Can Employers Adjust PF Deductions for New Employees Without Changing Salary Structure?

I need some help to understand the PF rules from the employer's perspective. My company has been registered for 2 years now, and they have deducted PF from more than 100 employees at the standard PF rate. Since our basic salary is 40% of the CTC (e.g., 18,000 - Basic), the PF deduction is 12% of 18,000, which equals 2,160.

We have been following this policy for 2 years, and my question is: can the employer change the salary structure for the deduction of PF so that less PF is deducted for "new employees" (without changing any structure for old employees) and thereby increase the take-home salary?

Can my employer restrict the PF amount to a minimum of 780/- without changing the basic or any other component in the structure? Is it possible for the employer to follow two sets of rules for PF deduction?

I am awaiting a response. Thank you.

Regards,
Riddhi

Understanding PF Rules: Basic Slab and Voluntary Contribution

As per the PF rules, the basic slab for PF is ₹6,500. In this case, individuals receiving a basic salary of ₹6,500 or less will have PF deducted at a rate of 6,500 * 12% = ₹780. This means, as per the salary, the basic salary * 12%.

Voluntary PF Contribution

The second scenario is the voluntary case. Here, it depends on the employee whether they want to have PF deducted in the organization or not. If they choose to deduct the PF, the percentage to be deducted is determined by the employee, but the employer's contribution will remain at 12% only.

Now, coming back to your query, they are deducting the PF in the voluntary case as you may have agreed to the deduction of PF. Therefore, they are deducting 12% of your basic salary.

Thank you.

Reducing PF Deductions: Key Considerations

To reduce PF deductions, you may need to obtain written consent from all your employees. In my opinion, it's better to have only one set of policies. Before reducing or changing PF deductions, you must obtain written consent from all employees and submit it to your regional PF office. There is no need to alter the basic salary.

Regards,
Manish Bali

As suggested by Mr. Manish, it is better to follow a uniform policy for all employees from an HR point of view. For new employees, if you are changing the EPF conditions, you should specify in the appointment letter that their EPF contribution will be strictly as per the EPF scheme and get their acceptance for that.

Regards,
Varghese Mathew

I fully agree with the opinion given by Manish. You have to obtain written consent from all employees regarding the reduction in PF contribution. Afterward, it is advisable to write an official letter enclosing the consent letters from all employees to the PF office, requesting approval. Until you receive written approval from the PF office, you should continue to pay PF based on the current basic wages, as is being done. Once you obtain approval from the PF office, you can reduce the PF contribution as mentioned in your note for reference.

Regards,
Sibabrata Majumdar
Management Consultant - Legal & HR
[Phone Number Removed For Privacy Reasons]

If your company is not changing the salary structure for present employees and is providing a new structure for new joiners so that their take-home pay will be more, there is nothing wrong with that. As per rules, deductions after ₹6,500 on PF are voluntary. If your company mentions what the monthly deduction for PF will be in the appointment letter and if the new employee agrees to that by giving acknowledgment, there should not be any issue.

Regards,
Amit