How to Handle PF Registration for a Few Employees Who Prefer Their Own Investments?

Dear Seniors, very good morning to all. I have a query. In a couple of months, there will be 20 employees in my company. The basic salary for all is more than $6,500. Currently, except for 2 or 3 employees, none want to go for PF deduction as they have their own investment plans.

Query Regarding PF Registration Code

My query is regarding the two or three employees for whom we do not want to obtain a PF registration code. Is there a procedure for this? Please guide me.

Thanks a lot in advance!

I really appreciate the detailed question. Here is the big picture.

The Employees' Provident Fund and Miscellaneous Provisions Act, 1956

The Employees' Provident Fund and Miscellaneous Provisions Act, 1956, clearly states in Sec 1(3-A) and Sec 5 that once you have 20 or more employees, you are directly covered by the act. It doesn't matter about the basic salary or whatsoever. Therefore, your company automatically falls under the EPF Act once you have 20 employees.

Opting Out of EPF and EPS Schemes

For employees who do not wish to participate in the EPF and EPS schemes, they should write a letter to the employer stating that they are not willing to be part of the scheme. This way, you won't have to incur extra costs.

However, please do not attempt to manipulate the law. If any issues arise, also refer to Sec 14 and 14-A of the act.

Regards.

Thanks, Yashwant, for the reply. So, I believe once there are 20 employees, we have to obtain the PF registration code for the company. Those employees who don't want PF deduction should provide a declaration for the same. Please reply if I understood it correctly.

Understanding PF Obligations for Employers

The question is not tedious but simple. You cannot contract out PF. It is a statutory obligation on each of the employer and the employee. The law applies by its force when the company has engaged more than 19 persons on any working day. There is no option. The liability of the employer starts, and they have to contribute for both shares.

In the event the employees are drawing more than ₹6,500 and have never contributed to PF, they may not be covered. The employer has to take a declaration from each and every employee about their previous PF membership in Form-11 as per paragraph 34 of the PF Scheme. I totally reject the opinion given by Mr. Yashwant.

Mind well, in the event you have failed to deduct the PF from the salary of the employee from the current month, you are not authorized to deduct it as arrears of PF later. Furthermore, the delayed remittance of PF is not an authorized deduction under Income Tax either. You may think that it is an inevitable evil for the employer, and you cannot escape it. Therefore, the coverage or registration by taking a code number is a must.

Dear Yashwant,

Your advice is not in accordance with the law. It is based on a misconception and misunderstanding.

Understanding the Employees Provident Fund Act

I should really appreciate the detailed question. Here is the big picture: The Employees Provident Fund and Miscellaneous Act, 1956 clearly states in Sec 1(3-A) and Sec 5 that once you have 20 or more employees, you are directly covered by the act. This requirement is not dependent on the basic salary or any other factor. Therefore, your company automatically falls under the EPF Act once you have 20 employees.

Employees who do not wish to participate in the EPF and EPS scheme should write a letter to the employer stating their decision not to opt for this scheme. This way, you can avoid additional costs.

However, please do not attempt to manipulate the law. In case of any issues, also refer to Sec 14 and 14-A of the act.

Regards,
Ravi

I understand that you have to register under PF once you have 20 employees. Even if none of them want PF, you will need to file blank returns with a fee of Rs. 7.

As for the payment of PF for 2 people, it is a pain. If you can convince them not to opt-out and get the Form 11 signed for both of them, then you can avoid the trouble. Probably you can convince them to create PPF accounts instead.

Going in for PF formalities for only a few employees is quite a tedious job. However, being in the HR field, we ought to do things for the employees within the guidelines of the statutory laws. It would be really great to have your company registered with the PF Office, and if the employees do not want this deduction, getting Form 11 filled is advisable. This would keep all employees satisfied, whether or not they want the PF deductions, and would probably attract even more employees.

Maybe through word-of-mouth publicity, at least the employees could spread good words about the company in terms of statutory compliance being followed. Employee satisfaction does matter a lot in the growth of the organization. If the existing employees' issues are addressed well, it will help assure the new employees that they are in the right company.