Struggling with Provident Fund Rules for Small Businesses? Let's Discuss Your Options

Hi, it would be great if you could advise on how to get rid of PF. Please note: The total employee staff is 30, and more than 18 employees are drawing less than 15,000 per month. Almost all sales employees are getting a DA of Rs. 125 to 150 per day, which amounts to 125*25 = 3,125 & 150*25 = 3,750. So, if we calculate the gross salary as 8,000 + DA 3,125, it comes to 11,125. If we pay the gross salary as 11,125, then the Basic is coming to 4,450 as per 40% of the gross salary.

Calculating Allowances

If we make Basic 60% of the gross, it comes to 6,675. How will we calculate H.R.A, Conveyance, Education, Medical Allowance, LTA, and Other Allowances? If I am putting Basic at 60% / HRA at 10% / Conveyance at 10% / Education at 10% / Progressive Allowance at 10%, so the basic of all sales employees is more than 6,675. Are we then eligible for Provident Fund or not? If yes, is there any way to get rid of PF?

Eligibility for Provident Fund

Is it the case that if we have more than 20 employees in the company, we are eligible for PF? Please do let me know the advantages &

Regards,

Since 30 employees are working, you must get a PF account number.

Division of Gross Salary into Components

Regarding the division of gross salary into different components, one crucial point to note is that your basic salary, on which you need to contribute to PF, should not be less than the minimum wages (basic + special allowance) as declared by the state government.

Regards,
Kamal

Dear Mr. Kamal, Thanks for your response. If a sales employee's monthly salary is 8000 and the monthly daily allowance is 3125, then if we calculate 8000 + 3125 = 11125, and if we calculate the basic as 60% of 11125, it equals 6675. As per the above calculation, everyone's salary will be more than 6675. So, do we have to start the PF system?

What I think is, if we are not starting the PF system now, then we will have to start ESIC if I calculate their salary + DA because many employees are getting less than 15000 per month. If not today, then after 3-5 months, we might have to start the PF system as we are planning to hire employees, and the number of hires may go up to 70–100 employees.

Please advise, if we will have a staff of 50 to 100 employees, where everyone's basic salary is more than 6500 per month but less than 15000 gross per month, then if the basic is more than 6500, are we liable to start PF, or is there any process wherein we can avoid the PF system? Kindly advise and share your view. Awaiting your response.

Exemption from Provident Fund (PF)

Employees can be exempted from PF if the basic component of their salary is above Rs. 6,500/-. Additionally, ensure that Form No. 11 is filled out by the employees in this case.

Regards,
Karima

Provident Fund and ESIC Contributions

Employee getting basic + DA more than 6500 can be exempted from PF contribution. But if any of your employees have a PF account number (were getting PF in their previous employment), then you have to continue the PF contribution.

ESIC is 100% applicable in your case as all employees are getting a salary below 15000/-.

But above all this, I would like to know why you are trying to escape from your responsibility to contribute to the PF fund, which is to secure the future of your employees. The Provident Fund is designed to provide retiring individuals with the means to live with dignity and security. Do not forget that employees are the most valuable assets, and because of the employees, an organization exists.

Regards,
Kamal

Dear Karima, please arrange to attach Form 11 as I am unable to find it on the PF site.

Regards, Saurav Banerjee

Thanks for the input, but the issue remains that although I have more than 20 employees, all earning above Rs. 6500/-, we can't get PF registration. Since one of the new employees has an existing PF account, how can we contribute to his PF? Your assistance in resolving this matter would be greatly appreciated.

Thank you.