Is It Legal for Our Delhi Branch to Exclude 180 Employees from Provident Fund Coverage?

Dear All,

Our Delhi branch is paying salaries to the employees above the minimum wages in our industry in Delhi, i.e., Rs. 7100. There are 180 employees at the Delhi branch. The branch commenced operations in April 2011 and currently does not fall under the Provident Fund (PF) coverage. PF is optional in our company; employees with a basic salary exceeding Rs. 6500 are not covered under PF. The management now aims for no employee at the Delhi branch to be under PF, as their minimum basic salary is already Rs. 7100.

Please provide your opinion on whether this scenario is legal or not.

Dear Aparajita, you have an employee strength of 180 at the Delhi Office. Legally, your office is coverable even if nobody is drawing Rs. 6,500/- as basic or less than Rs. 6,500/-. You have to apply for the provident fund code number and start compliance with the Act by paying only Rs. 7 per month.

Secondly, you can exclude the employees who are drawing Rs. 6,500/- as basic. You must have Form 11 filled out by the employees employed at the Delhi Office.

Regards

Your establishment has an employee strength of 180 at the Delhi office. Legally, your office is coverable even if nobody is drawing Rs. 6,500/- as basic or less than Rs. 6,500/-. You have to apply for the provident fund code number and start compliance with the Act by paying only Rs. 7 per month.

Coverage Under the Employees' Provident Fund & Miscellaneous Provisions Act, 1952

Under the provisions of the Employees' Provident Fund & Miscellaneous Provisions Act, 1952, any establishment employing 20 or more employees is coverable. Now, the question arises when no employee is drawing Rs. 6,500/- or less as basic, and all employees are excluded employees. For the purpose of coverage of an establishment, the Provident Fund Authority counts the number of employees, whether they are included or excluded employees. In this situation, your establishment/company is coverable under the provisions of the Act. However, it is mandatory for your establishment to pay the minimum charges of Rs. 5 under Account No. 2 and Rs. 2 under Account No. 22.

Regards,

Dear Aparajita, for your information, I am reproducing the Employees' Provident Funds & Miscellaneous Provisions Act, 1952.

[(1) This Act may be called the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.]

(2) It extends to the whole of India except the State of Jammu and Kashmir.

2[(3) Subject to the provisions contained in Sec. 16, it applies, -

(a) To every establishment which is a factory engaged in any industry specified in Sch.1 and in which 3[twenty] or more persons are employed, and

(b) To any other establishment employing 3[twenty] or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf

(f) “Employee” means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets his wages directly or indirectly from the employer, and includes any person, -



(i) Employed by or through a contractor in or in connection with the work of the establishment;

(ii) Engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1962 (52 of 1961), or under the standing orders of the establishment.]

Administrative Charges

Employees' Provident Fund Scheme:

- 1.10% of total wages on which Provident Fund is recovered subject to a minimum of Rs. 5/- shall be payable by the employer every month. Prior to 1.8.98, w.e.f. 1.8.98, 0.65% of total wages.

Employees' Pension Scheme:

- No administrative charges are payable by the employer. The entire cost of administration is met by the Central Government.

Employees' Deposit Linked Insurance Scheme:

- 0.01% of the total on which the Employees' Deposit Linked Insurance contributions are recovered, subject to a minimum of Rs. 2/- per month.

Regards

Thank you for sharing your valuable knowledge on PF. I have a question similar to this. My company does not have the ESI Code because no one in the company has a gross income of less than ₹15,000. So, the question now is, do we need to obtain the code at least for ESI? If yes, could you please define the clause? I would also like to add that the employees who earn less than ₹15,000 are hired through consultants and are not on our payroll.

Regards,
Kunal Kumar

I would like to add that in the case of an establishment where employees draw Rs. 15,000 and above, although they are not covered under ESI, if the establishment has a contractor or contractors who engage fewer than 20 workers and pay wages below Rs. 15,000, even though the contractor is not covered under ESI, the establishment/principal employer is obligated to apply for an ESI code and ensure that the contractor complies with ESI provisions.

Regards,
svsrao

Dear Sir, PF is applicable to employees whose Basic plus DA is less than ₹6500/-. Is it less than or equal to? Further senior guidance is needed, as I am new in this area. What is the amount to be deposited with PF authorities and in which accounts? Employees' contribution - A/c No. Employer's Contribution - A/c No. (What are EPF/FPF, EDLI, and Admin Charges, and how are these divided and in which account are they to be deposited?) If there is a delay in getting registration after the employee strength is more than the prescribed limit, what are the demurrage, penalty, and interest, and who is this to be paid by?

