paying PF and says that the consolidated pay of his labor is more than 6500/- per month, whereby he claims that he is going to show the same as Basic + DA. He asks me if there is any rule that states he needs to compulsorily pay PF even if the basic + DA is more than 6500.

Kindly suggest and provide me with your valuable advice.

Waiting for your valuable replies.

Thanks & Regards,
Siva

For more information, visit http://citehr.com#ixzz15X9Ip2Qt

Dear Siva,

As per my understanding, it is not only the 6,500 threshold limit that restricts the contractor from paying the PF contribution. There are other conditions as well that should be met, and the Employer/Contractor should submit a letter to the PF department stating that all his employees have a Basic + DA of more than 6,500 and hence will not be covered for PF contribution. Regardless of the threshold limit, if the company has exceeded 20 employees, they should register for PF.

Regarding the other two conditions, they are as follows:

1. An employee should not have been a member of PF at any time during their previous employment.
2. An employee should have withdrawn all their previous PF accumulations, if any.

Please verify with the PF department if you are unsure about the above.

Thanks

Dear Sir,

Thank you for your immediate reply. The issue at hand is that the contractor has numerous contract laborers and is supplying labor to three plants where he is remitting PF & ESI. However, this is a new plant that commenced production in October 2010. It seems that the contractor is attempting to avoid PF payments. While he has paid ESI, he is trying to evade PF payments by claiming that even the contract laborers are not interested in PF. Kindly provide me with advice on how to proceed.

Thank you,
Siva

Dear Siva,

Firstly, please request the contractor to provide the PF registration number. If the employment of his laborers is under the same registration, he should collect a Form 11, which is a declaration given by the employee stating that their salary is more than $6,500 and, therefore, they do not wish to contribute to the PF. The form should also state that the employee does not hold any previous PF number from any organization.

This Form 11 must be submitted to the PF department. Only then can you confidently state that the laborers are not covered under the PF, and as a result, there is no need for PF remittance. Otherwise, you may be exposed to PF compliance issues since you are the principal employer for the contract laborers.

Thanks

Dear Siva,

Firstly, please request the contractor to provide the PF registration number. If the employment of his laborers is under the same registration, he should collect a Form 11, which is a declaration given by the employee stating that their salary is more than 6,500 and hence they do not want to contribute to the PF. It should also state that they do not hold any previous PF number in any organization.

This Form 11 has to be submitted to the PF department. Only then can you take the stand that they are not covered under PF, and hence there is no need for PF remittance. Otherwise, you will have exposure to PF compliance since you are the Principal Employer for the contract laborers.

Thanks,

Showri

+91-99001-03820

More at https://www.citehr.com/296469-contra...#ixzz15XS5mc5y

Form 11 Applicability for New Contract Labor

If the contract labor has newly joined, then the same Form 11 will be applicable. They should mark the option stating that they were not a member of PF earlier. Subsequently, the same form should be submitted to the PF office if their salary is more than 6500.

If an employee is not covered earlier under the PF Act but draws a salary of more than 6500, including Basic + DA, he is not amenable under the PF Act, and the employer/contractor is not legally bound to contribute to PF. However, this will differ when an employee was earlier covered under the PF Act, and by virtue of a salary increase, he crosses the limit of Rs. 6500; he is bound to be covered under the PF Act irrespective of his present salary.

With regards,
Sanagapalli

Dear Mr. Siva and others,

Please note:

1. You have indicated that the consolidated salary is Rs. 6500/-
2. PF is payable not on the consolidated salary but on basic+DA
3. If Basic + DA is more than Rs. 6500, there is an option not to pay PF and follow the procedure of filling form 11
4. If your company is paying PF to the contractor as per your agreement, then invariably he has to remit it to PF and cover his employees; otherwise, all this amount will go to his profit pocket!
5. If the basic + DA is less than Rs. 6500, immediately ask him to cover all his employees under PF and pay the contribution; otherwise, your company is liable to pay
6. Also, as other respondents say, if he had covered his employees earlier and is not doing so now, it is illegal, and he has to cover them.

Please take suitable action based on the above.

Regards,
K. Ramachandra
Bangalore

Clarification on PF Contribution for Principal Employer

As per the PF Act, the principal employer is liable to pay his share of contribution up to Rs. 6500/- for basic + DA. He need not pay for amounts above Rs. 6500/-. This doesn't mean that he will not pay at all. He has to remit his contribution of Rs. 6500/-, i.e., Rs. 780/-.

Regards,
Srujana

Dear Sivasuil,

1. Please check if more than 20 employees are working in his company.
2. If yes, please ask for the registration certificate.
3. Even if he shows Basic + DA as 6500, he still has to deduct 780/-, i.e., the ceiling.

Thanks,
Manjula

Hello Everyone,

Sub: Regarding P.F. ceiling

If an employee's basic + d.a. is more than 6500, then the maximum deduction from the employee's end is 780.00. It depends on the employee whether he/she wants P.F. deduction or not. However, it is compulsory for Form-11 to be filled by the employee voluntarily and submitted to the concerned P.F. department.

Condition:
1. Employee newly joined and basic + d.a. is more than 6500.00.
2. Employee should not have been a member of PF at any time during his previous employment.
3. Employee should have withdrawn all his previous PF accumulations, if any.

