Understanding EPF Deduction on Overtime Payments: Insights and Guidelines

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.

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

No need to pay PF on overtime amount as 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.

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.

Arjun

Hello dear,

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, 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
9478323770

Dear All,

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

R. S. Singh
9810117040

Dear All,

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

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

Dear Soni,

This is not a matter of payment of overtime, whether by cash or cheque, as it is not applicable to overtime.

Regards,
Ajay Sharma

Hi,

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.

Khs

If you are preparing to register separately, then you can't deposit any amount for PF on OT, and you can fight gains matter.

Mr. Sunil,

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

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

S. S. Rawat

Hi,

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

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

i. the cash value of any food concession;

ii. 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), houserent 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;

iii. any presents made by the employer;

SO its pretty evident that over time is not included whetehr shown in 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 servers your purpose.

Thanks & Regards,

Harshal Jain

Assistant Manager (HR)

Dear Friends,

Read EPFS 1952, Section 29:

Contribution:

(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 fraction of a rupee less than 50 paise to be ignored.