Is It Legal To Deduct Employer PFcontribution From An Employee Salary?

Sir/Mam,
I have recently joined a company and in training period which is about to end up.While joining pf deduction was not there .but now they have introduced PF and that too WHOLE 24% (employer+employee contribution) deduction from employee salary.Request you to tell me is it legal? If no, then what action can be taken? Please reply me as soon as possible.

Have you got any appointment order. kindly verify that. As per the Act it is not legal one.
Rule says - Only 12 % will be deducted from employee salary.
You can approach your PF office and contact any Enforcement officer to clear this issue.
Dear seniors kindly correct me if iam wrong.
Regards,
M. Dinesh kumar.

Hi,
1.If they have introduced CTC then both contribution can be applicable.
2. If they are deducting both contribution from your gross then, its illegal.
3. Kindly make sure about CTC and Gross.

Ms. Varshney

We you join any company is advisable that clearly ask them about yours gross salary and CTC for a general view Gross salary and ctc can define as Following

Gross salary it include- In hand salary+ Statuary deduction (TDS, ESIC , PF , LWF etc only employee share)

CTC include- Gross salary+ Statuary benefit ( ESIC , PF , LWF, bonus, gratuity etc only employer share)+other benefit ( Transportation, Food, etc)

So kindly check yours appointment letter, if company deducting PF employer share from yours gross salary (as per appointment letter ) go to HR and ask for clarification in writing .

As per EPF Act 1952 Section 12.

Employer not to reduce wages, etc.

“No employer in relation to an establishment to which any Scheme or the Insurance

Scheme applies shall, by reason only of his liability for the payment of any

contribution to the Fund or the Insurance Fund or any charges under this Act or the

Scheme or the Insurance Scheme reduce whether directly or indirectly, the wages of

any employee to whom the Scheme or the Insurance Scheme applies or the total

Quantum of benefits in the nature of old age pension, gratuity, provident fund or life

insurance to which the employee is entitled under the terms of his employment,

express or implied. “

Regards

Anurag

This is a common mistake that many so called HR professionals make. In their eagerness to show savings to their boss, they try saving a few hundred rupee and expose the company to penalty.
The concept of ctc is that all cost will be on company account.
So under that concept, entire PF is deducted from ctc of the employee.
However, the Indian labour laws do not recognise ctc. Instead the concept of gross wages is followed. Once the gross wages is fixed, it remains at that level. So now that the PF has been introduced, the gross wages can not be lowered to pay the employers part of PF (sec 12). Only the deduction of employees share will increase.
The company can adjust it in ctc when appraisals take place. Meaning that you will get lesser hike then, but they can not lower your gross wages for this purpose,

Para 31 of EPF Scheme 1952 envisages that Employer’s share not to be deducted from the members
Notwithstanding any contract to the contrary the employer shall not be entitled to deduct the employer’s contribution from the wage of a member or otherwise to recover it from him.
As per the above ruling, the employer can not recover employer share of P.F.Conts. and also Admn. charges which works out to 13.61% from the salaries of employees. This practice is going on unchecked with wrong interpretation on the pretext of CTC, and this practice is nothing but hoodwinking the employees of showing exaggerated salaries in their CTC while appointing their workforce. Employees should know this ruling and should invariably resist to deduct Employer share of conts. and also Admn. charges.

I do not have much experience with EPF as the employees strength in my company has not reached 20 so far. I feel that the views of Mr. Srinivas Venkat appear to be in order. CTC fixing does not solve the problem. As is clear from its name, it is employer contribution and hence it has to come from employer kitty and not from the employee kitty. However, it can be considered by the employer while considering the annual increment grant time after evaluating the employee performance to accommodate this amount of EPF part in his annual increment as there is no binding guidelines for this component. You may grant the increment as zero or even 50% raise. It is up to the company and its resources.

Dear Friends,
Answer to the query is addressed correctly by two learned members by giving the reference of Section 12 and Para 31.
It is illegal to deduct the employer share from the salary of employee.
The queriest used the word "salary" and not "CTC".

Employer PF contribution is part of CTC and it is never deducted from Gross Salary. Only employee contribution is deducted from Gross Salary. Employee and Employer PF contribution is credited to Employee PF Account.