How Will the New PF Slab Changes Impact Employee and Employer Contributions?

I hope you have all read the PF circular regarding the increase in the PF eligibility slab from ₹6,500 to ₹15,000. I would like you to please share your views on the changes that will now affect employee and employer contributions without altering the current CTC for the employees. I am looking forward to receiving valuable inputs at the earliest since we need to implement these changes starting from the September 2014 salaries.

Thank you,
Chakradhar Reddy.

Please provide me with one CTC sample so that I can bifurcate accordingly.

CTC and PF Code Considerations

1. Earlier, your organization did not have the PF Code. If not, then we can design without any changes in CTC, but changes will occur in the Net Salary.

2. If you were contributing to PF earlier, there is no need to change the CTC; continue as is.

3. Only make changes for those whose basic salary is less than 15,000, and start their remittance from the 1st of September.

The definition for ‘Basic Wages’ given by the RPFC, Chennai regional office is attached for your reference. Kindly go through it and rework your salary component if required.

Since the EPF wage ceiling has been enhanced from Rs. 6,500/- to Rs. 15,000/- with effect from 1st September 2014, kindly note that whatever salary you are going to show, except in the below-mentioned components (categories), will attract PF for the limit up to Rs. 15,000/-.

• House Rent Allowance
• Dearness Allowance
• Cash value of any food concession
• Overtime allowance
• Bonus
• Commission

Section 2(b) "Basic Wages"

“Basic wages” means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include:

i. The cash value of any food concession;
ii. Any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
iii. Any presents made by the employer.

Hence, we would suggest that for employees getting less than Rs. 15,000/- as gross wages, please avoid showing components in the heading like ‘Travel Allowance, Special Allowance’ etc., to them, until you get clarity on components from the EPF department.

Please write to us if you are looking for any professional support in this regard.

Regards

EPF Changes Effective from 1st September 2014

Per Month

Salary: Rs. 12,000.00 Rs. 15,000.00

Employee Contribution: 12% Rs. 1,440.00 Rs. 1,800.00

Employer Contribution: 13.61% Rs. 1,633.20 Rs. 2,041.50

Total Contribution (12% + 13.61%): Rs. 3,073.20 Rs. 3,841.50

Employer Payment Breakdown

This A/c No: Rs. 12,000 Rs. 15,000

Acc. No: 10 - 8.33% Rs. 999.60 Rs. 1,249.50

Acc. No: 1 - 3.67% Rs. 440.40 Rs. 550.50

Acc. No: 21 - 0.50% Rs. 60.00 Rs. 75.00

Acc. No: 2 - 1.10% Rs. 132.00 Rs. 165.00

Acc. No: 22 - 0.01% Rs. 1.20 Rs. 1.50

Total Employer Contribution: 13.61% Rs. 1,633.20 Rs. 2,041.50

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I have corrected the spelling, grammar, and formatting in the provided text to ensure clarity and accuracy. Let me know if you need any further assistance.

Clarification on Dearness Allowance in Wage Ceiling

It is not correct to say that Dearness Allowance is not included in the wage ceiling of Rs 15,000/-. Please refer to the meaning of 'pay' in para 2(f) and also see para 29 of the EPF scheme, which includes DA for wages liable for contribution. Contribution is payable for DA as well if the wages, including DA, are up to or less than Rs 15,000/- per month.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

As per the following details, please let me know on what amount PF will be deducted:

Salary Details

- Salary: $15,050
- HRA: $2,000
- Conveyance: $800
- Special Allowance: $2,000
- 2nd Salary: $7,000
- Conveyance: $800

Please calculate the employee and employer shares.

Regards,
VK.SOOD

Earlier, we were paying the PF for each employee based on ₹6,500. Now, how can we pay the PF on Basic + DA or salary for the month? If it's based on Basic + DA, what is the percentage taken - 60% or 50%?

Regards,
Srinivas

You cannot reduce the basic now as it is against Section 12 of the EPF Act.

Regards,
Varghese Mathew

Clarification about Contribution

After the revision in the wage ceiling from Rs. 6,500 to Rs. 15,000 effective from 1.9.2014 per month, the government will continue to contribute 1.16% up to the actual wage of a maximum of Rs. 15,000 per month towards the Employees’ Pension Scheme. The employer’s share in the Pension Scheme will be Rs. 1,250 effective from 1.9.2014 (maximum).

Under the Employees’ Deposit-Linked Insurance Scheme, the contribution at 0.50% is required to be paid up to a maximum limit of Rs. 15,000.

The employer will also pay administrative charges at 0.01% on the maximum limit of Rs. 15,000, whereas an exempted establishment will pay inspection charges at 0.05% on the total wages paid.

Notes:

Wages up to a maximum of Rs. 15,000 towards wage (basic + DA).

