Is Our PF Deduction Calculation Correct for Mid-Term Leavers? Seeking Guidance

Dear Seniors,

Greetings for the day! I have the following query regarding PF. Please provide your best judgment on the matter.

PF Ceiling and Calculation Query

In our organization, we are following a PF ceiling of Rs. 6500 for both the employer and employee.

Case: Full and Final Settlement

One employee has a basic salary of Rs. 11,242. In the month of April, he worked for 10 days (1st to 10th, with the 10th being the last day) and earned a basic salary of Rs. 3,747.33. According to our calculation, the employee's PF deduction should be Rs. 3,747.33 * 12% = Rs. 450. However, our SAP system is showing an employee PF deduction of Rs. 260 (Rs. 6500 / 30 days * 10 days * 12%). The SAP representative mentioned that the same calculation is applicable in the case of mid-term joining/leaving. My question is whether this calculation is correct as per the EPF Act. To my knowledge, the PF ceiling is Rs. 6500 for the higher side, and if the earned basic is below the ceiling, then 12% should be applicable on the actual basic amount (which is below Rs. 6500).

Please provide your best judgment with supporting documents.

Regards,
Mahender Singh
[Phone Number Removed For Privacy Reasons]

Clarification on PF Calculation

6500 is a ceiling but is not his basic. His basic is 11242/-. Earned basic should be calculated based on his actual basic, not based on 6500.

So, I feel your calculation is correct, and PF should be 450. Configuration in the SAP system may have to be changed. I am also interested to see what other seniors will say about this.

Regards

Clearly, there is something wrong with your SAP, not with your interpretation. PF is calculated on the monthly wage subject to a maximum of Rs. 6500/-. Hence, the deduction will be Rs. 450/-.

System Adjustments for PF Calculations

Men create the system, not the system creates men. So, guide your SAP people to change the system formula to a higher limit at 6500 and lower as actual. You are right in your way; your system is wrong.

Hope I am clear!!

Dear Mahender,

All seniors are correct because PF is calculated based on Basic salary * working days per month * 12% for employee PF.

Example Calculation

For example: 11242 * 10 / 30 * 12 = 450/- is the PF amount for your employee.

Finally, you can check that the calculation in your SAP system is incorrect.

Regards,
Sameer

You can show the remaining amount of PF in VPF in your system.

Regards,
Mangesh Wakodkar
Aurangabad

Dear Mahendra,

The above are facts. Your SAP system is calculating based on the EDLI ceiling, so you need to modify it according to the EPF rules and regulations.

Regards,
Lakshminaryana
[Phone Number Removed For Privacy Reasons]
Statutory Consultant