Is Overtime Subject to EPF Deductions? Seeking Advice on Handling Inspector's Audit Request

Hi, three days ago, the PF inspector visited our factory to conduct an audit for the financial year 2010-11. We disburse salaries and overtime on the 7th of each month. The inspector requested a breakdown of the total salary and overtime amounts on a monthly basis for the entire year. The total overtime amount for the year was 240,000 rupees, of which he mentioned that EPF contributions on overtime amounting to 61,464 rupees needed to be submitted.

EPF Deductions on Overtime

My query pertains to whether the overtime amount is subject to EPF deductions. I have heard that if overtime is included in the salary sheet, EPF contributions need to be made on the overtime amount. However, if overtime is listed separately, EPF deductions are not required.

Please advise on the best course of action as it seems we may be required to pay a higher amount.

Thank you.

We do not need to pay PF on overtime wages, whether it is shown in the wage register or not. However, for ESI, we have to pay for overtime.

Overtime and EPF Contributions

No need to pay PF on the overtime amount as the PF amount is not covered under EPF, whether it is shown on the wage sheet or separately.

In our company, we pay overtime in cash and don't show overtime on the salary sheet. We don't pay PF on it.

Regards,
Dhrumin Soni

Over time, wages do not come as a basic + DA amount. If you are paying below the basic and DA, you need to pay the PF for that amount.

Regards,
Arjun

There is no need to pay PF on overtime, but ESI is payable. It doesn't matter whether you show overtime in your salary register or not.

No Need to Pay PF on OT Amount

No need to pay PF on the OT amount. The only reason is if you split the OT amount into Basic + DA. Another reason is if your basic salary is less than the current minimum wages.

Regards,
Rajvir
[Phone Number Removed For Privacy Reasons]

Contribution on overtime is not applicable as per the definition of wages under the PF Act.

Regards,
R. S. Singh
[Phone Number Removed For Privacy Reasons]

Clarification on PF Act and Overtime

Section 2(b) of the PF Act clarifies that overtime is not included in the basic wages; hence, PF is not applicable on the same.

Regards,
Ramesh Bhardwaj

EPF Contributions on Overtime: Clarification Needed

Before 3 days, a PF inspector came to our factory and conducted an audit for 2010-11. We pay salary and overtime on the salary day (7th of each month). The inspector asked me to make a list of the total salary and overtime amount month-wise for a year. The total overtime amount was 240,000. He mentioned that we have to submit EPF on the overtime amount, which is 61,464.00.

My question is, does the overtime amount fall under EPF? I heard that if we include overtime in the salary sheet, then we have to pay EPF on the OT amount, but if we show overtime separately, then we don't need to pay.

Please advise as we may have to pay more amount.

Clarification on OT PF Regulations

Dear PF inspector, you inquired about the OT PF, which is within your rights as an inspector conducting an inspection under the Factory Act 1948, Section 64 (Power to make rules), Subsection 4. According to this, we can take OT from a worker for 50 hours in a quarter. If you exceed the permitted OT hours, you are liable to pay PF on the excess amount. Otherwise, you are not liable to pay PF on OT.

Regards.

EPF Contributions on Overtime Wages

No need to pay EPF on OT wages as per the Act. If he demands to pay, then request him to give it in writing. No officer will give it in writing, but be careful about the double wages rule for OT as per your records.

Thanks,

Senthil

PF deduction is not required on overtime wages. The employer may already pay double the amount to the employee for overtime. Therefore, it is not required to deduct and remit the PF contributions.

Regards,
Khs

Explanation of Wages in the PF Act

I herewith attach the explanation about wages in the PF Act. Kindly go through it to get a clear idea about the basic wage and PF contribution.

Regards,
Sudharshanan

Components of Wages and PF Contributions

Wages are comprised of basic pay, DA, retainership, and the value of food and other benefits. Apart from these, there is nothing to attract for PF contributions. Only ESI contributions are attracted.

Regards,
S. S. Rawat

As per the PF Act, PF is not applicable to overtime. Even the government released an official gazette on it. You can search for more information on this.

Dear Rawat Sir,

Request you to please explain why and how OT attracts ESI contribution. Since OT is not a regular pay for an employee, there may be times when he will exceed the limit for some time and then fall back. It is mentioned on the ESIC website under FAQs. Please refer and suggest.

Regards

Definition of 'Basic Wages' Under EPF & MP Act, 1952

The definition of 'Basic Wages' has been defined under Section 2(b) of the EPF & MP Act, 1952 as below:

Section 2(b) "basic wages" means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include:
- the cash value of any food concession;
- any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
- any presents made by the employer.

So, it's pretty evident that overtime is not included whether shown in the salary sheet or not.

Further, refer to the link given below with detailed case laws:

http://www.epfochennai.tn.nic.in/pdf/RO_basicwages.pdf

Hope it serves your purpose.

Thanks & Regards,

Harshal Jain

Assistant Manager (HR)

EPFS 1952, Section 29: Contribution Details

(1) The contributions payable by the employer under the scheme shall be at the rate of ten percent of the basic wages, dearness allowance (including the cash value of any food concessions), and retaining allowance (if any) payable to each employee to whom the Scheme applies:

Provided that the above rate of contribution shall be twelve percent in respect of any establishment or class of establishment which the Central Government may specify in the Official Gazette from time to time under the first proviso to sub-section (1) of Section 6 of the act.

(2) The contribution payable by the employee under the Scheme shall be equal to the contribution payable by the employer in respect of such employee:

Provided that in respect of any employee to whom the scheme applies, the contribution payable by him may, if he so desires, be an amount exceeding 10% or 12%, as the case may be, of his basic wages, dearness allowance, and retaining allowance (if any) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act.

(3) The contribution shall be calculated on the basis of the basic wages, dearness allowance (including the cash value of any food concession), and retaining allowance (if any) actually drawn during the whole month whether paid on a daily, weekly, fortnightly, or monthly basis.

(4) Each contribution shall be calculated to the nearest rupee, 50 paise or more to be counted as the next higher rupee and a fraction of a rupee less than 50 paise to be ignored.

Regards