Can We Exempt a New Employee from PF Contributions Due to Their Preference?

In our company, we provide PF coverage to all employees irrespective of their salary. Now, a new employee has joined the company with a basic salary of Rs. 30,000/-, and he does not want to have PF facility and deductions.

Can we exempt him from PF contributions? Also, please let me know the procedures and forms to be filled by him.

Regards,
erv

For not covering an employee whose basic salary is more than 6.5K and who is not an existing PF subscriber in any of his previous organizations, he may be treated as an excluded employee under para 2f. Under para 34 of the PF scheme, he has to fill up Form 11.

In addition to what gh_manas25 has informed, based on my recent experience, this exemption is not selective. If you apply for this exemption, then all employees who have a basic salary of more than 6,500/- will get exempted.

Thank you for your replies. Therefore, the new employee will be exempted by filling out Form 11, and the rest will continue to be members even though their basic salary is above Rs. 6500, as they are already members and contributions are being made.

Regards,
erv

I too would like to clarify a few points related to PF:

Exemption from PF for High Earners

1) For those employees whose basic salary is more than Rs 6500, a few companies state a way to exempt them from PF. What should be the legal way of doing this? Though he would have opted for PF, he is now not getting the same.

PF Deduction for Salaries Above Rs 6500

2) Secondly, for any employee whose basic is more than Rs 6500 (for instance Rs 10000), what should be his deduction? Please find below the deduction and state which is correct:

- **Basic**: Rs 10000

A) PF deducted from the employee: Rs 1200/-
PF deducted from the employer: Rs 1200/- of which Rs 541 would go to pension and the remaining to his account (1200-541)

OR

B) PF deducted from the employee: Rs 780/-
PF deducted from the employer: Rs 780/-

Please clarify.

Employer's PF Charges

3) As per the act, what I know is that 1.61% of the PF charges are to be borne by the employer. Should this percentage be taken into account while calculating the CTC or not?

Legal Binding for PF Deduction

4) If any employee's basic is above Rs 6500/-, is there any legal binding that the company will deduct only Rs 780/- from his salary as PF deduction and not the original binding?

Thank you.

Provident Fund Coverage for New Employee

The new joiner in our company was a former member of the provident fund in his previous company where he worked for 16 years and contributed to PF based on his Basic Salary of Rs. 30,000/-, i.e., Rs. 3,600/- per month. He resigned from that company a year ago and withdrew his PF accumulations. For the past year, he has been running his own business and has now joined our company with a Basic Salary of Rs. 30,000/-. He has expressed that he does not wish to avail the PF facility.

The question arises whether he can be exempted from PF coverage in our company or if he should fall under PF coverage here as well. I have been informed that since he was previously a member, regardless of withdrawing his PF accumulations, he should be covered under the PF scheme in our company and must compulsorily contribute up to a Basic Salary of Rs. 6,500/-.

Please confirm whether this information is accurate.

Regards,
erv

As the employee has already withdrawn his PF contribution from his earlier organization, he is no longer a member of the PF fund. Therefore, it is no longer necessary to deduct PF as per statutory requirements. As mentioned earlier, he only needs to fill out Form-11 declaring that he is no longer an existing member of the PF.

Regards,
MG

We have selected a new candidate with a basic salary of Rs. 20,000/-. He was working with Company X until August 16, 2017, and is a member of EPF and EPS. However, he does not want PF deduction in our company now as his salary exceeds the prescribed limit. He has the option to opt-out. We are taking Form 11 from him, but do we need to take any undertaking as well? What would be the format of the undertaking?

Please guide.

Hi, I am Ravi Shankar Sharma. Suppose I joined a company and the salary is fixed at Rs. 35,000, but I am not interested in the deduction of PF and ESIC. How do I prepare a letter to the employer to declare that I am not opting for PF and ESIC deductions?

Dear Mr. Shankar Sharma,

Before raising a query related to PF & ESI, please go through the relevant act in detail. Can you please let me know how an employee whose gross salary is Rs 35,000 comes under the purview of the ESI Act? Please note that this forum is for knowledge enhancement and compliance with all labor laws. Your employer will follow the due procedure in coverage/exclusion. As an employee, you have no role in coverage/exclusion.