How Do I Calculate PF Arrears for Employees and Employers After a Salary Increment?

Good Morning All!!!!!

Our company gave an increment to employees for the year 2010-2011 in 2011, after which the basic salary got increased. I want to know how to calculate PF arrears for both employees and employers for the Year 2010-2011.

Example:
X employee basic salary difference (Arrears) for the year 2010-2011 is 1000*12 = 12000/-
Question: What will be the PF amount paid by the Employee?
Answer: 1440/-
Question: What will be the PF amount paid by Employers?
Answer: 1440/-

Are the above answers correct?

Please give your suggestions.....

Thanks,
Vikram

Yes, your answers are correct. However, in the employer contribution, you need to pay the admin charges along with the arrears for the year 2010-2011.

Regards,
Siva Kumar

Your calculations are very correct. For your easy understanding, I am attaching the model PF Calculation and deduction XLS file. I hope it will help you understand the calculation. Even though it is arrears, you have to make the entry only in the month of payment.

All the best,

Regards

Dear S. Bhaskar,

Thank you for your response. Could you please clarify the doubts I have regarding the calculations in the attached file?

The details are as follows:
BASIC: 10,000
PF: 1,200 (@12%)
ARREAR BASIC: 4,000
PF: 480 (@12%)
TOTAL BASIC: 14,000
TOTAL EMPLOYEE PF: 1,680
TOTAL EMPLOYER PF: 1,139 (@3.67%)
TOTAL EPS: 541 (@8.33%)

I am having difficulty understanding the calculation of the employer contribution. For example, the calculation states that 14,000 @ 3.67% will be 514, and EPS will be 1,166 @ 8.33% of 14,000. Please correct me if my conclusion is incorrect.

Thank you,
VIKRAM

Dear Vikram,

As per the latest policy, the EPS to which we are contributing, the Government is also contributing subject to a maximum of Rs. 541, i.e., 8.33% of the Maximum Basic Wages fixed by the Government at Rs. 6500.

Therefore, we are restricting the EPS to a maximum ceiling of Rs. 541, and the balance amount is being diverted in addition to the employer's contribution of 3.67%. This explains the variation.

I hope you can understand the concept.

Hi,

I want to know how to calculate PF if the employee's basic salary is reduced.

For example, if an employee was earning a basic salary of 10,000, their PF contribution by the employer would be 12% of the basic, i.e., 1,200. If the salary is decreased to 5,000, the PF contribution from the employer should not decrease from 1,200 to 600. This means the employer's contribution would be 24% of the basic.

How should I proceed with this? Please advise or provide any good references.