Navigating EPF Ceiling vs. Minimum Wages: Are Employers Facing a New Dilemma?

Hello Seniors! A big dilemma I am in for now. EPFO has set a ceiling of 6500 (above that voluntary) while the minimum wages for even unskilled employees are now close to 6400 (6362). Does the employer now stand on the verge of getting an exemption for all of their employees (voluntary contribution)? Either EPFO is slow in pace or the Labour department exceeds and brings EPFO to a vulnerable point.

Regards,
Manish Gupta

Coverage and compliance under the EPF & Misc. Provisions Act, 1952 have no relation to the minimum wages fixed in any state. Payment of wages less than the minimum as fixed is relevant only under the Minimum Wages Act.

It's a bit hard for me to understand the query, probably because it was raised by Corporate HR. Nevertheless, I would like to contribute to this thread with my limited understanding, Sir.

EPF Membership Continuation

Once an employee is a member of EPF, they continue to be a member even if their salary exceeds the threshold limit. If their salary is fixed above the threshold limit in a new employment, they still remain a member of EPF.

Threshold Limit and Minimum Wage

As mentioned by Harsh Kumar ji, the minimum wage rate is not relevant to the threshold limit. You may already be aware that this threshold limit is soon going to increase to Rs. 15,000. Additionally, you may know the definition of salary.

Please verify the accuracy of your statement that PF contributions above the threshold limit are voluntary.

Thank you.

Recently, EPFO is going to revise the EPF/EPS ceiling from Rs. 6,500/- to Rs. 15,000/- by order dated 14/07/2014. Secondly, regarding your query about minimum wages and basic salary, it is true that the basic salary can't be kept less than the defined amount as stipulated by the state government. In the matter of EPF, the deduction should be on Rs. 6,362/- above that amount, for those whose basic is Rs. 15,000/- to get them covered under EPFO.

Thanks & Regards,
Sumit Kumar Saxena

The basis of any compliance is the wages assigned by the organization, namely Basic & Gross salary (assigned based on the Minimum Wages Act). Hence, the EPF is directly related to Basic+DA. What we assign as Ba+Da should not be less than the minimum wage, and this Ba+Da is the ground for the contribution of EPF.

Concern for Blue-Collar Employees

My prime concern is for blue-collar employees whose wages are just close to the minimum wages. Organizations have a very decent way of exempting these employees (wages more than 6500) by misusing Form-11 under EPFO, though the provision under Form-11 is clearly mentioned, i.e., the employee should not have a working EPF account or he/she would have withdrawn the amount from the EPF account.

I mean to say, if Basic+Da assigned under the Minimum Wages Act is more than 6500 (which is already for semi-skilled & skilled), would the new incumbent be exempted by the provision under EPFO?

Thanks & regards,
Manish Gupta

Quoted by Manish Gupta
Corporate HR

I mean to say, if Basic+DA assigned under the Minimum Wages Act is more than 6500 (which is already for semi-skilled & skilled), would the new incumbent be exempted by the provision under EPFO?

Dear Mr. Manish, my answer to your above query is: NO. Please refer to the recent circular of EPFO dated 14/July/14, posted on this site also. Moreover, Mr. Korgaonkar has also explained the matter which is sufficient in this regard.

Thanks,
Anil Sharma