Is It Legal for My Company to Refuse PF Deductions if My Basic Salary Exceeds 6500?

Hi, the company is refusing to deduct the PF, saying the basic is above 6500. Does this decision depend on the company regarding whom to deduct PF, or is it compulsory to deduct from every employee who wishes for PF?

Thank you.

If your basic + DA is more than 6500, then it's optional. If your basic + DA is less than 6500, then it's mandatory.

If you have not filled out Form 11 when joining the firm, then the company is liable to deduct PF at least 12% of Rs. 6500, which amounts to Rs. 780. This will apply to your company if they have more than 20 employees working for them.

Hope this helps you.

For a newly joined person who has never been a member of the Provident Fund Organisation and has filled out Form No. 11 at the time of joining, with a Basic and DA of Rs. 6500 or more, the employer cannot pay his share of Rs. 780.

Please refer to the latest Circular issued by EPFO, dated 27th May '14. It is clearly mentioned in the said circular that EPFO authorities will not insist on employers to mandatorily deduct statutory contributions if an employee's basic wages exceed Rs. 6500/-.

Thanks,
Anil Sharma

Dear VM,

Of course, this is a premature query, but I'll address it. What happens if the ceiling is raised from ₹6,500 to ₹15,000 as and when notified? How about the period from "discontinued" till recommencement? Will we need to reopen/reactivate all the closed accounts, recover arrears, add contributions, and continue? Or should it apply only prospectively from the date the revised cap is notified? How should we address the broken period? Will the break in PF subscriptions and contributions not affect the "continuous service" for pensionary benefits? I'm certain the Ministry of Finance, Ministry of Labour, and Ministry of Law will consider these aspects while drafting the notification. What do you say?

Regards

Continuing PF Membership for Employees

The company must continue the PF membership of an employee who is already a member of PF at the time of joining. The employee needs to provide particulars in Form-11 or produce a PF slip to the employer for the continuance of membership. Otherwise, the employer might assume you are not a member or are an excluded employee. I believe it is your responsibility. You can now request the employer to include you in the PF membership.

I presume the situation you are anticipating may be this:

Employee Coverage Under New Salary Ceiling

A new employee whose salary is currently Rs. 14,500/- per month is, as per the current law, an excluded employee. Once the notification of the ceiling of Rs. 15,000/- is issued, he will become a covered employee with effect from the date of the notification or any other effective date mentioned in the notification. From that date, his contributions shall be deducted and remitted accordingly. There is no question of arrears. He shall be enrolled in EPF from that date. In the case of employees with salaries above Rs. 15,000/-, there will not be any change.

Email: [Email Removed For Privacy Reasons]
Phone: [Phone Number Removed For Privacy Reasons]

In the prevailing situation and query, Januds has not mentioned whether he was an earlier contributor to the scheme or if he joined his first company. In case he was a member of the scheme prior to joining the current company and facts were declared in Form 11, the management is bound to continue his membership, at least up to the ceiling limit of Rs. 6500/- per month. Otherwise, it is not mandatory for the company.

Have a good day.

Regards,
P K Sharma

Understanding EPF Contributions for Employees

I presume the situation you are anticipating may be this: A fresh employee whose salary is now Rs. 14,500/- per month. As per the present law, he is now an excluded employee. Once the notification of the ceiling of Rs. 15,000/- comes, he will become a covered employee with effect from the date of the notification or any other effective date mentioned in the notification. From that date, his contribution shall be deducted and remitted. He shall be enrolled in EPF from that date. In the case of employees with a salary above Rs. 15,000/-, there will not be any change.

Not only in cases like this, what happens when an employee was previously drawing less than Rs. 6,500, was contributing earlier, and the salary increased to above Rs. 6,500 at some point in the past, resulting in EPF contribution either being curtailed or discontinued as of the current date by the employer or employee? In such cases, what happens when the expected notification is issued either effectively prospectively or retrospectively (which I hope not)? Would there be any arrears involved?

Regards

Such orders will not be retrospective. I do not understand how a contribution can be discontinued in the case of a member when his salary is increased from Rs 6500/- to over Rs 6500/-. Contributions cannot be stopped when the salary is increased above Rs 6500/-. The member will continue to contribute, but his contribution is limited to Rs 780/-.

Email: [Email Removed For Privacy Reasons]
Phone: [Phone Number Removed For Privacy Reasons]

Notification for Revision Update

The notification for the revision from 6500 to 15000 is still not released. This will take time, and the same cannot be done on a pro-rata basis.

The employee who is a member of EPF can never opt out just because of a salary rise (i.e., above Rs. 6500/-). He/She can continue their PF deductions above the limit also, but for PF calculation, the Employer can consider only the limit, i.e., Rs. 6500/-.

In the second case, if an employee joins on a salary that is above the PF deduction limit, then he will not be eligible for any EPF deduction. In this case, if the employee wants to deduct his EPF contribution, then the Employer has no choice but to deduct both parts, i.e., 12% + 12% = 24%. Here, you can see that the Employer is bearing the Administration Cost, i.e., 1.61% for this process.

Regards,
Santosh Khamitkar Sr. Manager - HR/Admin

This is just a bill, which you can say is a private bill from one of the members submitted to the parliament. If it has been approved, then it is called a government bill, as per my knowledge. Then, through a notification, it will be circulated to the rest.

