Employees Refusing PF Deductions: Do We Need Signed Consent Forms?

In our organization, some employees are not willing to have PF deducted from their salaries. Do we need to maintain any signed form from them? Please kindly suggest.

Thank you.

Regards

I hope you are aware that the basic salary limit for PF is ₹6,500. Individuals earning more than ₹6,500 as their basic salary are not eligible for PF. However, many companies display two basic salary components - one for PF and the other as the company basic.

If an employee's basic salary exceeds ₹6,500, we are not required to deduct PF from their accounts.

You can use Form No. 11, which I have attached here, for exemption from PF for those whose salary is more than 6500.

Regards.

If the Basic Pay (BP) is ₹6500/-, then Provident Fund (PF) is mandatory; otherwise, the employer commits an offense.

If the employees had a PF account earlier, then the continuation of PF is necessary even if the BP exceeds ₹6500/-.

If the employee never contributed to PF earlier and currently the BP exceeds ₹6500, then PF is optional.

PF is mandatory nowadays. Clients are asking for PF paid challans when submitting the monthly bills. Therefore, counsel the employees about the PF benefits.

The Benefits of Provident Fund (PF) for Employees

PF is a very good investment option for employees, especially those in the lower scales, because they are yet to understand the value of investing discipline. They don't realize that the ₹780 or 12% they deposit is not only that but also the employer's contribution is added to it.

So the ₹780 actually is ₹780 + ₹780. A part of the employer's contribution goes to the Pension Fund, and in an eventuality, that pension amount can be claimed by surviving dependents. Moreover, on the PF part of the employee and PF deposit of the employer, the employee also earns interest rates of 8.5% (changes yearly). In case of a loan requirement for medical, hospitalization, marriage, or even insurance payments—some employees may not be able to get it from the bank—they can approach PF to give advance against their deposit (valid after 5-7 years).

It's a good thing for the employee to be invested in PF. I would request you to explain these benefits to them. If they are still not convinced, then PF gives the employee the option to restrict the contribution to ₹780/- only for those whose Basic+DA is more than ₹6500/-; alternatively, they can also claim exemption by filling form 11 (provided they aren't already enrolled in PF). Once enrolled, they need to continue. Also, as a precautionary documentation measure, I would suggest collecting a letter from the employee with their request (i.e., they wish to limit their contribution to ₹780/- or they wish to claim exemption from PF since they haven't been enrolled earlier and are above the limit).

Warm Regards,

Deena Jagasia

Hi all, if an employee is not willing to deduct the PF, it is not the employee's choice; they have to accept the conditions of the company/organization. So, it is mandatory.

Manoj is correct. Once you are a member, you have to join. Read the exemptions on Form 11; they are self-explanatory.

If an employee is drawing more than Rs. 6500/- as basic salary and does not willingly contribute to the Provident Fund (PF), is it mandatory for the employer to contribute to his account equivalent to Rs. 6500/-, or should the employer also not contribute to the fund?

Deepti, it is applicable in all establishments where the basic salary is higher than 6500.