Understanding PF Deduction and Coverage When Employees Transfer to New Companies

Dear seniors,

My query is: if an employee who is a member of PF moves to a new company where his basic salary is more than 6500, is it mandatory for the new company to continue deducting his PF or not?

Regards,
Bipin

Dear Mr. Bipin,

This is a total description of the employee. If he/she needs to have the same deducted, the company will proceed as per his/her description.

Rgds

No, in my opinion. It would have been a different case though if the salary had risen in the same organisation.

Until the employee has withdrawn his EPF accumulations, he is a member of the fund. A PF member is expected to contribute irrespective of his salary. Therefore, in the new establishment, he will be covered even though his salary exceeds Rs 6500.

Regards,
Madhu.T.K

Every company has a certain salary level. Someone is contributing to the PF fund in "X" company. When they move to "Y" company where their salary level is more than Rs. 6500/-, it is the policy of company "Y" to decide whether they are willing to extend this benefit to the employee or not.

The PF Act is very clear on this matter - if the salary is more than Rs. 6500/- per month, the employee is considered an exempted employee. Just because the employee was covered under PF in "X" company does not compel "Y" company to provide the same benefit. While the employee may be a member of PF, both companies are separate entities.

Looking at it from another angle, if in company "X" there is no PF coverage, and the employee is moved to company "Y" (with a salary lower than Rs. 6501/-), they must be covered under PF. The fact that the employee was not covered under PF in company X does not exempt "Y" company from covering them under PF. It is the law and the Act that determine the eligibility criteria, not the employee's status as a continuing member of PF or otherwise.

Consequently, the law or Act cannot compel an employer to extend PF benefits to an employee (irrespective of the benefits enjoyed in the previous company) if their salary exceeds Rs. 6500/-. It is at the EMPLOYER'S DISCRETION.

Therefore, in your case, the employee need not be covered under PF unless you choose to extend this benefit to them.

Balaji

Yes, Mr. Bipin,

The respective employee needs to be covered under the subsequent employment unless he has withdrawn the PF contribution from the earlier organization. This coverage can be for and up to the salary of Rs. 6,500/- only. If he has withdrawn before joining another organization, he ceases to be a member and shall become an excluded employee. As such, if the basic salary is more than Rs. 6,500/- per month, he shall not be covered under the scheme. In this case, the company needs to ensure by taking an undertaking from the employee that a) he was not covered under the EPF Act, or b) he has withdrawn the contribution and does not want to opt for the coverage, since his basic salary is more than Rs. 6,500/- per month.

Kiran Savargaonkar
SRI Management Consultants (HR & Labour Laws), Pune
Cell No. 9822431074

Dear all,

I need all experts' help regarding the PF. On how much salary is the PF deducted? I know the limit for PF is 6500, but I am confused about the clause stating that the 12% PF deduction made from an employee's salary should only occur when their salary is equal to or greater than 6500, or if the deduction takes place regardless of whether the salary is less than, equal to, or greater than 6500.

Suppose an employee leaves an organization, can they apply for the withdrawal of the PF amount at any time, or is there a specific time period for withdrawal? If the employee has opened their PF account through their company, how can they apply for the withdrawal of the PF amount - through the company or on their own behalf?

Please sort out this query.

Thanks & Regards,
Malkeet Kaur

Dear Malkeet Kaur ji,

If a person leaves and joins another establishment that is also covered by the PF Act, he/she can continue the PF by transferring all the credit in his/her account to the new employer's establishment using the prescribed form. However, it is the responsibility of the receiving establishment to ensure that every employee is covered by PF as per the regulations. It is not advisable to withdraw the PF credit accumulation from the previous employer as it may impact EPF Pension eligibility, etc. You do not need to visit the previous employer for all formalities. Your present employer should handle the procedures. If you have ledger sheets of your previous PF account, attach copies to the Transfer Form and submit them to your current employer. They will take care of the necessary steps.

Even if you withdraw the previous balances and the account is closed, there is no restriction on opening a new account through the new employer.

Regarding salary, even if it is over Rs. 6500/-, you will be considered to be drawing Rs. 6500/-, and PF subscription and employer contributions will be processed accordingly.

Regards,

Kumar

Dear Balaji,

The very purpose of Form 11 is to ensure whether the new employee was earlier covered by EPF. It is the responsibility of the new establishment to give him coverage if the new employee declares in Form 11 that he was earlier covered by PF and has not withdrawn the accumulations. If, on the other hand, he was not covered by PF earlier, then he also gives a declaration in the same Form 11 that he was not a member of PF earlier. In that case, he need not be covered. However, if he declares that he was earlier covered by PF and he had not withdrawn his PF accumulations, then it is the obligation of the establishment to provide coverage even if the employee's PF qualifying salary exceeds Rs 6500.

You may please go through Form 11, which is attached for your ready reference.

Regards,
Madhu.T.K

Dear Seniors,

There are different versions provided by participants which have further added to my confusion. Isn't there any official document available on the internet from which the matter can be referred? The official PFO site does not elaborate in detail.

Regards,
Bipin

Dear Bipin,

Good morning!

However, it is not mandatory beyond the minimum bracket of deduction. But as far as social security is concerned, it is advisable that the new company should deduct his PF with the new account or transfer the old one and continue the same.

Regards,