How to Explain Provident Fund Non-Contribution to Your Bank After a Promotion?

Handling Provident Fund Contribution Queries After Promotion

It is the policy of our company to stop contributions to the provident fund for employees who get promoted. I was promoted by my company two years ago, and the company ceased contributions to my provident fund. Knowing this policy before my promotion, I have no objections to my company.

The issue arises as I have applied for a home loan, and the bank is inquiring with my employer about the reason for the non-contribution to the provident fund. How can I handle this situation without causing any harm to my company? How can I provide a response to the bank through my employer that will not create any problems for my employer?

Those who have registered with EPF have to continue with PF until the end of their service. Promotion or salary enhancement are not reasons for discontinuation. Please contact the concerned Regional PF Commissioner's Office immediately.

Regards,
Abbas.P.S

There is no policy to stop EPF contributions. If EPF contributions start from joining, they will continue until the end of your service. Only the company can stop EPF contributions at the joining time if employees fill Form-11 under the PF Act. Enhancements in salary or promotions are not reasons to discontinue EPF contributions. Please contact your Regional PF Commissioner.

Thanks,
Kuldeep Rawat.

An employer cannot stop deducting PF from a covered employee irrespective of any hike in his/her salary. Of course, the employer can restrict the contribution to 12% of Rs 6500 and need not contribute 12% of the hiked salary, but continued coverage is mandatory. Kindly contact RPFC regarding the matter ASAP.

Regards,

Understanding EPF Obligations and Company Policy

Internal company policy cannot overrule the statutory requirement of the Employees' Provident Fund (EPF), which is an obligation for companies under the Factory Act. Members are correct in stating that any employee who is working and registered under the EPF Act, which implies the deduction (contribution) of EPF is being made on both employee and employer accounts by following the EPF rules, cannot have this stopped until the employee leaves the organization or resigns.

Steps to Address the Issue

Second, it seems you need to speak to your employer or HR personnel in this regard because there might be something unclear to you, or you may be lacking some information. If the company is operating with such a policy, which is not possible under the rules laid down by the "Factory Act," they must be registered with the EPF, or they could face serious legal issues.

Still, I would suggest you speak to your HR personnel to get complete information in this regard first.

Apart from the patent illegality of your organization, you can offer this explanation to the bank: since your pay has crossed the Rs. 6,500 mark, you have ceased to be an employee as defined under the PF Act, and hence there is no statutory need for your coverage. This is not a sound argument, but that is all that can be thought of.

Regards,
KK

Even if your pay exceeds Rs. 6500/- upon promotion, you need to continue to be a member of the P.F. and not cease to be an employee. You shall continue to contribute to the P.F.

Regards,
B. Saikumar
Mumbai

Are you talking about EPF or some other Provident Fund? Please clarify. It is not possible to discontinue contributions on promotion under the EPF Act/Rules.

Dear Mohitejitendra, let me first appreciate your attitude towards the company. You do not wish to cause any problems for your employer. This indicates that you are also aware that the company's policy is incorrect.

I also appreciate the responses by the members. All the members expressed themselves very accurately.

While supporting the views of Shri. Anil Arora ji, our Board Moderator, I suggest that you should make a representation to the bank stating that you are an 'excluded employee' within the meaning of the EPF & MP Act, and therefore, no PF should be deducted. Shri. Kknair has also suggested this.

All the best.

In case you were a member of the EPF Scheme prior to promotion, your company cannot stop the deduction of PF contribution after promotion due to statutory provisions; however, it can restrict the contribution up to Rs. 6500.

If an advance is being sought from the EPF office, they have the right to inquire about non-contribution and take action as per the provisions under the Act for such a default.

Regards,
Chandok AK RPFC (Retd.) [The link provided no longer exists]

Mr. Chandok is right. If an employee is a member of the P.F. scheme before promotion, he cannot become an 'excluded employee' merely because his wages exceeded Rs. 6500/- after the promotion. However, the employer's contribution can be restricted to Rs. 6500/-.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Dear Sai Kumar ji, Greetings of the day! I too agree with Shri. Chandok ji. I also agree with you. The querist is also well aware that his company is wrong, but he needs a remedy on a home loan from the bank without causing harm to his employer. Therefore, I suggest he convince the bank that he is an 'excluded employee'.