Since an excluded employee, i.e., drawing wages more than Rs. 15,000, can also become a member of the Fund and the Schemes on joint request, and if, for instance, such an employee is getting Rs. 20,000 per month, his share towards provident fund contribution will be Rs. 2,400 (e.g., 12%), and the employer’s share towards provident fund contribution will be Rs. 550 and Rs. 1,250 towards the Employees’ Pension Fund.

In addition to the clarification on contributions towards the Pension Scheme and EDLI, I wish to add the following rates of contribution.

Contribution Rates

SCHEME   EMPLOYEE’S   EMPLOYER’S   CENTRAL GOVT’S

Provident Fund Scheme   12%   3.67%   NIL

EDLI Scheme   NIL   0.5%   NIL

Pension Scheme   NIL   8.33%   1.16% (on wages up to max 15000)

EPF Admin Charges   NIL   1.1%   NIL

EDLI Admin Charges   NIL   0.01%   NIL

Regards,
T M Rao

Enclosed herewith is a summary sheet on the EPF Scheme.

Regards,
T. M. Rao

Could anyone please confirm the PF insurance increase from 1.5 lakhs to 3.5 lakhs and the effective date? One of my associates passed away on August 14.

Thanks in advance.
Regards.

I am new to this forum. I want to know what the new rules the government has implemented on PF are and what the process of withdrawal is.

If the employer has not agreed to revise the employee's salary after the PF ceiling limit enhancement, the take-home salary will be lower. What is the remedy?

Regards,
PBS KUMAR

Dear Sarita,

Changes in Employee Provident Fund

Below are the changes made regarding the Employee Provident Fund:

1. The minimum threshold has been raised to Rs. 15,000 from Rs. 6,500. Current members who are limiting their monthly contributions to Provident Funds to a minimum salary range of Rs. 6,500 (Rs. 780) will now have to contribute at least to a salary range of Rs. 15,000 (Rs. 1800).

2. It is now mandatory for all employees with a salary up to Rs. 15,000 to maintain PF accounts.

3. 12% of PF wages (BP+DA) goes as an employee contribution to the Employee Provident Fund account.

4. Employer Contribution (12%):
- 8.33% (of BP+DA) to Employee Pension Scheme
- Balance i.e., 3.67% goes to the Employee Provident Fund

5. Apart from the PF contribution, the employer has to bear admin charges which include:
- 1.10% of basic (Administration Charges)
- 0.5% of basic (Employee Developed Linked Insurance Charges)
- 1.01% of basic (Employee Developed Linked Insurance Charges)

6. The minimum contribution for employees with a salary up to Rs. 15,000 has increased for both employee and employer (i.e., 12% of 15,000 = 1800).

7. Employees who became members in PF post 1st September 2014 and having PF wages (BP+DA) greater than Rs. 15,000 cannot become a member in the pension scheme. Such employees' whole employer contribution (12%) would be absorbed into the PF itself.

8. The new pension scheme is effective from September 1, 2014.

Hope this information helps.

Best regards,
Vineeth

Thank you for your reply; it was very helpful. I am a little confused about the amounts of 6500 and 15000. Are these figures our basic salary within our Cost to Company (CTC), or are they our total salary amounts per month? As far as I know, the Provident Fund (PF) deduction is typically 12% of our basic salary every month. I appreciate any clarification you can provide on this matter.

Thank you.

It's not the CTC. It's actually the Basic + DA for some companies, while others just limit it to 'Basic Pay' alone. In fact, it depends on your company policies. That means if there is no payment to me from the company under the salary head 'DA,' then only the basic pay is considered for provident fund. However, the withdrawal policies for both PF and pension are kept the same as far as I know.

Also, kindly refer to the various court verdicts that have been issued regarding the same (BP + DA case conflicts between employees and companies).

Hope this serves.

Regards.

There is a new PF ceiling change, but the new ceiling is ₹15,000/-. Now, there is no effect. In case an employee's EPS amount is above ₹15,000/-, then a 1.16% extra charge is applicable.

Regards,
Sonu Kumar
[Phone Number Removed For Privacy Reasons]

What will be the PF contribution of an employee whose gross salary is Rs 10,000? Basic: Rs 7,700, HRA: Rs 3,850, Conv: Rs 800. Please reply.

Please let me know, my salary is ₹15,000 and the basic is ₹6,000/-. They used to deduct ₹780/- for PF contribution, but in September, they deducted ₹1,800/-. Is it correct? As I understand, it will not be applicable if the salary is less than ₹6,000/-. If a person leaves his/her company in 6 months, will he/she still get the PF amount?

There is no exemption from PF if the salary is less than Rs 6000/- per month. The maximum contribution to the pension fund is Rs 1800/- per month.

Regards,
Varghese Mathew