How Should We Structure Salaries to Meet PF Requirements Amid EPFO Inspections?

Recently, there was news in the Economic Times about EPFO inspecting companies splitting wages to reduce PF liability. Refer to the link below for more details on this news: http://articles.economictimes.indiat...d-organisation

All organizations have certain salary structures to benefit the employees while fulfilling the statutory requirements. Can somebody guide me on how we should structure the salary so that the PF requirements are fulfilled?

Regards,
Sarika

Understanding PF Wages and Allowances

As per the PF Act, Section 2b provides the definition of basic wages. The limit of PF wages has been increased from Rs. 6500 to Rs. 15000 (notification yet to be received). If you are deducting PF below Rs. 15000 and the salary of the member is higher than the wages you have shown, you must certify how the same is not PF wages. PF wages are only excluded with HRA, Bonus, Overtime Allowance, Commission, or any other similar allowance payable to the employee. This means all emoluments are covered under PF wages except for the above-mentioned items.

Most companies deduct PF on Basic and DA. Allowances such as Education, Conveyance, Medical, etc., are not considered under PF wages. Until the limit was restricted to Rs. 6500 wages, and you were deducting on Rs. 6500, no queries were raised from the PF office. Hence, be careful with excluded allowances; understand why they are not included in PF wages if they are below Rs. 15000.

Thanks,

Bhat