How Are Companies Adjusting to the PF Ceiling Increase from 6,500 to 15,000? HR Insights Needed

In light of the recent increase in the PF ceiling from 6,500 to 15,000, I would like to know how other companies are handling this change. Are they adjusting it in the existing CTC of employees, or are they increasing the CTC for all employees? HR friends, please share what is being done in your company.

Thanks for your help.

Regards,
Mini

It simply means that the employee whose basic salary is above 6,500 and 15,000 or less shall be included in the PF scheme. It does not mean that you have to increase the salary. Earlier, it was optional for the employer to deduct the PF of those employees whose basic salary is above 6,500. However, most companies do deduct PF regardless of the basic salary. It is now mandatory to deduct the PF for employees whose basic salary is between 6,500 and 15,000.

My Introduction:

This is Alok. I am a Cite HR member and have completed my MBA-HR, DLL and am now working as an HR trainee at Cosmo Films Public Ltd. I will be glad to exchange ideas and share knowledge. As I have recently begun my career in this profession, I am also looking forward to professional networking. Please feel free to write to me at [Email Removed For Privacy Reasons]. I would like to know your email ID so that I can send it from my company mail ID.

I would be willing to share HR knowledge and professional networking.

Regards

I appreciate your prompt response. I would like to ask if an employee's CTC is 35,000 with a basic of 15,000. His PF deduction right now was 780 with a company contribution of 885, Net salary: 33,335, Gross 34,115. Since his eligibility for PF deduction is Rs. 1,800 now, and the company contribution is also Rs. 1,800, will his net take-home now be Rs. 31,400, and CTC remains 35,000, or will the employee's CTC now increase to Rs. 36,800?

I know some companies are not increasing the CTC and are adjusting the entire amount within the same CTC; otherwise, the cost of the company for all employees will increase tremendously. Or in case the CTC is increased now for the company, then that amount which is increased is adjusted in the increment of employees whenever they're due for an increment in April. Please advise on what to do, as the costing of salaries will increase tremendously. Thank you for your help.

Regards

His CTC does not increase to 36,800; his takeaway will be 31,400 if you have made the deductions correctly (I am relying on your figures). It's simple, you don't have to increase the salary, just that PF will have to be deducted on the basic if it is 15,000 or less, and accordingly, the employer's share too. Of course, if his basic salary is going beyond 15,000, then you need not deduct on the above amount.

Feel free to write to me at [Email Removed For Privacy Reasons]. I would be able to give my company email id; would like to know your email id too.

Regards,

There are a few practical questions while implementing this policy:

1. If the basic salary of an employee "A" is less than Rs. 15,000, how do we need to contribute to EPS? Is it 8.33% of the basic pay or a minimum of Rs. 1,000?

2. If an employee "B"'s total gross salary is Rs. 40,000 and the basic is only Rs. 10,000 (25% of gross is basic) with the rest of the amount adjusted towards Special Allowance (excluding HRA, Conveyance, PF), how do we need to calculate the pensionable wage? Do we need to change the calculations from the existing basic of Rs. 10,000 to Rs. 15,000?

Experts, kindly advise.

Regards,
Jyothi

As per the gazette notification dated 22.08.2014, the statutory limit has been raised from Rs. 6500/- to Rs. 15000/-. Hence, those employees whose contribution for EPF was restricted by the employer to Rs. 6500/-, i.e., Rs. 780/-, will now be raised to 12% of Rs. 15000/- or the actual basic salary + DA + Concessional Value of Food Allowance, whichever is lesser, effective from 01.09.2014.

Do we need to conclude that the EPS contribution is 8.33% of either Rs. 15,000/- (Rs. 1,250/-) or 8.33% of less than Rs. 15,000/- (less than Rs. 1,250), whichever is lesser? We need to ensure that the employee's basic salary should never be less than the minimum wages applicable to the respective state and year.

Regards,
Jyothi

Contribution for EPS was restricted by the employer, i.e., 8.33% of Rs. 6500/-, which amounted to Rs. 541/-. This contribution has now been raised to 8.33% of Rs. 15000/- or on the actual basic salary + DA, whichever is lower, regardless of the minimum wages.

I understand your concern. In your case, as you mentioned, the employer's contribution cannot be adjusted in CTC; it has to come from the employer. Therefore, the CTC will need to be raised, and the employee's CTC will now increase to Rs. 36,800. You mentioned that some companies are adjusting this in their CTC, which is unfair. They may face legal complications as the PF authorities will inspect all organizations to ensure compliance with the new wage ceiling.

Company Approach to PF Ceiling Adjustment

In our company, management has increased the CTC by Rs. 780 to Rs. 1,800 or by 12% on the basic, whichever is lower. Please follow the same approach to avoid any legal issues. It should not affect the employees' take-home salary.

Please let me know if you have any other queries regarding this.

Regards,

Dear Jyothi, If the basic salary of an Employee "A" is less than Rs. 15,000, how do we need to contribute for EPS? Is it 8.33% of the basic pay or a minimum of Rs. 1,000?

The EPS contribution will be 8.33% of the basic salary or Rs. 15,000, whichever is lower. The Rs. 1,000 minimum is not an EPS deduction; it is the minimum amount the employee needs to receive as a pension per month after retirement.

If an Employee "B"'s total gross salary is Rs. 40,000 and the basic is only Rs. 10,000 (25% of the gross is basic), with the rest of the amount adjusted towards Special Allowance (excluding HRA, Conveyance, PF), how do we need to calculate the pensionable wage? Do we need to change the calculations from the existing basic of Rs. 10,000 to Rs. 15,000?

Deductions should be based on Basic only. Please retain the gross salary concept for EPF or EPS; we do not need to alter the salary structure for the purpose of PF. Calculate only on the Basic salary, i.e., on Rs. 10,000 in this case.

Employee contribution: 12% on Rs. 10,000

Employer contribution: EPF - 3.67% on Rs. 10,000 and 8.33% on Rs. 10,000.

I hope I have clarified your doubts. Please let me know if you have any other queries.

Regards

Usually, for every financial year, companies budget employees' salaries, and it is fixed to a certain amount for the entire year. Each company has its own policy to make changes in the salary structure, and there is no rule that employees' net take-home pay should not be reduced because of the increase in the wage ceiling in EPS. Though my opinion may seem employer-friendly, this is the hard truth that any employer can argue. If there is any rule or policy regarding net take-home pay not being reduced, kindly share it with everyone, which can be helpful for other HR professionals too.

Regards,
Jyothi