Can Our Company Legally Reduce PF Contributions Without Changing Basic Salary?

Dear Members, I would appreciate it if anyone could clarify this query. A company is deducting PF at 12% on the full basic salary (e.g., Gross Salary Rs. 24,000, Basic Rs. 12,000, HRA Rs. 6,000, Conveyance Rs. 800, Special Allowances Rs. 5,200). PF is deducted at 12% of Rs. 12,000 = Rs. 1,440, and the same amount is paid by the employer as their contribution, making the total contribution for that employee Rs. 2,880. Now, the employees are requesting the management to reduce the maximum contribution to Rs. 780, restricted to a Basic Salary of Rs. 6,500. The company is willing to do this but without changing the basic salary of Rs. 12,000. Now, the contribution to PF will be Rs. 780 + 780 = Rs. 1,560. Please let us know whether the company can change to the new scheme or if it has to follow the old one. If it's new, what are the rules to be followed? If it's old, why does it have to be followed? Thank you very much in advance. Regards, Sekar

You can follow the new contribution, i.e., 780+780=1560, as the employee having a basic salary of more than 6500/- always has a choice whether he wants deductions on his actual basic salary or on 6500/-.

Regards,
Pooja

Though you are entitled to discontinue the remittance of the provident fund contributions in excess of Rs. 780, you are advised to seek consent from all affected employees. I am attaching a draft of the consent for your reference. Additionally, it is recommended to issue a notice of change under 9A of the ID Act.

In this regard, I draw your attention to the judgment dated 05.02.2004 of the High Court of Kerala in the matter of The North Malabar Gramin Bank Officers Association & Another Vs. Reserve Bank of India & Others (Case No: OP. Nos.14011 of 2001(R), 17647 of 2001, 17655 of 2001, 17994 of 2001 & 13968 of 2001).

I invite other members of this forum to comment on this subject matter.

Thanks and regards,
Keshav Korgaonkar

Provident Fund Contribution Query

Can an employee with a basic salary of more than 6500 stop contributing towards the provident fund with the consent of the employer?

Dear mohitejitendra,

The answer to your query is no. Once a member of the Provident Fund (PF), always a member of the PF. The employee does not have the option to stop contributing to the PF. However, the contribution can be restricted to Rs. 780/-.

Please let me know if you need any further clarification on this matter.

Regards,

Right suggestion by Keshav Ji, employers can limit their contribution to Rs. 6500 even at a later stage. Please refer to the link posted by Shri Madhu: (https://www.citehr.com/443418-pf-contribution-employer.html).

Regards,
Suresh

Yes, it can be done, and Mr. Kargaokar ji and Pooja rightly advised you. The subject matter has already been discussed earlier on CiteHR.

Since your company is already giving the benefit of PF on the full basic salary, it has become a service condition for the purposes of the ID Act. If your company wants to change the policy, you have to apply for approval from the Labor Authorities in respect of the employees covered under the ID Act. For the other employees, their consent will suffice. However, before changing the PF deduction pattern, you have to inform the PF commissioner and obtain his formal approval. You can do it legally as per various judgments cited by Mr. Kargaokar. But keep in mind, there should be only one policy in this respect, applicable to all employees. You cannot have two sets of policies, one for old and the other for new arrivals.

Regards,
Pkjain

I agree with you that there should be only one policy regarding PF deduction. In the past, I have observed uniformity in benefits and facilities provided to employees. Lack of uniformity and disparities in benefits among employees were considered discriminatory. Nowadays, we see more flexible components in benefits and facilities. In the CTC structure, discrimination should not be a factor in my opinion.

Ultimately, how one presents oneself plays a crucial role. Additionally, the current generation of law enforcement authorities seems to have little interest in enforcing the law; their focus appears to be elsewhere.

Regards

I have one query. Recently, I joined a company, and at the time of joining, they didn't inform me about PF. After two months, they informed me that there is a PF deduction from my salary, and the amount is $1,600. Is this amount illegal? Because as far as I know, the PF amount should be $780 or 12% of the employee's basic salary. Kindly provide me with the necessary information.

Thank you.

Hi all, I have one query. Recently, I joined a company, and at the time of joining, they didn't inform me about PF. After two months, they informed me that there is a PF deduction from my salary, and the amount is 1,600. Is this amount illegal? Because, as far as I know, the PF amount should be 780 or 12% of the basic employee salary. Kindly provide me with the necessary information.

Thanks & Regards,
Saumya Shrivastava

Supreme Court Judgment Reference for PF Contribution Query

Please refer to the similar discussion in the link provided below, where I have uploaded a Supreme Court judgment in the case of Marathwada Gramin Bank Karmachari Sanghatana Vs. Management of Marathwada Gramin Bank (SC 2011 LLR 1130). The query can now be concluded from the Supreme Court judgment and the discussions so far in both threads.

https://www.citehr.com/443348-pf-con...n-reduced.html

Regards