Employer's Duty: Do They Need to Contribute to PF if Salary Exceeds Rs. 6500?

Employer's Obligation for PF Contribution

Is the employer bound to pay their share of Provident Fund (PF) if the basic salary of an employee exceeds Rs. 6500 per month? What other obligations are there if it exceeds Rs. 6500 per month?

No, the employer is not bound to pay. However, the employer can contribute to the administrative charges.

If the employee is already registered with EPF, the PF contribution must continue even if the salary exceeds Rs. 6,500. However, the statutory obligation on such contributions will be restricted to Rs. 6,500. If the employer and employee wish, the contribution can be based on the actual salary.

Regards,
Abbas.P.S

I want to ask a question: if an employee's basic salary is above 6500/- at the time of joining, is it obligatory to deduct the PF?

Kind regards,
Gowri Sankara Rao

If the employee's fixed basic salary is 6.5 or above, it is not mandatory to deduct the PF.

Regards,
Jaya

If the basic salary is less than 6500, then which figure should be considered for PF calculation?

Regards,
Sushant

That's not the question. The query is whether an employee's salary is more than 6.5 at the time of joining, and he wishes for his EPF to be deducted. In that scenario, is the employer obligated to pay his share of EPF contribution, i.e., 8.33 EPS and 3.67 in EPF? Please clarify this for me.

Applicability of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952, is applicable to every establishment with 20 or more employees. Under Section 5 of the Act, the Central Government may frame a scheme called the Employees Provident Fund Scheme for the establishment of a Provident Fund under the above-mentioned Act.

Definition of Excluded Employee

According to Para 2(f)(i) of the Employees Provident Fund Scheme, an employee whose pay (Basic Wages with Dearness Allowance, retaining allowance, and cash value of food concessions admissible thereon) at the time he is otherwise entitled to become a member of the fund exceeds Rs. 6,500/- per month is an "excluded employee" and is not required to be a member of the fund. Otherwise, an employee who does not meet the criteria of an "excluded employee" shall be entitled to and required to be a member of the fund as per Para 26(1)(a) of the Employees Provident Fund Scheme.

Enrollment of Employees Exceeding Rs. 6,500/-

As per Para 26(6) of the Employees' Provident Funds Scheme, an Officer not below the rank of an Assistant Provident Fund Commissioner may, on the joint request in writing of any employee of the factory or other establishment to which this Scheme applies and his employer, enroll such an employee as a member or allow him to contribute on more than Rs. 6,500/- of his pay per month if he is already a member of the Funds. Thereupon, such an employee shall be entitled to the benefits and shall be subject to the conditions of the Fund, provided that the employer gives an undertaking in writing that he shall pay the administrative charges payable and comply with all statutory provisions in respect of such an employee.

Conclusion on Excluded Employees

In light of the above provisions, "excluded employees" under Para 2(f)(i) of the Employees Provident Fund Scheme are not required to be members of the Fund and thereby pay PF contributions. Therefore, an establishment can have employees for whom the Company pays Provident Fund contributions and those for whom it does not. Finally, no separate declaration from an employee, whose salary is over and above Rs. 6,500/-, needs to be taken for not paying contributions towards the Provident Fund.

Thank you, Navalkardeepti. It's useful, but my question is, if an employee whose basic salary is more than ₹6,500 wants to contribute to EPF, is the employer bound to pay the employee's share of the contribution, i.e., EPF 3.67% and EPS 8.33%? Please clarify for me.

No, there are a number of judgments. An employer is only bound to pay his share of contribution up to the prescribed limit.

Thank you, sir. However, someone informed me that the employer isn't bound to pay, and they told him the same. I am looking for any official notification regarding this. Anyway, thanks again for your help, sir.

This is in reference to the conversation above regarding the employer's Provident Fund (P.F.) liability for employees receiving a salary higher than the P.F. threshold. I would like to present my views on this matter as follows:

Employee Membership in the Employees' Provident Fund (E.P.F.)

An employee becomes a member of the Employees' Provident Fund (E.P.F.) upon joining if their monthly salary, inclusive of Basic and Dearness Allowance, is Rs. 6000 or more. The employee will continue to be a P.F. member even if their salary exceeds the P.F. threshold, and the employer will only contribute based on Rs. 6500 or as outlined in the "Standing Orders."

Employer's Contribution Obligation

However, the employer is not obligated to contribute to the P.F. share for excluded employees who joined the organization at a salary of Rs. 7000 per month (Basic+DA). This policy applies uniformly to all employees meeting the specified criteria. There are no exceptions made for any individual.

Thanks & Regards,
Deepak Behl

I think different matters are being mixed up, causing you a lot of confusion. The law requires the employer to pay their share of contribution of 12% plus administration charges on the actual salary subject to a salary ceiling of Rs. 6500 per month. Where the salary exceeds Rs. 6500 per month, the PF contribution will be computed as if the salary is Rs. 6500 per month. (Here salary means basic + DA only)

If an employee joins the employment at a salary of more than Rs. 6500 (joining salary) and does not have a previous active PF account, then the employee has an option of intimating to the employer that they wish to be exempt from PF. Only in such cases, the employer is exempt from their contribution. In all other cases, they have to pay the same.

Employer Contribution to PF on Wages Exceeding Rs 6500

Employers need not contribute on wages exceeding Rs 6500 per month. Their contribution is limited to 13.61% of Rs 6500.

It is not the judgment or "standing orders" that prescribe this. It is paragraph 26-A(2) of the PF scheme that limits the employer's contribution.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

Hi all, it's confusing—some say employers are bound, some say employers aren't bound to pay. Can anyone provide me with any notification under the act?