How to Calculate PF Deductions for an Employee on Leave After an Accident?

Dear All, I have one query, please let me provide the solution. We are a very small organization, and we are deducting the PF amount within the limit of ₹6500/-.

Our Case

Last month, one of the employees met with an accident. She attended her duty from 1st Sept. to 20th Sept. 2013. After the 21st, she met with an accident and did not attend her duty for the remaining days. Her salary for these 20 days is ₹8000 (Basic only). So, can we deduct the PF amount like ₹6500/- * 12% of what?

Her salary is deducted from the month of Sept. 2013. (10 Days)

i.e., the calculation is like:

1. If her 20 days' salary exceeds the limit of ₹6500, then we can deduct the PF as 6500*12%.

2. If her 20 days' salary exceeds the limit of ₹6500 and she did not attend her duty for the remaining 10 days, and if her salary exceeds ₹6500, then we consider only her present days and can deduct PF with respect to (6500/30)*20 days * 12%. Is it okay?

Please provide me with a solution for this query... please.

Regards,
Disha G.
Human Resource Department

You can deduct PF on the actual drawn basic for 20 days and pay. There is no need to pay on Rs. 6500/-. The calculation formula shown by you is correct.

Even if the salary exceeds Rs. 6500, the ceiling salary will be treated as 6500 for the whole month. Accordingly, for 20 days of attendance out of 30, the contribution will be calculated as 6500 x 20 / 30 x 12% = 520.

Regards,
Abbas.P.S

You must understand that PF is a fixed contribution and you cannot decrease it. It has to be paid either on the basic salary or on 6500 (keeping in mind the cap aspect). If I am not wrong, you are misunderstanding the concept of basic salary and gross salary. Please clarify.

Clarification on EPF Coverage for Employees Earning Above Rs. 6500

As per the details posted, your employee is earning more than Rs. 6500. She is not covered under the EPF Scheme 1952 under Section 2(f).

According to Section 2(f) of the EPF Scheme 1952, an "excluded employee" means:
- (i) An employee who, having been a member of the Fund, withdrew the full amount of his accumulations in the Fund under clause (a) or (c) of sub-paragraph (1) of paragraph 69.
- (ii) An employee whose pay at the time he is otherwise entitled to become a member of the Fund exceeds [six thousand and five hundred rupees] per month.

Very recently, the limit of Rs. 6500 has been enhanced in an amendment to the said Act.

Regards,
SPKR

If you are contributing to the PF for employees with a basic salary above Rs. 6500/- subject to the statutory ceiling, then in this particular case, the basic for 20 days will be deemed as 6500 x 20 / 30.

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

PF Deduction on Basic Salary

PF deduction is calculated on a maximum amount of ₹6,500. You need to deduct PF on ₹6,500, which amounts to ₹780 (12%). If an employee receives a basic salary of ₹8,000 and works only for 20 days, you should still deduct PF based on ₹6,500. In such a scenario, the employee would receive ₹5,333, and PF will be deducted on the full amount because the 20 days' salary does not exceed the limit of ₹6,500. If the salary for 20 days exceeds this limit, the PF deduction remains based on ₹6,500.

Madam/Sir, PF is always deducted on the salary earned during the month. If the salary exceeds Rs. 6500/-, statutorily you can restrict deduction up to Rs. 6500/-. If you are already contributing/deducting PF on the full salary (i.e., in excess of Rs. 6500), then the PF should be deducted on the actual sum paid.

Regards,
Pradheep

Clarification on PF Calculation Limits

Well, I have seen all the discussions. But one thing is for sure: none is talking about the limit of Rs. 6,500. Please note that the limit of Rs. 6,500 is related not just to a mere figure but to the month. In other words, a salary of Rs. 6,500 per month is the limit.

In this case, even though the salary is Rs. 8,000 per month, and for full working days, the limit of Rs. 6,500 per month can easily be applicable, it can be confusing when the salary earned is less than the prescribed limit of Rs. 6,500. For 20 days of work, the under-ceiling salary will be Rs. 4,333, and the over-ceiling salary will be Rs. 1,000, making a total of Rs. 5,333 (amount in paisa ignored). In my opinion, the PF should be calculated only on Rs. 4,333, i.e., the under-ceiling salary, and not on the entire salary of Rs. 5,333. This logic needs to be clarified because, for computer programs, such points can pose a significant hurdle.

