Confused About PF Admin Charges? Need Clarity on Calculation for Ceiling Wages vs. Total Wages

Dear Friends,

I give below a typical case wherein I do not know how to calculate PF Admin charges. I would like to know, as per the PF Act, what is the correct calculation, i.e., whether PF admin charges should be calculated on the ceiling wages of Rs. 6500/- or on the total wages, since the employee is contributing more than the ceiling limit. Please let me have the clarity, as I am new to the HR Dept.

Case:
If B + DA > 6500, then Employee = 12%, Employer = 12% + 1.61%
Example: B + DA = 10000 and considering that the employee is not contributing any additional PF greater than 12% of 6500 for 10 months of the year and in February & March, the employee had contributed a lump sum of Rs. 3000 each month, then
Employer = Rs. 780, Employee = Rs. 3780 ((12% * 6500) + 3000) + 1.61% * 6500 = Rs. 104.65
In this case, whether the admin charge of 1.61% on 6500 is correct or not? Or should 1.61% be calculated on Rs. 10000 (B+DA) as stated in the first paragraph.

Regards,
Sreenandhini

I have already answered your queries including the above vide citeHR/320892 as under. Kindly go through.

Dear Sreenandhini,

Example: The employee's Basic - 5000, DA - 4000, Total of Basic + DA = 9000.

The Employee is on Loss of Pay for 5 days in the month and his earned salary is (9000 / 30) * 25 = 7500. For the purpose of PF calculation, Rs. 7500 will be considered.

The above calculation is fully correct.

Case 2:

If B + DA < 6500, then Employee = 12%, Employer = 12% + 1.61%.

Example: B + DA = 5000

Employee = Rs 600, Employer = Rs 600 + 1.61% * 5000 = Rs. 80.50

The above calculation is fully correct.

Case 3: (a)

If B + DA > 6500, then Employee = 12%, Employer = 12% + 1.61%.

Example: B + DA = 10000 and considering that the employee is not contributing any additional PF greater than 12% of 6500, then

Employee = Rs 780, Employer = Rs 780 + 1.61% * 6500 = Rs. 104.65

The above calculation is fully correct.

Case 3: (b)

If B + DA > 6500, then Employee = 12%, Employer = 12% + 1.61%.

Example: B + DA = 10000 and considering that the employee is contributing additional PF for the total of his salary then

Employee = Rs 780, Employer = Rs 1200 (10000 * 12%) + 1.61% * 6500 = Rs. 104.65

In this case, whether the admin charge of 1.61% on 6500 is correct or not?

Here, there are mistakes.

1. If the employee is not ready for a higher contribution, why does the employer have to contribute?

2. The split up of 1.61% is as follows: 1.1% is an admin charge on the PF amount, 0.5% is premium on EDLI, and 0.1% is an admin charge on EDLI. It should be mentioned that the premium and admin charges on EDLI must be restricted to the ceiling salary (Rs. 6500). However, admin charges on PF may vary according to the contribution above the ceiling salary.

Case 3: (c)

If B + DA > 6500, then Employee = 12%, Employer = 12% + 1.61%.

Example: B + DA = 10000 and considering that the employee is not contributing any additional PF greater than 12% of 6500 for 10 months of the year and in February & March, the employee had contributed a lump sum of Rs. 3000 in each month, then

Employee = Rs 780, Employer = Rs 3780 ((12% * 6500) + 3000) + 1.61% * 6500 = Rs. 104.65

In this case, whether the admin charge of 1.61% on 6500 is correct or not?

As stated above, split the normal contribution and additional contribution (mistakenly quoted as employee 780 & employer 3780, but it is vice versa) and charge 1.1% only on 3000.

Abbas.P.S

I understand that you have already explained. Now, my doubt is whether I should calculate 1.1% of PF Admin charges on Rs. 6500/- or Rs. 10000/- (including additional contribution of the employee) and what the PF Act says about this. I request you to clarify this point only and give reference to the relevant section of the PF Act.

Regards,
Sreenandhini.

Kindly refer to the concerned portion as follows:

"Example: B + DA = 10000. Considering that the employee is not contributing any additional PF greater than 12% of 6500 for 10 months of the year and in February & March, the employee had contributed a lump sum of Rs. 3000 in each month, then:
Employee = Rs. 780,
Employer = Rs. 3780 ((12% * 6500) + 3000) + 1.61% * 6500 = Rs. 104.65.

In this case, whether the admin charge of 1.61% on 6500 is correct or not? As stated above, split the normal contribution & additional contribution (mistakenly you quoted as employee 780 & employer 3780, but it is vice versa) and charge 1.1% only on 3000."

It is clear that 1.1% is not for the ceiling limit, but for the actual contribution. For details, kindly refer to paragraph 38(1) of the Act.

Abbas.P.S