New Employee's PF Deduction Dilemma: How Should We Handle This Situation?

One new employee joined my company in July, and until now, we have not deducted any PF. Additionally, he has not transferred or withdrawn PF from his previous company. We usually start deducting after 6 months for new employees. What should we do in this new joiner's case?

As per the PF statutory Act, contributions should start from the day of joining. If a new employee needs to transfer their previous account to the current account, HR should take steps and follow through. How can this transfer be done? Initially, you should allocate a PF number for the current organization. Once the PF number is allocated, contributions should immediately take place.

You are not complying with the PF Act. You need to deduct and contribute to the PF from the date of joining. You may be in significant trouble if PF authorities come to know of this. Please consult your legal team.

Regards,

Hi Deeputty, how come employees are running the show? Is this how PF is deducted in your organization? If he didn't withdraw, it's his wish. If he wants to transfer, the first thing he needs is a PF account number, which he doesn't have because there are no PF deductions. If this is how you deduct from all employees, please change it by consulting your management.

Regards, Sai

According to the PF Act, if your company or organization falls under the PF category, then PF must be deducted from the DOJ (date of joining) of every employee based on his or her basic salary.

Regards,
Meenu

If an employee's basic pay is more than $6500, is it up to management whether to deduct or not? I'm just clarifying my doubts. Please reply.

Please start deducting PF from the employee and also contribute the employer's share with immediate effect. You can mention their date of joining for this month, or you can also pay the arrears—both employees' and employers'—with interest.

Thank you,

Regards,
G.K. Manjunth
Sr. Manager - HR

Understanding Form 11 and PF Contribution

Form 11 is used for declaration. It serves as proof of whether the employee had Provident Fund (PF) in the previous organization or not. Even if the employee's basic salary is above ₹6,500, if they had PF in the previous company, then PF contribution is mandatory.

Even if their basic salary exceeds ₹6,500 due to an increment or promotion, PF contribution remains mandatory. However, you can restrict the contribution to ₹6,500; there is no need to contribute on the full basic amount.

Regards,

Please follow the PF Act and rules with the latest instructions in the matter and act accordingly; otherwise, it will be an irregularity on the part of the organization.

Regards,
Suri Babu Komakula

PF Deduction for Employees with High Basic Salary

If an employee's basic salary is more than ₹6,500 and PF has never been deducted in the past, it is up to the company to decide whether to deduct PF or not. This is in accordance with the PF Act.

Regards,

Please note the following points:

1. When your organization is covered under PF, you have to deduct from day one and allot the membership number. Employees cannot request to start it after 6 months.

2. Transfer of the previous one through the prescribed forms submission.

3. If a new employee's salary is more than ₹6,500 (Basic + DA) per month and he was not a member in the previous organization or is a fresher, then there is no need for coverage.

4. But as an employee benefit, you can cover him as per his request, restricted to deductions only on ₹6,500.

5. Form 11 is a declaration by the employee for non-membership in his previous employment.

Hope it's clear now.

Regards,
Ulhas Chandratre
HRM Consultants, Pune

PF Deduction for New Employees

PF for a regular employee should be deducted from the date of joining. The PF account should be opened in the present organization, and PF deductions should be deposited therein. It is the employee's responsibility to transfer their account from the earlier organization to the current location.

Thank you.

Hi all, what's the basic process when an employee joins an organization regarding the documentation and all the formalities that are essential at the time of joining? Additionally, could you provide information about the PF and ESI deductions?

If the employee's salary is ₹20,000/-, his basic salary is ₹10,000/-. Currently, we are deducting ₹1,200/- from his contribution and ₹1,200/- from the employer's contribution. Is there any provision to set the ceiling at ₹6,500/- and deduct ₹1,200/- from his salary and ₹780/- from the employer's contribution moving forward? Please advise, senior members.

Regards,
Raju

Important Points Regarding PF Coverage

1. When your organization is covered under PF, you must deduct from day one and allot the membership number. The employee cannot request to start it after six months.

2. Transfer the previous PF through the prescribed forms submission.

3. If a new employee's salary is more than ₹6,500 (Basic + DA) per month and he was not a member in the previous organization or is a fresher, then there is no need for coverage.

4. However, as an employee benefit, you can cover him as per his request, restricted to deduction only on ₹6,500.

5. Form 11 is a declaration by the employee for non-membership in his previous employment.

I hope it's clear now.

Regards,
Suresh Kumar M

HRM Consultants, Pune

Does your firm have a PF Trust, or are you remitting to the EPFO? If you have a PF Trust, the problem could be solved easily. If not, you have to remit the PF of employees' subscriptions together with the employer's contribution without delay. For any delay in remittance, your firm should add interest and remit. I think this employee, when he was working elsewhere, should have had his PF remitted to his PF account, in which case you should also remit to the SAME PF account. Ascertain the account number from him and do the needful. Transfer formalities can be taken up simultaneously. This would also regularize his EPF Pension account; otherwise, he would lose his past pensionable service.

Regards,
Kumar S.

PF Membership Compliance for New Employees

In the case of a new employee, please obtain Form 11 to ascertain their PF membership. Since they have not withdrawn their PF, they are considered a continuing PF member. Hence, they are required to be enrolled as a PF member from day one, even if their emoluments exceed ₹6,500.

The practice of your company is not in compliance with the law. Since November 1990, everyone is required to be enrolled as a PF member from the date of joining. However, it is not too late; you are required to deposit both shares of PF contribution regarding the employee without enforcing any deduction on account of the employee's share from them. You will be required to pay damages under Section 14B at 25% per annum, as per the PF Act, and interest under Section 7Q at 12%.

The employee should fill Form 13 and forward it to the concerned PF office to get their PF account transferred to the new account number provided by you.

Regards

Employer's Responsibility in PF Deductions

“BEWARE” an employer cannot or is not authorized to recover employees' subscription arrears for those months you have not deducted or failed to deduct from them. This is your fault, and you, as the employer, have to compensate. The employer himself should make good or pay on behalf of the concerned employee and also add the accrued interest on the failed installments, remitting them to the employees' PF account to regularize your negligence. In this respect, the PF Act does not exonerate the erring employer.

In short, an employee cannot recover or deduct more than one month's PF subscription from another employee. So be careful, as this penalty cannot be nullified regardless of the reason, including if the salary itself has not been paid to such employees.

Regards,
Kumar.S.

A little correction: Please read "Employer" instead of "Employee" in the 6th line. The employer cannot recover more than the current contribution from the current month's wages of an employee. The employer is subject to prosecution for willful concealment of facts in Form 12A.

Rest is okay.

Form 2 - Nomination and Declaration Form

Form 11 - Declaration by a person taking up employment in an establishment in which the Employees' Provident Funds & Family Pension Fund Scheme are in force.

Please find the attachment.

Regards, Anoop

Provident Fund Deduction for New Employees

When a new employee joins an organization, the employer needs to deduct the PF amount from day one itself.

When an employee's basic salary exceeds Rs. 6500, it is up to their discretion whether to contribute to PF or not.

- If they wish to continue PF, then by having a ceiling of Rs. 6500, PF can be deducted, and the employer can also contribute the same.
- In this case, when an employee's basic salary is more than Rs. 6500, for example, Rs. 8000, and they are willing to contribute 12% of their basic salary, they can deduct it. The employer can choose to contribute 12% of the basic salary or 12% of the ceiling Rs. 6500.