Can a Company Legally Opt Out of Provident Fund if All Employees Agree?

I wanted to clarify one of the doubts I have about PF. I heard from some sources that if all the employees of a company sign a declaration stating that they do not want to opt for the PF facility, the organization can opt out of registering for PF. Please clarify whether this is accepted as per the law. Thank you.

My answer to you is as follows:

Clarification on EPF Applicability

What you heard is wrong. The EPF Act is applicable to establishments with a total headcount of 20 or more, regardless of salary and whether or not the individuals have opted for EPF.

A person who is already a member of EPF cannot choose not to contribute towards EPF. A person who is not a member of EPF and whose salary at joining is more than Rs. 6500/- can choose not to contribute towards EPF at the time of joining by providing a declaration to this effect.

If all individuals in your establishment are earning more than Rs. 6500/- at the time of joining or when the establishment is covered under EPF, and they were not members of EPF previously, they can choose not to contribute towards EPF. In this scenario, none of the individuals in your establishment are required to be covered under EPF. However, you are still liable to obtain an EPF code number for your establishment and pay a total of Rs. 7/- every month towards administration charges for EPF and EDLI.

I hope this clears up any doubts you may have. I would appreciate it if other members could provide additional value to this information.

Regards

Good reply, Korgaonkar Ji! If a sample declaration is attached, it will be highly helpful to such seekers. I am attaching a sample on behalf of you.

Regards,

Thank you, Learned Members,

Mr. Korgaonkar, please validate my understanding:

1. The company needs to get an EPF code once there are 20 employees on the rolls.
2. Even though there are 20 or more employees on the payroll, they can opt out of PF contribution if their salary is above Rs. 6500, provided they were not covered earlier or did not get enrolled in their previous organizations (kind of fresher).
3. An employee (fresher or previously enrolled employee) drawing less than Rs. 6500 will be compulsorily covered in PF.

Please provide feedback.

As per the PF Act, the act is applicable from the day on which 20 persons are found working in your premises or on the roll. The other things start later, such as if all are getting above ₹6,500, then you need to deposit just ₹7 (₹5 in the account, ₹2 and ₹2 in 22). Thirdly, if a new employee earns below ₹6,500, you have to deduct and deposit his contribution along with the employer's share as per the law.

Thanks
Regards

I have made certain changes to your draft. Presently, not being a member of EPF is an essential criterion for becoming an 'excluded employee' within the meaning of the Act. The revised draft is attached.

Best regards,
[Your Name]

Dear Experts,

Can you please tell me what the salary is as per the PF Act? Is it BASIC + DA if it is less than 6500, or is it only BASIC if it is less than 6500?

Regards,
MAHAN

I would suggest that you may take Form 11 from the employees who join your company at a salary (PF qualifying salary, which shall include basic and DA only) of more than 6500 so as to make them excluded. The Form 11 is attached for your reference.

Regards,
Madhu.T.K