Is an Employee Legally Required to Contribute to EPF & EPS After Changing Jobs?

PF Contribution Query

I have a doubt regarding PF contribution. An employee was working in Company A, and his Basic + DA is greater than 6500 INR. The employee is contributing towards EPF & EPS in Company A.

He then resigns and takes up employment in Company B, where his Basic + DA is also greater than 6500 INR. The employee is saying that he doesn't want to contribute towards EPF & EPS, citing the ceiling of 6500 INR. Now, is the employee duty-bound to contribute to EPF & EPS (considering the previous contributions in Company A)?

Is Company B duty-bound to deduct EPF & EPS?

Please guide me in this matter with supporting material from the EPF Act. I am looking for a solution from a legal perspective.

Regards,
Suresh

EPF Contribution for Employees with Previous Membership

If, at the time of joining an establishment (say Company B in our present example), the salary of the employee (Basic+DA) is more than Rs 6500, he can be considered an excluded employee. However, since he was previously covered under the EPF (when he was working in Company A) and he has not withdrawn the benefits and closed the accounts, he is expected to continue contributing towards PF.

Now, as far as the present employer is concerned, he can only rely on the words of the employee joining. To determine whether to include him or not, he has to collect a declaration (Form 11) from the new joinee. This form declares whether he has not been a member of PF (in case he was not a member earlier) or he has been a member of PF (if he was covered earlier). If the declaration states that he has been a member of the PF, the present employer should also include him in PF regardless of his salary and make arrangements to transfer his PF by issuing Form 13.

Now it is up to the employee to decide whether to give a false declaration or to continue with PF.

Form 11 is attached.

Regards,
Madhu.T.K

Thank you so much for your reply. Sir, in case the employee resigns from Company A and withdraws the benefits under EPF, at the time of joining Company B, he declares in Form 11 that he was a PF member in Company A. His salary in Company B (Basic + DA) is greater than Rs 6500. In this case, is the employee duty-bound to contribute to EPF & EPS (earlier in Company A, the employee was contributing towards EPF & EPS)? Is Company B duty-bound to deduct EPF & EPS?

Regards,
Suresh

Excluded Employee and EPF Withdrawal

In the above scenario, he is an excluded employee. Normally, before joining Company B, there should be a gap of at least two months because the withdrawal forms (Form 19 and Form 10C) will be accepted by the EPF Organisation only when they are submitted two months after leaving the organization.

Please note that in Form 19, there is a declaration of non-employment to be given by the employee/member that he has not been employed in an organization to which the PF Act applies. This two-month waiting period is to ensure that if the employee joins another employer to whom PF applies, then he is not expected to withdraw the PF but is expected to transfer it to the new account.

The relevance of Form 11 is also to ensure this. As far as the new employer is concerned, he can rely on the declaration given by the employee, and his past PF details cannot be checked in the present scenario and in the absence of a National Social Security Number, which was planned but not introduced due to some technical reasons.

Regards,
Madhu.T.K

Super clarification given by Shri Madhu! Please also clarify what will happen if an employer fails to collect Form 11 from the employee who has newly joined.

Dear Seniors,

Please correct me if I am wrong on Form 11.

Understanding Form 11

@Ramachandran Sir, Form 11 is a declaration by the employee stating whether he was/is a PF member with his previous employer. It serves as documentation if the new employer omits the new employee (with the consent of the employee) from EPF contribution. This Form 11 serves as written evidence in case of an inspection by a PF inspector on what basis the new employer has omitted the employee from PF contribution.

The previous post by Madhu Sir would address whether the new employee can be omitted or included in EPF contribution and also discuss Form 11. (PF contribution is mandatory if the salary of the employee Basic+DA is less than Rs. 6500).

Penalties for Non-Compliance

Seniors, I am also interested in knowing if there are any penalties in case of failure to produce Form 11 during an inspection by a PF inspector.

Regards,
Suresh

There is no penalty if the employer omits to include one member based on the declaration given in Form 11. Moreover, Form 11 is not to be submitted to the PF Office but is to be kept with the employer as proof that he has inquired of the employee about his previous PF matters.

Regards,
Madhu.T.K

Incentives and PF & ESI Deductions

Company XYZ pays sales incentives to employees upon achieving sales targets on a monthly basis. Is the payment of incentives eligible for PF & ESI deductions? Does the incentive fall under the purview of the definition of basic wages/wages as per the EPF & ESIC Act?

To my knowledge, I think incentives are excluded from PF & ESI contributions. Your point of view will be highly appreciated.

Regards,
Suresh

Query on Outstation Allowance and PF Deductions

Company XYZ pays outstation allowance to employees on a monthly basis. Is the payment of outstation allowance eligible for PF deductions? Does outstation allowance fall under the purview of the definition of basic wages as per the EPF Act? Your point of view will be highly appreciated.

Regards,
Suresh

An employee was covered under the EPF Act in the previous organization when he was receiving a basic salary greater than Rs. 6500. When he joins the present organization, his basic salary is also greater than Rs. 6500, but the employee is not willing to contribute to PF. However, employers must take responsibility for PF, even if the employee is not interested, because an enforcement officer may conduct an inspection and require enrollment under PF. At that time, PF contributions will accumulate.

To avoid this situation, the employer insists that the employee obtain a certificate from the previous employer stating that no PF contributions were made for this employee. In any case, the employer must confirm this.

Regards,

V. Subbarao

Dear Seniors, I have a doubt regarding PF contributions. An employee was working in Company A where his Basic+DA exceeded Rs. 6500. The employee was contributing towards EPF & EPS in Company A. Subsequently, he resigned and joined Company B, where his Basic+DA is also greater than Rs. 6500. The employee states that he does not wish to contribute towards EPF & EPS, citing the ceiling of Rs. 6500. Now, is the employee duty-bound to contribute to EPF & EPS, considering that he was contributing in Company A?

Is Company B obligated to deduct EPF & EPS?

Please guide me on this matter with supporting material from the EPF Act. I am seeking a legal perspective on this issue.

Regards, Suresh