Regards,
Santosh Khamitkar

Company Liability for PF Registration

I have one more query regarding this post. Suppose an employee joins an organization that is not registered for a PF account with EPFO or has only 8 employees on its roll, and the newly joined employee was a member of PF. In this situation, what is the liability of the company? Which option can a company take in this situation:

1. To get registered with EPFO and deduct the PF of the employee?
2. To get Form 11 filled up by the employee and not deduct any PF?

Which option should a company choose for this case?

Regards,

PF Deduction Conditions

If you have more than Rs. 6500 basic + DA, then:

• Condition 1: If your PF was deducted in the past by another company, you have to provide details to your current company in Form No. 2. After that, your company is obligated to deduct your PF amount and deposit it with the respective department along with its contribution, at least up to Rs. 6500.

• Condition 2: If your PF has not been deducted in the past or if you were not a member of any pension or PF-related department, then we cannot forcefully request your company to deduct PF. You can only make a request in this regard.

Summary in a Legal Way: If you indicate 'nil' in Form No. 2 and your basic + DA is more than Rs. 6500, then the company is not obliged to pay its contribution.

Sorry, it's not Form No. 2; it is Form No. 11.

Understanding PF Deductions

If you have a basic salary + DA of more than Rs. 6500, then:

• **Condition 1:** If your PF was deducted in the past by any other company, you have to provide details to your current company in Form No. 11. After that, your company is obligated to deduct your PF amount and deposit it, along with their contribution, of at least Rs. 6500 to the respective department.

• **Condition 2:** If your PF was not deducted in the past or you were not a member of any pension or PF-related department, then we cannot compel your company to deduct PF. You can only make a request for it.

Summary in a Legal Context

If you indicate zero contribution in Form No. 11 and your basic salary + DA is more than Rs. 6500, the company is not obligated to pay its contribution.

My question is, if the person had a salary of less than Rs. 6500/- and was a member of EPF in their previous company, would we be required to deduct and deposit their PF upon joining our company even if my company is not registered with EPF as it currently has only 8 employees? Based on your response that I would need to deduct and pay their PF, would I first need to get my company registered?

Please reply.

Regards,
Sandeep

When the Act itself is not applicable to your organization, why do you bother?

Regards,
Varghese Mathew

If your organization never exceeds 20 people since its inception, then PF is not applicable. So, don't worry. You are in an Exempted Establishment company. Inform workers that PF is not applicable in your company.

Dear friends,

Here is a typical example: an employee who joined here was a member of EPF in his previous company. Could he be denied EPF contribution in the present employment just because it's not within the ambit of the EPF Act? Is he not entitled to continue his EPF account and remit his own, if not the employer's contribution (which obviously may not arise)? Any clarification on this, please?

Regards,
Sandeep

Just because the employee's basic salary is above 6500/-, the management cannot afford to avoid paying the contributions, either the employee's or employer's. Please remember that an employee has the option not to contribute to EPF at the beginning of their professional career. As and when their basic salary exceeds 6500/- at the start of their profession, they can choose that option by filling out Form 11.

However, any organization is not willing to provide such an option for its employees.

Thanks and Regards,
Ravichandra Paanem

If an employee's basic salary is more than 6500, the deduction of PF is not mandatory. It depends on the employee.

Regards

Your understanding that "if the wages are more than Rs. 6500/- per month of an employee, the PF is optional" is incorrect. This statement holds true in the case of an individual whose first salary exceeds Rs. 6500/-. If the employee was already a member of EPF, they have no choice but to continue contributing to EPF.

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

Here, the missing link is, what about an existing PF member (employee 'X') of a registered employer switching to a new employer (B) who has no EPF registration as they have fewer than 10/20 employees? The question is, in order to continue the subscription and contribution of an existing member (X), should the new employer (B) go for EPF Registration and contribute only for this 'X' member? Whether his salary is less than or more than 6500 is secondary.

No need to continue to contribute for him as the new employer is not bound by the EPF Act. The employee can withdraw his EPF.

Regards,
Varghese Mathew

Budget: Labour Law Update

The Finance Minister has approved a host of reforms under Labour Laws, specifically regarding the Provident Fund, as follows:

- PF Coverage Limit Raised from Rs. 6,500 to Rs. 15,000. As a result of this revision, employees drawing wages between Rs. 6,500 and Rs. 15,000 will be covered under the PF Scheme. The maximum Employee Share of PF per month will be Rs. 1,800 (12% of Rs. 15,000) instead of Rs. 780 per month as of today. In other words, employees drawing between Rs. 6,500 and Rs. 15,000 earlier will not be eligible to be excluded under Para 26 of the EPF Scheme. As a result of this amendment, 50 lakh new workers will come under the ambit of the Provident Fund Scheme.

- Minimum Monthly Pension Amount raised to Rs. 1,000. This will directly benefit the 28 lakh pensioners who currently receive less than this amount.

Employees' Provident Fund Organisation (EPFO) will launch the "Uniform Account Number" (UAN) Service for contributing members. This will facilitate the portability of Provident Fund accounts and simplify the transfer of the PF corpus of employees when they switch from one employment to another. Please note that these are budget announcements, and the changes will come into effect once the Notification to that effect is issued by the EPFO. As a result, the effective date of the proposed changes is not known as of today.

Regards,
Kishor

Subject: Re: PF Not Deducted by Company, Citing Basic Salary Above 6500

Mr. Kumar, most employees opt for PF for future security. PF should be deducted even if the basic salary is less than 6500.