How to Handle Employees' Reluctance to Contribute to EPF After Wage Ceiling Increase?

As you all know, the Wage Ceiling for EPF has been raised from Rs. 6,500 to Rs. 15,000 w.e.f. September 01, 2014. Some of our employees who were not covered earlier (whose basic salary is between Rs. 6,500 and Rs. 15,000) are to be enrolled for EPF but are not willing to make EPF contributions as they have their personal savings.

Now, please let me know if there is any way out for not compelling them to make EPF contributions.

Thanks,

Dhananjay.

I understand your issue, and this wage ceiling enhancement decision has been pending since 2012. So, you should have conveyed this earlier to employees. Moreover, there is no rule in the EPF Act that an employee cannot be given an exception from EPF Contribution because their wage is between 6500-15000.

Advice on EPF Contribution

My advice is to convince them about the EPF Contribution by explaining the benefits. At the same time, convince the management to contribute the Employer's Contribution separately (which should not be deducted from the Employee as part of CTC).

Thanks and Regards,
Ravichandra Paanem.

I have a feeling the department is not going to take kindly towards any manipulation of salary structures at this stage. If you try to manipulate the breakup by reducing the basic salary, they are definitely going to issue a show cause or even take the matter to court. The court is likely to rule against you. Even if not, the matter will prove very costly for you in terms of litigation costs as this will drag on for ages.

While the management is free to decide the salary structure, it cannot reduce the basic salary to reduce the PF component. It is one thing to put the salary structure in a particular way; it is another matter to change it to decide PF. Field officers have already been briefed on how to check these things in an audit. Circulars have been used internally for catching such cases.

I agree. But the department cannot insist on how to design the salary structure. If an employer pays basic + DA as per the Minimum Wages Act of the State, now suppose if any establishment redesigns their salary structure by keeping basic + DA as per the Minimum Wages Act, can the department have an objection? Or can any other act like the Labor Act/Minimum Wages Act raise an objection? What is the legal standing for that?

Kindly give an opinion.

Regards, Pramod Thakar, Pune