Understanding PF Deductions: Is Your Employer's Contribution Part of Your CTC?

I am a frequent visitor of this forum, and it leaves me in awe to see the spontaneous responses from the eminent HR professionals for the queries posted. I have a small query pertaining to the PF deductions. The PF is deducted from the salary, which constitutes 12% from the basic pay, and 12% is from the employer's end. My query is:

1. Is this 12% employer's contribution included in the employee's CTC, as mentioned in the offer letter?
2. Is there any rule of thumb that the CTC should not be deducted from the employee's salary (i.e., employer's contribution from employee salary)?
3. If the employer's PF is deducted from the employee's salary, is it legitimate? If not, what is the best possible solution?

I am inexperienced with PF deductions, and it would be great if someone could help clear this ambiguity.

Thank you in advance.

Dear Mohammed Arif,

You may include the employer's share of EPF in the CTC. However, it should not be deducted from employees' salaries.

Abbas. P. S.

Understanding CTC and Employer Contributions

CTC (Cost to Company) refers to the total amount of expense an employer spends on their employees. Hence, it includes the employer contributions.

1. CTC includes the employer contributions, which will be mentioned in the appointment order.

2. As per the EPF Act, employer contributions should not be deducted from an employee, but there is no relation between the EPF Act and CTC. Many companies will fix a consolidated pay and deduct the employer contribution from their employees.

3. Types of Pay Structures

Your pay may be fixed as below:

Type - 1

Informing you of a salary of Rs.11,364/- and not deducting the PF employer contribution from employees:

- Wage: 11364
- 12% Employee: 1363.68
- 12.36% Employer: 0
- Net: 10000

Type - 2

Informing you of a consolidated pay of Rs.10,000/- at hand and deducting the PF employer and employer contribution from employees:

- Wage: 13220
- 12% Employee: 1586.4
- 12.36% Employer: 1633.992
- Net: 10000

Both calculations are similar as you get Rs.10,000/- at hand every month. It depends on the employer's calculation of CTC.

Regards.

Hi all,

Thank you for responding to my query. Now I have clarity, and I regret making a mistake in my second question, where I should have mentioned PF instead of CTC.