Understanding Provident Fund Contributions and Salary Slip Provision

Dear All,

I am working in an Insurance Distribution House that is yet to apply for PF. However, we are in the process of contributing to the employees' PF. That is why we are including the phrase "Provision for PF" in offer letters and salary slips of the employees, and the PF amount is being added to the employee's salary. Is there any problem with this? Please let me know.

Regards,
Gargi

Your question is vague and does not provide complete information regarding the problem. Please explain in detail if you need an answer from the forum.

Until you have the PF registration, you cannot deduct PF from the employee's salary. Regarding the phrase in the offer letter/appointment letter, that can be included, indicating that when PF becomes applicable, the deduction will be made from the salary.

Dear seniors,

I just want to know if I can check the PF data of a newly recruited employee if they previously had a PF number. Will every company assign a new number to newly recruited employees? Is there any possibility to check whether they're defrauding others' PF numbers on a fake salary slip?

Thank you.

Dear All,

Firstly, I would like to thank you all for your feedback. However, the issue I am addressing is the Employer's contribution to PF, not that of the employees. If we are not applying for PF, can we still mention it in the Salary Slip as a provision for PF?

Regards,
Gargi

Provisions cannot be mentioned in the Salary Slip. You are creating a provision that may or may not incur expenses. If expenses do occur, they may not align with the provisions made, leading to reversals in the books of accounts. Therefore, if your company has not contributed towards the PF, it cannot be displayed.

Dear Saji,

As far as my knowledge is concerned, the employer's contribution towards employees' provident fund is 12%. If we make a provision of 12% of the basic of the employee as "provision for PF" and pay the amount as a part of his/her salary, then what is the harm in it? Please let me know.

Regards,
Gargi

First, tell me: Are you liable for PF? What is your company size in terms of the number of employees? If you are liable, why have you not applied for it? If you are not liable, why are you confusing yourself? You said you are putting a provision in the appointment letter for PF. What exactly are you writing?

As Mr. Saswata has rightly said, since you have not applied and are not legally bound for PF deduction, why do you want it to be shown in the Salary Slip and create confusion for the employees? If by any chance an employee leaves the company before your registration, showing the PF contribution will only invite troubles. The rest is your choice.

Dear Gargi,

You mentioned that your organization is "YET TO APPLY for PF" then why so much confusion. When the organization is not covered under PF - is there any ACT/Law you are referring to wherein you can show "Provision for PF" as a part of Gross Salary? Why is it necessary to show such "Provision" or what is the objective behind such practice?

Also, showing that in the salary slip is altogether a different subject. The salary slip is a documental proof of what an employee earns, i.e., his gross income less his share of contribution. Here you are confusing it with CTC where the company mentions each and every penny spent on an employee. I say so because you've mentioned that the Provision is only towards the company contribution.

To sum up with seniors, you might invite trouble unless you have enough supporting to prove this practice.

Regards,
Gargi

Dear Hiral & Saji,

As we cannot reduce an employee's CTC by the amount of the PF contribution, could you please let me know under which account should we mention that portion of his/her salary?

Regards,
Gargi

You don't have to show it in any account until the applicability. Please ask your Accounts Head for further clarification. The working of CTC in the appointment letter can be shown in the Annexure of the salary, and in Notes, you clearly mention that the contribution towards PF will be accounted for only on applicability.

Last but not least, the CTC is a working and is not to be shown on the Salary slip. In the Salary Slip, the Gross Salary and the Deductions are mentioned, to the best of my knowledge.