Can Our Company Cap PF Contributions Mid-Year? Seeking Advice on Formalities and Compliance

PF Contribution Capping Inquiry

In our organization, currently, we have PF contributions from both the employee and employer (12% + 12% on Basic + DA) from the day the organization started. We do not have any capping of ₹6,500.

The organization is planning to implement a capping of ₹6,500 for both the employee and employer effective July 12 (planning to contribute only ₹780 from both sides). I would like to know the following:

1. Can a company start capping of ₹6,500 in the middle of the year?
2. If the capping is implemented in the middle of the year, are there any formalities to be completed with the EPF office (any intimation to the PF department)?
3. Are there any forms that need to be filled out by employees and employers and submitted to the PF department?

Seniors, kindly advise in this regard.

Regards,
Sinchana

You should provide a written letter to the PF department along with a Board Resolution (if the company is a Limited company). Additionally, you can obtain a declaration from all employees for the change in PF contributions.

Procedure for Reducing Employer's Contribution to $6,500

Can a company reduce the employer's contribution from the actual basic to $6,500? If yes, what is the procedure?

Yes, it can be done. There is no rule prescribed in the PF Act or Scheme as to how to implement the same. However, it can be done.

Steps to Implement PF Contribution Changes

First of all, since you have to reduce the amount of PF Contribution, which ultimately amounts to a change in the service conditions of the employees, it would be advisable to pass a board resolution in this regard. Put a notice intimating the employees and also obtain a no-objection from the individual employee or their union if there is anyone operating in your establishment.

Then, intimate the PF Authorities about the same along with the copies of the papers as suggested herein above about the company's decision and the effective date of the same. It would be better if you send a copy of the same to the Labour Authorities also.

There may be some objection from the PF Authorities, which you have to deal with as the situation warrants in the future. However, it is permissible, and no employer can be forced not to change the policy.

Regards,
pkjain