Regards,
Devender

Coverage Under the Act

Since the establishment is a branch in Delhi, it falls under the coverage of the Act as a branch of a covered establishment. Therefore, the Delhi branch is automatically covered under section 2-A of the Act.

Provident Fund (PF) Contributions

Regarding Provident Fund (PF) contributions, all employees who were previously members of the Employees' Provident Fund (EPF) before joining the Delhi branch must be made members statutorily. Among new employees, those classified as employees and earning ₹6,500 or less must be made members statutorily.

Employees earning more than ₹6,500 at the time of joining who were not EPF members before are considered excluded employees. However, they have the option to become members if the employer consents and is willing to comply with the schemes.

A deposit of ₹7 is required monthly only in cases where the covered establishment is closed or has no members.

Regards,
A.K. Chandok
RPFC (Retired)
[Email Removed For Privacy Reasons]
[Phone Number Removed For Privacy Reasons]

Hi Aparajita, your establishment is not covered under the purview of PF contribution. However, the act is applicable to your unit, but it does not require making any contribution or obtaining a PF Code number. As an establishment, it is necessary to inform the nearby PF office through proper communication.

Regards,
Veda
[Email Removed For Privacy Reasons]

Dear all and Seniors, if an employee is not willing to contribute to the Provident Fund and is drawing a salary of more than ₹6,500, is there any declaration format for employer safeguard, or has the PF Act embodied any declaration format?

Dear Sir, I have a doubt. The minimum of Rs. 5 is payable only if the recovery is less than 5. When there is NO RECOVERY by virtue of the act itself being inapplicable, as I do not have any employees (Rs 6,500 & below), why should we pay the minimum and why should we register? Can you please shed some light with some court judgments, etc.?

Applicability of Provident Fund (PF)

The applicability of PF for a company showcases its ethics and values towards the workers. It is important to emphasize PF deductions for all employees. The calculation should be a minimum of 12% of the Basic salary and not less than Rs. 780.

Thank you.

Dear All, there is an option that you can deposit P.F since an excluded employee, i.e., drawing wages more than Rs. 6500, can also become a member of the Fund and the Schemes on joint request. If, for instance, such an employee is getting Rs. 10,000 per month, his share towards provident fund contribution will be Rs. 1,200 (e.g., 12%), and the employer's share towards provident fund contribution will be Rs. 659 and Rs. 541 towards the Employees' Pension Fund.

Mr. Azad,

The total number of employees is 60. However, the number of employees earning below Rs. 15,000 is about 10. The rest earn above Rs. 15,000. Please advise.

Thanks in advance,

Vijaya

Dear Mr. Mukesh/all concerned,

Please let me know if I am wrong in understanding PF from what I have learned in this long thread.

Understanding Provident Fund (PF) Requirements

For organizations with over 20 employees, PF is compulsory. If their salary (Basic + DA) is less than or equal to Rs. 6500, then both the employer and employee contributions are 12% of Basic + DA. If the salary exceeds Rs. 6500, PF calculations can be limited to Rs. 6500, with Rs. 780 from both employer and employee sides. Could you confirm if this is correct?

Furthermore, for those with a salary above Rs. 6500, is it possible for them to opt out of PF? If so, how can they do this?

Please advise.

Thanks,
Ravi

You fully understand the provident fund contribution. Yes, the provisions of the EPF & MP Act are applicable to organizations where 20 or more employees are employed. The salary for the purpose of provident fund contribution is only Basic, not DA. It is mandatory for the management to contribute to the provident fund for employees earning Rs. 6,500 or less. If any employee is earning above Rs. 6,500, it is up to the management whether they want to extend the benefits of the Act to those employees or not.

Regards,

Dear Sir/Madam,

My organization is registered under the Societies Registration Act of 1860. I would like to inquire about the applicability of the PF Act to our organization. Is the organization exempt from the PF Act?

Another question I have is: Do part-time staff also fall under the category of employees for PF calculation when determining the total number of employees in the organization?

Thanks & Regards,

Divya Cherian Earaly
divyaearaly@gmail.com