Regards,
Bunti

Just check again with the PF department if you are unsure about the above.

Clarification on PF and ESI Contributions for Contractor Employees

If contractor employees receive Basic + DA of more than Rs. 6,500/-, they do not need to pay PF. However, please check their salary register. If their salary is less than Rs. 15,000/-, they should pay ESI.

Regards,
K Subramanian

Kindly find the attachment for the ceiling limit of P.F for becoming a member in the P.F Fund.

Thank you,

Regards,
Mayank
[Phone Number Removed For Privacy Reasons]

As per the PF Act, wages mean Basic + DA. So, it is compulsory to deduct and pay the PF for Basic + DA (i.e., Basic - 3500 + DA - 3000, total PF Rs. 780 + Rs. 780 = Rs. 1560/-). As per the EPS Act, the ceiling for wages is Rs. 6500/-; above that amount, wages need not be paid. Only follow the up to ceiling wages.

Regards,
E. Sivasakthivel.

The cardinal principle is that an employee (otherwise fulfilling the criteria of >20 persons engaged), whether by the Principal Employer or the Immediate Employer (Contractor), enters first time in employment and draws a basic salary (not + D.A) > 6500/- per month, then he can apply for exemption from P.F. to be declared as an exempted employee. Other than this, all are to be covered under P.F. Act, up to Basic Pay <= Rs. 6500/-

Even if the contractor disobeys this, the Principal Employer is supposed to pay the P.F. contribution on behalf of the contractor and adjust the amount from his bill.

D.K. Moitra

There is no rule for compulsory payment of P.F. if the salary goes above ₹6500/- basic + D.A. It can be possible with the mutual understanding of the contractor and contract worker in writing. You can also demand the P.T. challan.

Thank you.

Dear Shiva,

Payment of PF is a must by the Contractor, whether the salary is more than 6500/- or not. This 6500/- clause is particularly applicable to have a sealing in PF. If the employee's basic + DA salary is more than 6500/-, then up to 6500/- only you can recover the PF amount from any pay. If the management wants to pay on the total Basic + DA amount, that is applicable also. Therefore, you should insist that the Contractor also pays the PF.

Hope this is clear to you.

Regards,
Murthy

My question is if an establishment has a PF number but some of its employees are drawing wages (basic + DA) more than 6500, do we need to fill out Form 11? Some say to submit Form 11 to the PF department, while others say it's not compulsory; just maintain Form 11 in your company's PF records.

Hi!

Paying more than Rs. 6500/- per month is irrespective of the liability to pay P.F. If the following conditions are met, then the individual has to register with the P.F. department:

1. Employing 10 workmen in any day if working with the aid of power, otherwise 20.
2. If the individual is paying Rs. 10000/- as Basis+D.A., in that case, they have to pay P.F. on Rs. 6500/-.
There is no issue whether it is a new plant or an old plant; P.F. starts from the first day of production if the minimum number of employees crosses the specified limit. Make sure to communicate with your contractor in a proper legal way.

Regards,
Mitesh Pathak

Hi Everybody!
I am in peculiar state.
The contractor doesn't have PF allotted to his labours, and one of the labour has died in an accident at site, what actions against PF obligation to be done.... Our client is active in asking for the PF obligation details.
Labour compliances have been cleared.
Regards,

Dear Koshik,

Please speak to the contractor regarding this issue, and he will provide you with the PF number for your claim. If the contractor is unwilling to share the PF details, kindly contact the principal employer directly to address this unfortunate situation.

It is the principal employer's responsibility to ensure all PF challenges and returns are taken care of promptly.

If the basic pay + DA is more than 6500 upon joining, and the employee was not a member of EPF earlier, he is to be treated as an excluded employee. The contractor/employer is not statutorily bound to deduct PF contributions unless mutually agreed upon.

Dear Mr. Chandok,

First of all, 6500 is a ceiling limit set by the government. If drawing basic + DA more than 6500, then PF is considered on 6500. It doesn't matter whether the employee was not a member of EPF earlier.

As per PF guidelines, no one can treat an employee as excluded or included by their own will; it is judged based on whether PF is applicable or not.

Mitesh Pathak

Dear Sir,

First of all, 6500 is a ceiling limit set by the government. If drawing basic+DA more than 6500, then PF is considered on 6500. It doesn't matter whether the employee was not a member of EPF earlier. According to PF guidelines, no one can treat an employee as excluded or included by their own will; it is judged by only one way whether PF is applicable or not.

Mitesh Pathak

Dear all,

I am employed in the Government sector, and my contractor has been deducting the Provident Fund (P.F.) contributions over the past year. However, he has not provided the P.F. amount from his end, and there seems to be an issue with the calculation as he has deducted double the P.F. amount from our salaries. This has resulted in us not receiving our basic salary. Upon checking, I have found discrepancies in the P.F. amount, which has not been accurately paid by the contractor. I am seeking guidance on how to address and resolve this problem effectively.

Thank you.

There is no statutory liability for the contractor to contribute to PF if the basic and DA exceed 6500. For more information, please refer to the earlier posting.

Regards.

It would be advisable to request clarification from the department. If the clarification is positive, you may proceed to accept his argument regarding the collection of an Indemnity Bond from him.

With Regards,
Advocates & Notaries
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