Understanding Provident Fund Deductions and CTC Impact in Start-Up Companies

Dear All,

I am working as an HR executive in a new startup company. They have started deducting PF. However, they are deducting PF on CTC, which is creating a problem as the maximum salary gets deducted. For example, if my CTC is 20,000, they are deducting 1200 as my contribution and 1316 as the company's contribution from my CTC only. Can they do this?

Hi,

Based on my knowledge, it should not be like that. PF should be 12% of the basic salary and should not exceed 780/-.
I believe I am correct in this matter.

Dear,

Your company is deducting more than what is required by the EPF rules. They have deducted 780, and the contribution by the Employer is also 780 plus Admin charges.

For clarification, please contact 9866917232.

Lakshminaryana

As per the Employee Provident Scheme, PF contribution is based on the earned Basic + DA, and the contribution rate is 12%.

Regards,
Suresh

It is not proper to deduct P.F on CTC. As per Sec. 6 of the P.F Act, the contribution has to be deducted on Basic wages + DA + retaining allowance, if any paid + cash value of food concession, if any, subject to the maximum of Rs. 6500/- per month.

B. Saikumar
HR & Labour Law Advisor
Mumbai

Dear All,

I feel the queriest has not correctly presented his query. What I understood from the post is that the queriest is getting less money in his hand than what is agreed in CTC. There is a deduction of Employee share 12% and Employee share 13.61% from CTC.

My questions to the queriest are as follows:

1. Is the employer's share considered as a cost in the CTC structure?

2. Are the deductions towards PF started by the company at a later stage on coverage and was this PF component not considered in CTC?

CTC is the cost to the company on an employee. Whatever amount is spent by the company, the company can include it in CTC as a cost to it. The company can include PF employer share in the CTC component. Many companies, in my experience, even include costs towards leave, gratuity premium, etc., in the CTC component, and in my opinion, they are not wrong.

HR professionals should first understand this concept of CTC and be transparent in explaining it to new entrants when deciding on their package deal.

I visit many corporates where I see HR professionals not understanding this concept, and they fail to convey it to employees effectively.

No company can make a deduction from your salary towards the employer's share/cost. But it is like the bottle is half empty.

I hope the viewers/readers of my post will understand my views properly. If not, at least they will not doubt my caliber as has been done in another thread very recently.