How Should EPF Contributions Be Calculated for High Earners Working Part-Time?

EPF Sealing Based on Basic Wages

Please share your views on EPF sealing based on basic wages. This pertains to situations where an employee's basic salary exceeds ₹6,500, and a ceiling of ₹6,500 has been set for EPF contributions. If an employee works for only 15 days and their basic salary for those days is also above ₹6,500, how should the EPF be calculated?

For example, let's consider employee A, whose monthly basic salary is ₹60,000. If he works for 15 days, his total basic for those days amounts to ₹30,000. In this scenario, we need to determine the EPF contribution. Your insights on this matter would be appreciated.

Thank you.

Hope there is no difference in it. As you are calculating the PF on the ceiling of basic Rs. 6500 for all the employees, when his salary is Rs. 60,000.00 and you pay Rs. 6500 as PF, then on a basic of Rs. 30,000, it needs to be paid on the ceiling of Rs. 6500 only. It will be the same as you paying on the ceiling of basic Rs. 6500/-. You can also check with the local PF office persons for better clarification.

As rightly said, there will be no difference as you are calculating and deducting PF on Basic Salary, which is more than the ceiling of Rs. 6500/-. The deduction of Rs. 780/- (12% of 6500) will continue unless the basic salary falls below the amount of Rs. 6500/-.

Thank you.

If an employee with a salary of Rs. 10,000/- per month works only for 15 days in a month, their deemed basic ceiling is Rs. 3,250/-. Therefore, I believe the employer's contribution is limited to 12% of Rs. 3,250/-, which amounts to Rs. 390/- only.

Regards,
Varghese Mathew

The EPF ceiling of 6500 is for the full month, and for 15 days, the EPF basic would be calculated according to the calendar days of the month on 6500. EPF will be deducted and deposited accordingly. For online filing data for challan submission, you have to show NCP (Non-contributing period). Hence, when an employee has worked for 15 days only and not for the full month, you have to show his contribution period of 15 days. This also affects the Pension scheme. Please see the online challan preparation of EPF.

If you agree with the viewpoint for EPF deduction on 6500 for 15 days of work, then you will be showing his work in your records for 15 days and in the EPF records for the full month. Would this be correct?

Thanks,

V K Gupta

Dear friends, Yes, Mr. Varghese Mathew is right in this regard. If two employees with the same salary of Rs. 60,000 work for 30 days and 15 days respectively, how will their PF contributions become the same? The ceiling on the salary of 6500 means it is for the total of one month. If attendance gets reduced, the connected benefits/contributions will also be adjusted accordingly.

Regards, Abbas.P.S

The Executive category of persons which you have mentioned in your query is normally termed as 'Excluded Employee', as defined under para 2(f) of the Employees' Provident Fund Scheme. An employee who, having been a member, withdrew the full amount from his EPF accumulation on retirement after the age of 55 or for migration from India whose pay exceeds Rs. 6500/- at the time of appointment.

An Employee Once Covered Will Continue to Be Covered

If the pay of an employee, who is already a member of the scheme, exceeds the limit of Rs. 6500/-, he will continue to be covered under the Scheme (Para 26 A (2)) and 6 A of EPS.

For example: The pay of 'X' at the time of joining the employment on 1/4/2012 was Rs. 6000/- p.m. His pay was increased to Rs. 7000/- with effect from 1/4/2013. Though his pay exceeded the ceiling of Rs. 6500/-, he will not be treated as an 'excluded employee' as provided under Para 2 (f) of the Scheme. The payment of contribution in respect of him has to be continued at least on Rs. 6500/-.

As regards your query that if an employee's basic salary/wages is more than Rs. 6500/- and a ceiling has been set at Rs. 6500 for EPF, and he worked for 15 days, then what will be the procedure to calculate EPF if his 15 days basic is also more than Rs. 6500/- is concerned, the deduction of the PF contribution is limited to the amount of salary earned by an employee (subject to a limit of Rs. 6500/- p.m) irrespective of the number of days of work put in by him. A limit of Rs. 6500/- p.m also holds good for the Executive employee whose basic salary is Rs. 60,000/- per month and he has worked for 15 days, then his 15 days total basic is Rs. 30,000/- as inquired by you.

Regards,
BS Kalsi

Please clarify below:

Employee basic is Rs. 7000/-, so the employer's contribution will be Rs. 780, and the employee's contribution will be 12% of Rs. 7000.

Is this correct?

Employees can contribute 12% of Rs 6,500/- or their actual salary, or more than 12% of their salary. However, the employer's contribution is legally limited to 13.61% of Rs 6,500/-. The employer can choose to contribute more than Rs 6,500/-. Nevertheless, the employee cannot contribute more than 13.61% in any case.

Regards,
Varghese Mathew

If the employee wants to contribute more than his deduction, then the employer has to contribute the same amount as the employee.

For example, if "X's" basic salary is 10,000/- per month and he wishes to contribute 1,200/-, the employer must also contribute the same amount or adhere to a fixed ceiling amount, i.e., 780/-.

The employer can also contribute Rs 1200/- if he is willing. If not, he needs to contribute only Rs 780/- plus administrative charges of Rs 10,000/- and EDLI, EDLI administrative charges of Rs 6,500/-.

Regards,
Varghese Mathew

There are two distinctive categories of employees:

Category 1: Existing Provident Fund Members

(i) When a person is enrolled as a member of the Provident Fund while drawing a salary less than Rs 6500, but subsequently, their salary exceeds Rs 6500, they will continue to be a member of the Provident Fund at all times. However, the employer has the option to restrict their contribution to the Fund to the amount payable on Rs 6500 per month. Thus, the contribution beyond Rs 6500 is at the discretion of the employer, but once they extend the benefits, they cannot withdraw the same at a later stage.

Category 2: New Employees with Higher Salaries

In the second category, a person appointed on a salary exceeding Rs 6500 and who has not been a member of the Fund earlier will not be liable for the benefits of the scheme under the Provident Fund since they will be termed as an 'Excluded employee'. Of course, if the employer and employee both agree, there is no bar in enrolling an employee as a member under the Provident Fund.

Regards,
BS Kalsi
Member since Aug 2011