Employer Deducted Full PF from My Salary: Is This Allowed and What Can I Do?

Hi, my employer has deducted the entire PF amount, i.e., 12% employee contribution and 12% employer share, from my salary. Can they really do this? It is not mentioned in my appointment letter. Please guide.

Thanks in advance.

Regards,
Manish

Well, it is commonly used by employers nowadays as they mention the CTC with other salary break-ups, including the PF (employee part), but they do not mention that the employer's contribution will also be taken from the salary.

Actually, CTC stands for the cost to the company, and that's why they say that they agreed on a particular CTC, and the employer's contribution is also part of CTC.

If your organization mentioned CTC in your salary breakup, then they can deduct both parts of PF from your salary. But if they have not mentioned it, you could talk to the HR department about this. Mentioning CTC is the current trend in industries where they show how costly you are for the organization. In CTC, organizations mention PF, ESIC, Mediclaim, Promotional Coupons (if any), Gratuity, and variable components as well.

So, take a look at your salary breakup and discuss it with HR.

Thanks

Regards

Legal Provisions on EPF Contributions

It is illegal to deduct the Employer's (ER) share of contribution to EPF from the salary of the Employee (EE). Please read Paras 30, 31, and 32 of the Employees Provident Fund Scheme 1952. In a nutshell, the provisions are as follows:

Para 30: The ER, in the first instance, pays both the ER and EE share.

Para 31: Even if there is a contract to the contrary, the ER is not entitled to deduct the ER share of contribution from the salary. He cannot recover it from the EE in any other manner either!

Para 32: The amount of EE share, paid in advance by the ER, can be deducted from the salary of the EE.

It is a very clear legal position that the ER cannot deduct the ER's share of contribution from the salary of the EE. The Cost to Company (CTC) is different from salary. Let us not confuse the two.

Provident Fund Contribution Requirements

According to the Provident Funds Act of 1952, the contribution has to be made from both sides, meaning the employer and employee need to contribute 12% each. Additionally, administrative charges are to be borne by the employer. Therefore, if the employee has had the entire contribution deducted solely from their end, it is not acceptable as per the law. Request the employee to contribute half of the required amount from their end.

Please confirm if this issue pertains only to your case or if it is affecting all employees. If the latter is the case, kindly inform the regional PF officer about this matter.

All the best,
Suresh

The Employer can't deduct the Employer's contribution from Employee gross salary. But he can do the same thing from CTC, which is already included.

Employer Deducting Employer's Share from Salary

If any employer deducts the Employer's Share from the salary, it is against the provisions of the EPF & Miscellaneous Provisions Act, 1952, and can be brought to the notice of the concerned Regional Provident Fund Commissioner (RPFC).

I am slightly confused over the above statements. I believe the employers show PF contribution by them as part of CTC as an indirect benefit only. In such a case, it reflects notionally what the cost is but not to really deduct from the employee. Deducting from the employee, the employer's share cannot be permitted.

Deductions Under PF Act

It is not permitted to effect both deductions under the PF Act, regardless of the CTC agreed upon.

Understanding Salary Break-up and PF Deductions

If the salary break-up shows the MGPF (Management PF) in the CTC, then it can be deducted from the salary, i.e., 12% + 12% = 780 + 780 = 1560; otherwise, not.

I do not agree with the above view, and the PF Act never permits the recovery of the Employer's Contribution from any employee. Moreover, it is statutory to deposit a matching employer's contribution along with the Employee's Contribution, which is to be recovered from the employee's salary at a specified rate of 12%.

Additionally, it is important to note that the employer is required to contribute Rs. 541/- per month towards EPS Contribution, calculated at 8.33% on Rs. 6500/- out of the 12% employer's contribution.

I inquired with the PF office, and they confirmed that it is illegal. They asked for the submission of documents and a letter to the commissioner in hard copy to take action.

Thanks a lot, everyone, for your help!

Regards,
Manish

Dear Sir,

Greetings for the day.

No employer can only deduct an employee's salary without deducting the employer's share as well.

Sumit

Dear Manish,

It is not permissible by the PF department to deduct both employee and employer contributions from an employee's salary. This practice is entirely illegal and unethical.

Chetan

Hello,

As an HR executive, I am including the employer contribution of 12% in the salary payslip. Is this correct or not?

Kindly reply.

Thanks