Is PF Deduction Mandatory for Employees Retained After Retirement Age? Seeking Guidance

Retirement Age and PF Contribution Query

I am working in a manufacturing factory as an HR executive. We have retained some employees in service after they turn 55 years old. In our company, the retirement age is fixed at 55 years, but we have kept them on as they are still efficient and willing to work.

My question is, is it compulsory by law to deduct their PF contribution? Could you please guide me on the statutory provisions regarding this issue? Should we deduct both their PF as well as the employer's share, or is it not mandatory?

Please help me with this query. I am eagerly waiting for your suggestions.

Regards,
Milind

As per your company policy, the retirement age is 55 years. If you want to retain some of the critical employees, you can retain and convert them as consultants. Except for IT, no other statutory benefits like PF, ESI, PT, etc., are applicable for consultants.

Hope this is clear.

Regards,
Kamesh

Regarding EPF, there is no age bar. As long as they are in service, EPF is statutory. However, pension contributions have to be stopped on the day of attaining 58 years. After the age of 58 years, the employee will be eligible for both salary and pension.

Regards,
Abbas.P.S

I have gathered some information about it. After the age of retirement, no employee can be a full-time employee. His/her PF contribution will remain continuous. However, the contribution to the pension fund (8.33%) will be diverted to the provident fund (whole 24%), and the pension fund account will be closed.

So, is it correct?

Waiting for a reply.

Regards,
Milind

Yes, it is correct. After retirement, the PF department only accepts 24% as PF alone (nothing in the pension account). So, while generating the PF challan, you have to reduce one subscriber in account no. 10 as well.

Regards,
Babanaresh

P.F for Retired Employee

There is no doubt that an employee who, having been a member of the P.F. fund of an establishment, withdrew the full amount of his accumulations on the eve of his retirement as admissible under para 69 of the P.F. Scheme 1952, framed under the P.F. Act 1952, is an 'excluded employee' and is not eligible to join the fund under Para 26 of the scheme. However, once he is re-appointed in connection with the work of the company and his remuneration is within the wage limit of Rs. 6,500/-, he attracts the definition of 'employee' and the Act becomes applicable to him afresh.

In Harrison Malayalam Ltd. & Ors v. RPFC & Ors. (Cal H.C) 2001 I LLJ 1160, the company was held liable to cover an employee who took VRS and received his P.F. amount and was re-appointed on a lump-sum basis thereafter.

Regards,
B.Saikumar
HR & Labour Law Consultant
Chipinbiz Consultancy Pvt Ltd.
Mumbai

Employment or Re-employment of a Retired Employee in an Establishment

If an employer fails to cover an eligible employee, the employer will have to pay even the employee's contribution since an employer has been debarred from making a recovery of a member's subscription for more than one month as per the provisions of para 32 of the EPFS. In this context, there are two types of retired employees:

• Those who retire from establishments that are covered under EPFS & Act.1952 and
• Those who retire after working in establishments not covered under the Act.

In the former case, the retired employee, having settled his PF account, will not be eligible for PF on re-engagement. If he has not settled his PF account and is re-employed, then he is eligible to continue his PF account, and the establishment has to oblige him irrespective of whether or not he is drawing more than Rs.6,500.

Ref. Case Laws:

1. The Bombay Printers Ltd. Vs. Union of India, 1991 LLR 443 (Bombay H.C.)
2. The Calcutta Telephones Vs. Presiding Officer Central Govt. Industrial Tribunal, 2001-II CLR 108 (Calcutta H.C.)

(Sorry to say the full text of case laws is not readily available, as quoted from reference books)

In the present case, the question will have to be decided upon whether the re-employed employee closed his PF account on the first day of his rejoining and whether his salary is less than or greater than Rs.6,500 per month on his re-appointment.

The question of full-time or part-time does not arise as part-time employees also need to be covered if they are eligible. Even persons working from home (like Beedi workers and an Accountant who writes the accounts of the establishment sitting at home) also need to be covered under PF.

Here, a question arises whether the retired employee was given an extension of service beyond 55 years (the age of superannuation) or re-appointed afresh with new terms and conditions after he was fully settled (as he used the term "retained").

You may decide based on the facts of the case.

Dear friends, please don't decide a case with an intention to deny anyone any benefits that are justifiably due to them. Laws are not meant to deny anybody but to safeguard one's legal rights.

Regards,
Kumar S.

Dear Soumita17,

Generally, retired individuals (after reaching the superannuation age of 55/58/60 years, as applicable) who continue in service, whether in the same role or similar positions, are treated as new hires. This approach aims to prevent legal issues and operational challenges concerning PF, gratuity, etc., and to clear the path for promotions down the line. They are superannuated based on the extended service conditions to avoid interference with established policies for a specific individual. However, exceptions exist, usually in higher-ranking roles within scientific or technical fields.

In your situation, you need to review your organization's personnel policies to determine if they allow for such extensions. If not, one option is to conclude the previous service upon superannuation, settle any outstanding dues, and then re-engage the individual under new terms, possibly with a consolidated salary and additional benefits like housing or a car, or with the same perks. I do not oppose the idea of an extension outright. If you decide to extend the service, ensure it is done with appropriate special provisions and approvals.

The terms and conditions of the appointment letter will vary based on your decisions regarding the above.

Regards,
Kumar S.