Can Employers Lower PF Contributions After Paying 12% on Full Salary for 3 Years?

Could you please confirm if an employer is paying PF at 12% on the basic salary (without a ceiling up to 6500) for 3 years, and then after 3 years, the employer wants to apply the ceiling of 6500 for PF contributions? Is it possible to reduce the contribution?

Regards,
Arthy. S

The answer will be no as per the EPF Act. Contribution once made cannot be reduced at any point.

Warm Regards,
C.M. Mohla

As per the P.F. Scheme, an employer is not obliged to contribute more than Rs. 6500/-, and hence, in my view, he can bring his contribution to the wage level of Rs. 6500/-. Probably, he may have to inform the P.F. as per the procedure, which you can inquire about.

Regards

Response to Provident Fund Contribution Query

Please find attached herewith a copy of the Judgment dated 05/02/2004 to answer your query. Accordingly, you are entitled to discontinue the remittance of the provident fund contribution in excess of the rate prescribed by law.

Even though you have the entitlement as mentioned above, it is advisable to seek consent from all affected employees. Additionally, as per Section 9A of the ID Act, no employer who intends to make any changes in the conditions of service applicable to any worker regarding any matter specified in the Fourth Schedule should do so without giving prior notice.

I trust that your query has been addressed correctly.

Thanks and regards,
Keshav Korgaonkar

Regarding the question above, I would also like to know if a person who was contributing 12% to PF in a company, let's say X Company, and then changes jobs to Y Company, would they be allowed Restricted PF or do they need to continue with the 12% deduction. Is there an option for the employee to choose?

Thanks,
MS

Mr. Kargaonker is absolutely right. PF contribution can be restricted to the statutory limit prescribed under the law subsequently also. The judgment will help you to understand the matter completely.

In one company's case, I got it implemented. Initially, the PF Authorities were not convinced to allow the employer's request, but subsequently, in appeal, it was allowed.

Regards,
Pkjain

While the employer is well within his right by bringing his contribution to the statutory level under the P.F. Act, Mr. Keshav Korgaonkar has also rightly alerted to the possible risk of attracting Sec. 9-A of the Industrial Disputes Act. Though the employer is not reducing the wages but only limiting his contribution to the statutory level, he may not attract item (1) of the Fourth Schedule but may attract item (2) of the Fourth Schedule. Therefore, it is prudent, as suggested by Mr. Keshav, to either issue a notice under Sec. 9-A or take consent of the employees concerned.

Regards,
B. Saikumar
Labour Law Advisor
Mumbai

I just want to add to what I have said in the previous post regarding Sec. 9-A. Sec. 9-A is attracted if the employee in respect of whom the contribution has been reduced by the employer is a "workman" within the meaning of Sec. 2(s) of the Industrial Disputes Act, 1947. Otherwise, Sec. 9-A is not attracted.

Regards,
B. Saikumar
Mumbai

In my opinion, the employer can do so but with the permission of the RPFC by providing convincing reasons for doing so. This has been decided by the High Court in a few cases, one being cited above.

Regards,
Chandok A K
RPFC (Retd.)
<link no longer exists - removed>

Dear Keshav Ji & Saikumar Ji, What happens when some of the employees do not give their consent to the employer (to limit employer PF contribution to Rs. 6500)? How does the employer proceed in such a scenario?

Notification and Employee Consent

Secondly, when there is a notification by the company 21 days before changing the policy on PF contribution, is it deemed that all employees have accepted the notification?

Regards,
Suresh

Supreme Court Judgment on Gramin Bank Case

Please find a judgment of the Supreme Court in the case of Marathwada Gramin Bank Karmachari Sanghatana Vs Management of Marathwada Gramin Bank (SC 2011 LLR 1130) for your reference. The judgment, which I had posted earlier in this thread in the matter of The North Malabar Gramin Bank Officers Association & Another Vs. Reserve Bank of India & Others, is of the Kerala HC. Now we have a judgment of the Supreme Court.

Regards