Is It Fair to Change EPF Contributions Without Informing Employees? Seeking Advice

Hello Seniors,

Greetings of the Day! I have been working in a company for the last year, where we used to calculate PF contributions like this:

Previous PF Contribution System

- Employee Salary = 10,000
- Employee contribution (12%) = 1,200/-
- Employer contribution (13.61%) = 1,361/-

Now, they have adopted a system like this:

New PF Contribution System

- Employee Salary = 10,000
- Employee contribution (12%) = 1,200/-
- Employer contribution (13.61%) @ 6,500 = 780/-

Is it right to make such changes in EPF without giving information to the employees/workers? Kindly revert to me as soon as possible.

With regards,
Shams Tabrez

As per the PF Act, you should restrict either the employer's contribution to ₹6,500, i.e., ₹780, or both the employee's and employer's contributions to ₹6,500. Any contribution you make above ₹6,500 will be part of the Voluntary Provident Fund (VPF).

Since they are suddenly reducing only the employer's contribution, it is better to inform the employees. Otherwise, there may be confusion and misunderstandings between the company and employees later on.

Regards,

If I am not wrong, the law states that the minimum contribution from an employer towards PF should be Rs. 780/-, which your company is currently contributing. However, your company has not communicated to its employees about the sudden change in deductions/contributions, which is not correct. In my opinion, it would be best not to pursue legal action against the company.

Communication from HR Department

The company's HR department may consider communicating the sudden change to the employees after consulting with the management.

Points on PF Deduction

Please review the following points applicable to you:

1. There is no binding for PF deduction as per law if the PF salary is more than 6,500.00 at the time of joining.

2. If employees join the service on a lower PF salary, i.e., less than 6,500.00, then as per law, a minimum deduction of 780/- on 6,500.00 should be done.

3. If the PF salary is more than 6,500.00, then consider VPF if employees are interested in contributing more beyond the limit.

4. For VPF contributions, please first complete the necessary written procedures with employees to prevent legal complications in the future.

Regards,
Maher B.B.
[Phone Number Removed For Privacy Reasons]

EPF Contribution Changes and Legal Considerations

It is true that as per the statute, the contribution for both employer and employee could be Rs. 6500/- (Basic + DA + VDA). In excess of this, if the employer desires to deduct from their employees on the entire salary, it would be treated as VPF, in which case written consent needs to be obtained from the employee concerned.

The issue is, if the deduction was effected on the entire salary earlier, i.e., 1200/- @ 10000/-, a subsequent decision in reducing the contributory amount in respect of the same employee could attract legal opinion, which needs to be checked. However, for fresh recruits, the revised system could hold good. Further, I suggest that an intimation to this effect could also be given to the PF authority to be on the safer side.

Regards,
bk mohanty
Director
Cypress Management Associates
[Phone Number Removed For Privacy Reasons]

As per the law, the organization can contribute the basic amount of up to Rs. 6500 only. If it is more than that, it is not objectionable by the department. However, an employee can object to deducting the EPF on a basic of Rs. 6500 or exceeding Rs. 6500 per month.

At the time of joining, if the basic + DA + VDA is less than 6500/-, the contribution would be accordingly at 12% from both the employee and employer. Subsequently, if such salary components exceed 6500/-, the employer might restrict their contribution to 6500/-, while the employee, if they so desire, might agree in writing to contribute the entire salary components exceeding 6500/-, to be termed as VPF.

Regards,
B.K. Mohanty
[Phone Number Removed For Privacy Reasons]

I want to withdraw my PF amount from the company, and for that, I have already filled out forms 19 and 10C. Now they are asking for a crossed cheque. Could you please explain to me why they are asking for that cheque?

Regards,
Amit Shukla

Dear Shams ji,

The question you have asked is very simple. But I don't know why it took me so much time to respond. The answer to it is - No. It is a change in a service condition regarding matters specified in Schedule IV in the ID Act, which requires notice under Section 9A.

Furthermore, I would like to draw your kind attention to the judgment of the Supreme Court, according to which you can reduce the PF contribution. It is also essential to read, understand, and interpret the chapters of the EPF & MP Act that deal with the membership of the Fund.