Can We Limit Employer PF Contributions to Rs. 6500 Despite Higher Past Wages?

Dear Senior HRs,

Is it possible to restrict the employer contribution to the maximum wage ceiling of Rs. 6500 for employees who have contributed to the actual basic wages over and above Rs. 6500 for the past two years?

Now, can we restrict the wage ceiling to a maximum of Rs. 6500 as per existing wage ceiling norms?

Please clarify.

Regards,
Prabhu R

Yes, there is a provision in the EPF Act to restrict the wage ceiling to a maximum of Rs. 6500/- and accordingly deduct contributions from both the employee's and employer's sides.

Regards,
Janardan

Request to Seniors,

My doubt is that when an employee is appointed with a condition of a 12% contribution on Basic & DA towards PF, and he is drawing more than Rs. 6500/- (Basic & DA), can we restrict the PF contribution only to Rs. 6500/- without giving notice to the employee? Will it affect as a breach of the service contract or terms and conditions of appointment? Kindly give your opinion.

Regards,
Mohan Kumar

As per the PF Act, if an employee is drawing a salary of Rs 6,500 (basic & DA) per month, the employer is bound to pay and deposit PF contributions in accordance with the applicable rate.

On the other hand, another employee of the same organization is drawing a sum of Rs 20,000 (basic & DA) per month according to the terms and conditions of his employment. The employment terms stipulate that his PF contribution will be deducted on Rs 20,000 (basic & DA). Consequently, the employer is depositing PF contributions on Rs 20,000 (basic & DA). In this scenario, the employer cannot restrict the deduction of PF contributions to Rs 6,500 per month instead of Rs 20,000 per month arbitrarily. Such actions by the employer would be considered a violation of the terms of employment.

However, if the said employee expresses his desire in writing to the employer that he is willing to deduct PF contributions on Rs 6,500 per month instead of Rs 20,000 per month to increase his net take-home pay, then he can opt for the same as per a recent circular issued by EPFO.

Regards,
Sibabrata Majumdar
Management Consultant Legal & HR
[Email Removed For Privacy Reasons]

The employer cannot reduce the contribution directly or indirectly. Once you start complying beyond restricted limits, you cannot reduce it to ceiling limits. However, such restrictions can be applied in the case of new joiners/contributors.

Regards,
P K Sharma

As per the latest amendment, an employer cannot reduce wages as per the Provident Fund Act. No employer, in relation to an establishment to which any scheme or the Insurance Scheme applies, shall, by reason only of his liability for the payment of any contribution to the Fund or the Insurance Fund or any charges under this Act or the Scheme or the Insurance Scheme, reduce, whether directly or indirectly, the wages of any employee to whom the Scheme or the Insurance Scheme applies or the total quantum of benefits in the nature of old age pension, gratuity, provident fund, or life insurance to which the employee is entitled under the terms of his employment, express or implied.

Dear Professional, Your question is right. Whenever there is an amendment from the Government, it is the duty of the employer to provide awareness to the employees by posting it on the notice board. Simultaneously, the employer should create a format for reducing the PF deduction and have it signed by the employees for future reference. If any legal issues arise, the employer has control.

It is always better to obtain employee consent for any frequent changes in the HR scenario, as they are the backbone of the organization. This should be documented in writing on the company letterhead to the PF department, stating that the employees have accepted the ceiling limit; failure to comply will result in consequences.

We have heard that the limit is going to be revised from Rs. 6,500 to Rs. 15,000. Please wait for the update accordingly.

Hope this meets your requirements.

Regards, Vijayalakshmi J Manager - Training

I have some employees with a Basic + DA above Rs 6500. I want to know about the formalities for submitting PF wages above Rs 6500.00 to EPFO. Please suggest the process for the same.

Thank you.

Regards

I have some employees with a Basic + DA above Rs 6500, as per the Minimum Wages Act in Maharashtra. I want to know about the formalities for submitting PF wages above Rs 6500.00 to EPFO. Please advise me on the process.

Thank you.