Understanding PF Contribution: Can Employers Deduct 24% from Employees Alone?

HR Gems:

Can anybody shed some light on PF contribution? Is there any clause which says (12%+12%) 24% of the contribution can be deducted from the employee alone? If so, then I believe there is no point in having PF contribution. Please share your comments.

Can we deduct the Medical Insurance Premium amount from the employees' salary? As far as I know, we cannot do these two things as per the law. What do all of you say? Please provide your inputs.

If, by any chance, we have to resort to tactics, then what I understand is we can add these components to the employees' CTC as additional benefits from the employer. Am I on the right track?

Thanks for your time.
- Mirza

Dear Mirza,

The employees are entitled to pay 12% of their basic salary to the PF. The employer is also required to pay the same amount and deposit it with the PF. However, the employer is not supposed to deduct the same from the employee's salary. The employer's contribution would still be added to the CTC of an employee.

Regarding Medical Insurance Benefits, these are extra benefits provided by the employers, but they include that amount in preparing the CTC. CTC stands for Cost to Company, which means what exactly the employer is bearing while employing you will fall under CTC.

I hope this has helped solve some of your queries to some extent.

Regards,
Amit Seth.

Amit:

Thanks for your inputs. I was well aware of these things, but to make 200% sure of myself, I have posted this query.

For example, if one's salary is 4 lakhs per annum, and if I include the Mediclaim, PF contribution, and other additional components, then the CTC would vary. Isn't it? This means that for the employee, his CTC would be 4 lakhs per annum only, but for the employer, it differs because all these components get added to it. Please clarify.

Thanks a ton for your time! :)
- Mirza

Dear Mirza,

Yes, the CTC will include all these variable components as well, and it would be reflected in one's CTC too, which is provided by the company.

Regards,
Amit Seth.

Dear Mirza,

Greetings!

I have attached a Word document that provides you with information on PF Contribution.

Regards,
John N

Dear Mirza,

As you know, CTC term is different from Gross Salary. Cost to Company includes every expense (including Gross Salary) on a particular employee which is being covered by the Company. It may include Employer PF Contribution (which can be 12% or 13.61%), the premium amount of Health Insurance, employer's ESI Contribution (4.75%), etc. However, when we talk about only salary, the employer is not allowed to deduct their own contribution from the employee's salary. Gross salary includes only Basic, D.A., and other allowances paid to the employee. Employers' contributions should be included in the Salary.

Thanks,
Anuj