Is My Employer's Reduced PF Contribution Fair? Seeking Advice on CTC Changes

My CTC is 59,189 per month. The salary breakup is as follows: Basic - 29,302, HRA - 17,581, Conv - 2,930, Med - 2,930, LTA - 2,930, and PF - 3,516. The PF of 3,516 mentioned is the employer's contribution. Additionally, the same amount was deducted from my salary as an employee contribution.

Recently, my employer has informed me that they will only deposit 780 rupees as the employer's PF contribution and have refused to pay the remaining amount (3,516 - 780 = 2,736) as part of my salary. However, my CTC remains the same, and they have not provided any new documents to reflect a change in the CTC.

Please let me know if I am eligible to receive the extra money or not.

Thanks

Employer's Contribution to PF and EPS

They need not pay you the difference as it is in CTC, which is a costing factor. They cannot restrict their contribution to ₹780. W.E.F. September 1, they have to pay ₹1800 as the employer's contribution. Out of that, ₹1250 will go to EPS and ₹550 will go to PF. As per the Honorable SC's decision in the Marathwada Gramin Bank case, the employer can limit their contribution to 12% of the statutory limit, i.e., ₹15000 w.e.f. September 1, 2014.

Regards,
Varghese Mathew

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Please, can anybody explain to me what the deduction structure would be if an employee's salary is 20,000 (basic + DA)? I am looking to understand the deductions such as PF, pension, EDLI, admin charges, etc.

Understanding CTC and Gross Salary under Indian Law

In technical terms, under Indian law, there is no concept called CTC. The law only recognizes gross salary. You should always negotiate based on gross salary. CTC is a tool to mislead employees.

However, in civil law or contract law, what is promised must be paid. If they have shown PF on the full salary, they are required to give it to you as it would belong to you when it is deposited in the PF account. To that extent, you can insist that they deposit the full PF, not just on the ceiling limit. Otherwise, they should give you that money if they don't deposit it in PF.

Assessing the Promises Made

But you need to see what they actually promised you in writing. Did they specify the CTC and give its breakup along with your appointment letter? Is it on the company letterhead or from the company email account? Or have they only given the gross amount? If so, then under contract law, you have no remedy.

Again, in the real sense, you have no remedy. You cannot take legal action against your employer unless you want to risk losing your job. Legal remedy is very expensive and can go on for years, so it's not a practical solution.

Leveraging Your Position

If you are a critical resource and the company wants to retain you, then you have leverage. You can approach the person who recruited you or your top management and express your disappointment that HR is altering your remuneration from what was promised. You would like their intervention. Focus on ensuring that the differential in your salary is paid into the PF account as promised in the CTC when you were recruited.

Hope this helps.

Thank you, Saswat, for the information. My company provided the CTC details on the official letterhead to me with the breakdowns. PF is a part of my CTC. Currently, they are only depositing 780 rupees as the employee contribution. Can I ask them to pay me the rest as my salary?

Please read my earlier post very carefully. It has lots of "ifs" and "buts" in it. You cannot "claim" or "demand" it because there is no way as such to enforce CTC.

As I said, it depends on who you are, how important you are to the company, and how critical they think it is to retain you. If you think you are important (or that the company went through a lot of effort to get you on board) and therefore have leverage, go and talk to the person who recruited you. Tell them that you feel cheated as what was told to you as CTC is not what the company is actually providing to you and that you feel it's wrong for a company of this standing to do something like that.

Going by the ethics as well as contract/tort jurisprudence, they should give that money to you as PF only, and there is no direct justification to say increase my take-home salary. On the other hand, you can always say that you don't need to give it to PF, so as per your promise (on letterhead), that money rightfully should come to me as a higher salary.

I know I am not giving an answer but two different answers, each of which is mutually exclusive. But that is what it is, and you need to decide which of the two paths is best for you.

Understanding CTC and Gross Salary

CTC stands for Cost to Company. It includes all costs the company incurs on you, which would encompass many expenses that you may not directly receive. For instance, money spent on training forms a part of your CTC. If you are provided with a car, its cost, driver's salary, and estimated fuel expenses will be included in your CTC.

Gross Salary and Deductions

Gross salary refers to your actual salary before any deductions are made, comprising Basic, DA, HRA, and other allowances. Deductions are the amounts subtracted from your salary, permitted under the Payment of Wages Act, sections 6 and 7. In your case, deductions from the gross salary would typically be the employee's contribution to PF (12%) and potentially ESIC if applicable. However, the employer's contribution is not considered a deduction as it was never part of your salary but was displayed in your CTC as an additional amount spent by the company on you.

There are numerous detailed discussions on CTC on cite hr. If you still have unresolved confusion, you can explore those discussions further.