Is It Legal for Employers to Enforce Compulsory PF and Deduct Both Parts from Salaries?

Hi All, I am working as an HR professional in an IT company. My employer is trying to impose compulsory PF for all employees. However, many employees are not falling under the PF slab and do not want PF. Despite this, my employer is attempting to implement it forcibly. Additionally, he is deducting both parts from the employee's salary.

Legal Concerns Regarding Compulsory PF

Is this legal? Can any employee take legal action against the employer as they are making it compulsory for all and deducting both ends from the employee's salary?

Please reply soon.

Regards, Rashmi

To be frank, PF contributions are beneficial for employees. They are a part of savings and can be considered for tax exemption. In fact, nowadays, many organizations are including both contributions in CTC, but it is not included in the gross pay.

In a few organizations, the same thing is happening as you discussed, but it is not accepted by PF. 

Hi Muralidhar, First of all, thanks. I know that every employee has the right to be a part of PF or not if their basic salary is more than 6500. My question is, if an employee earns more than this, they do not want PF deductions. However, my employer is still forcibly implementing PF on all employees and is not willing to listen to anybody. So, please tell me if there is any solution for this.

I agree that if someone has a basic salary of more than 6500 per month, then they are considered an exempt employee. However, it is the management's policy to deduct PF for everyone, and for the sake of a few employees, management cannot change its policy. Nowadays, the company decides the CTC, which includes both parts of PF. Legally, you cannot get any remedy for this.

Dear all,

As per the provisions of Rule 2(f) of the EPF Scheme, an employee whose pay is less than Rs 6,500 per month is covered under the Act. Employees drawing a salary exceeding Rs. 6,500 are not covered under the scheme. At the same time, the contribution is limited to a salary of Rs 6,500 per month, but a higher contribution is permissible. The employer is liable to pay a contribution only on a salary of Rs 6,500; however, the employer can voluntarily contribute more as an extra employee benefit.

In any case, the employer cannot enforce any of its employees drawing a salary exceeding Rs. 6,500 to participate in the scheme. However, the employees should appreciate the employer's intention that he is really trying to save something through this approach.

Regards,
U.C. Dalai
Chief Executive Officer
Aparajita Compliance Solution Private Limited

After the basic salary of ₹6,500, an employee can be exempted from EPFO. If the employee's emoluments exceed ₹6,500 per month, they have the option to join the scheme(s) with the employer's consent. Is your company deducting the PF on the full basic salary? If your management wants to deduct the PF from all employees, that's good. Employees should be happy about this because it is beneficial for them in the end.

Regards