Regards,
Adv. K. H. Kulkarni

Eligibility for EPF Coverage and PF Deduction Calculation

Employees whose salary (Basic + DA) is Rs. 6500/- or below are eligible to be covered under the EPF Act. The deduction of PF is proportionate to the actual number of days an employee worked during the month. Of course, EL/PL should be taken into consideration for this purpose.

So, if any employee worked for 20 days during the month, deductions of the employee's and employer's share should be calculated accordingly.

Regards,
Eswararao Ivaturi.

The contribution of Rs. 520/- is correct, as posted by ABBAS, KULKARNI, MATHEW, and JAYANT.

Corporate Manager - H.R./I.R.
[Phone Number Removed For Privacy Reasons]

Thank you very much for your very useful and valuable support. I really appreciate your response.

Gratuity Withdrawal Assistance Needed

I also need your help with Gratuity Withdrawal for our employees. We deposit the Gratuity amount into LIC, and there are two cases:

1. One of the employees has completed 4 years, 5 months, and 28 days in the organization. My question is, can he withdraw the Gratuity?

2. One of the employees joined our organization 10 months ago and passed away 3 months ago. Can we withdraw his Gratuity from LIC?

Please assist me with both cases, and if possible, kindly send me the claim form that we need to submit to LIC for Gratuity withdrawal.

Thank you in advance.

Regards,
Disha G.

Dear Sir/Madam, I have one query; please provide me with a solution. I am in the HR department and am looking into PF and ESIC issues from one year back. There was a mistake where an active employee's PF was settled, but to date, I have continued to pay the PF amount under the same number. Please give me a solution for this query. Regards

PF is deducted on Basic and DA. Employees who join the organization and draw Rs. 6500/- or below are covered. After joining the organization, even though the limit is crossed, the PF is deducted on Rs. 6500/- only. This amount is calculated based on actual working days during the month, taking into account any paid leave.

Eswararao Ivaturi. Beyond this, employees can.

You can go ahead and calculate PF on 20 days pro-rated Basic salary. That's the norm for PF deduction, and it is never on the basis of wages; rather, it is on wages earned.

Dear all, I had an occasion to discuss the matter with the RPFC, and he was of the firm opinion that there cannot be any proportionate reduction in PF contribution in relation to the attendance of the employee. PF is payable on the wages earned and not on the rate of wages. So if the employee draws wages in excess of Rs. 6500/- even though there is a reduction for the absence, then PF is payable for the amount of Rs. 6500/-. But if the wages go below Rs. 6500/-, it has to be on the full amount.

Guidelines from the Chief PF Commissioner

Is there any guideline from the office of the Chief PF Commissioner?

Regards,
KK

If your opinion is accepted, a person who works all days of the month and has not will get equal contribution. The RPFC would have said so to get more money to fund. On my inquiry with a Kerala PF official, proportionate recovery is correct.

Regards,
Varghese Mathew

PF should be calculated on Basic. If her basic is Rs. 8,000/-, then PF will be 12% of Rs. 8,000/-.

Regards,
Srinivas

I know a case where a contractor had deposited contributions on a proportionate basis but ultimately had to pay up at the rate of Rs. 780/- per month on the orders of RPFC. I had discussed the matter then with the RPFC, and he was stressing, as per Section 6 of the Act, mandating payment of PF contribution on the wages payable to each of the employees covered under the Act and on the definition of para 2(f) of the EPF Scheme, stating that an excluded employee is only those employees who draw wages exceeding Rs. 6500/- per month.

Although I pointed out that in case the wages of an excluded employee drop below the Rs. 6500/- limit, if the employer has to pay contributions for such instances, then it will be an anomalous situation. But he was insistent on his interpretation. There would surely be some official circular from the PF organization; the readers would benefit if it is made available.

Regards,
KK

Mr. Varghese Mathew is right in this regard. Salary is meant for one month of attendance. Out of two employees with the same salary but different attendance, the earning amounts will be different. Accordingly, all statutory deductions related to salary will also be different. Otherwise, those who have less attendance will be more beneficial, at least in terms of PF. If you have experienced a slippage from any of the RPFCs, it should not be taken as a record against the general ethics and precedents.

Regards,
Abbas P.S