Understanding PF Obligations for Small Employers: Do Contract Workers and High Earners Need Coverage?

Hi Everyone, I am a newbie to this site as a member. However, I do follow threads on a needs basis. Today is the day when I really need help from fellow members. Following are the questions I have related to PF:

Employer with More Than 20 Employees

I am an employer with more than 20 employees working for my SMALL establishment:

- **Q1.** Do we have to pay PF to contract-based employees as well?

- **Q2.** Can full-time employees drawing a basic salary of more than 6500 be exempted from paying PF?

- **Q3.** If the answer to Question 2 is YES, then do I have to add the name of any new employee joining the organization in ECR and show PF contribution as zero? Or is there no need to show? Simply show the existing employees drawing PF amount?

The reason why I am asking these questions is that I would like to learn the tricks of the trade from the beginning itself and apply them on my own.

Thanks,
Atul

Coverage of Employees Under PF

1. All employees drawing less than Rs. 6500 are covered. If the contractor has a code number, he will recover and deposit. However, you are liable as a principal employer.

2. Employees joining above Rs. 6500 need not be covered. Employees who joined with you for less than Rs. 6500 and subsequently crossed Rs. 6500 will continue to be covered. However, the contribution can be restricted up to Rs. 6500. For a definition of which allowances are to be included for Rs. 6500, kindly seek advice locally. That is a different subject.

3. I am not sure about ECR. I think you do not need to show the names of non-members.

Thanks,
Sivasankaran

EPF Act Coverage for Employees

20 or more persons engaging and receiving salary payments from the company, whether directly or indirectly, should be covered under the EPF Act.

Regards,
P. Xavier Raj

Dear Sivasankaran & Xavier,

Thanks for your response.

Regarding Question 3

If I do not show the name of the new employees in the ECR joining above the basic salary of 6500/-, should I just get Form 11 signed by them and keep it with my records for future reference, indicating that these employees have been exempted from paying PFs? Do I have to send a copy of these new joiners or Form 11 to the EPF office as well? Should I also get Form 2 filled from them, or is Form 2 simply meant for employees who will be contributing to PF?

Many thanks for your help.

Regards,
Atul

You need not send Form 11 to the EPF office. Please confirm that the employee has not been previously covered under EPF. If the employee was a member and has withdrawn the full amount, including the Pension Fund, then there is no need for further action. However, if this is not the case, they should be covered under the Act.

As you mentioned, Form 2 is specifically for those who are required to contribute to EPF.

Regards,
Mohan

Note: Can anyone reading this please advise if my statement is correct?

Even if the employee was earlier a member of another organization, it is not mandatory to cover him or her in the new organization if his or her salary is more than $6,500. This is provided that in the new organization they do not cover employees earning more than $6,500.

Regards,
Sivasankaran

Mandatory PF Coverage for Earlier Members

It is mandatory to cover PF for earlier members. If anyone resigns and joins a new organization where their basic pay plus DA is over ₹6,500, they are required to be covered under PF. In cases where there was no PF contribution from the previous organization at the time of joining and the salary is over ₹6,500, we can collect a declaration. In such cases, covering PF is not mandatory.

Regards,
P. Xavier Raj

It is very simple. If you are joining a new organization, it means you are a new PF member in that organization. Depending on the new organization's policy, if they are paying PF for all employees (including those above the 6500 ceiling), then they can extend this benefit, but it is not mandatory. They can stop contributing towards PF if the new employee's Basic + DA is more than 6500/-.

If you still have any doubts, feel free to ask.

Regards, Ramana

You do not need to show exempted employees in ECR. Form 11 is mandatory, and it should be sent to the EPF department.

Stay Cool,
Atom

In case of persons drawing more than Rs. 6500/-, if they are already members of PF and contributing in an earlier concern and join your organization, continue their contributions by deducting on the maximum amount of wages of Rs. 6500/-. For this, you have to take proof. Otherwise, they will go out of the purview of the Act. Contract workers are also to be covered by the contractor or by you if they are not covered.

Regards,
D. Gurumurthy
LL. HR & IR Consultant, Hyderabad.