Is My Company Breaking the Law by Skipping PF and Holding 20% of My Salary?

I joined a company last month, which has 154 employees, but it doesn't have a policy for PF. Neither do they deduct PF amounts nor do they contribute. Also, they withhold 20% of the salary per month, which they call PLI, and pay it back at the end of the year.

So I want to know:

1. Is the company in violation of the law for PF?
2. Can the company deduct 20% every month and keep it with them as is and pay it in the last month?
3. My previous company was depositing PF, so can I keep my PF account idle for the time I'm in this company and start using it again in the future?

Hi Hardeep,

If the company is in violation of the law for PF, this is clearly a violation of rules. Please check the area applicability. You can also raise a complaint online for the same.

Can the company deduct 20% every month and keep it with them to pay in the last month? No, they cannot deduct and keep it. Anyway, please check your CTC breakup. What is PLI?

Yes, you can keep that account idle for 3 years and later as well. Up to 3 years, you will get interest on that.

Violation of PF Rules

The company is certainly in violation of PF rules unless each of the 150 employees joined with a salary above ₹15,000 and did not have a PF account at the time of joining, which I don't think is possible.

Keeping Your PF Account Active

You can keep your PF account active for as long as you wish. The account will earn interest for 3 years, after which it will go dormant, but the money and accumulated interest until then are protected. When you join a new company later, you need to provide your UAN, and they will contribute to the same account.

Understanding PLI

I assume PLI stands for performance-linked incentive. Deducting 20% from the gross salary is a violation of the Payment of Wages Act, even if they are paying it back later. I assume that PLI means it is not always paid back unless the person performed well and kept the boss happy. However, if they are considering this a part of CTC but not actually showing it as a part of the gross salary, then yes, it would be allowed.

So you need to give us some more details.

Violation of Employment Laws by Employers

An employer with an employment strength of more than 150 is clearly violating the provisions of the Employees' Provident Fund & Miscellaneous Provisions Act, 1952, and can be made liable for coverage with retrospective effect. The matter should be brought to the notice of the area enforcement officer or regional Provident Fund Commissioner either online or through a written complaint.

Retaining wage/salary at 20% of earnings is also a violation of the Payment of Wages Act, and no employer can withhold your wages. This matter needs to be brought to the attention of the area labor inspector.

Regards, P.K. Sharma

Both factors of PF, as well as a 20% deduction of wages, seem to be illegal, apparently. Learned members of this forum have already advised. Please follow accordingly.

In your case, it is clear that this company is violating the laws of the state as it cannot retain any part of an employee's salary and PF is compulsory if the employees are more than 20. (Now it will be 10).

Please contact the nearest PF office or enforcement officer, or email them at (http://search.epfoservices.org:81/locate_office/office_location.php).

Even if in the offer letter 20% of CTC is defined as PLI, the company can't deduct; it can pay a lesser gross salary to that effect.

Dear Hardeep,

If the company's employee headcount is 20, then PF deduction is compulsory.

Thank you.

Is there an exemption to exempt PF benefits in an institution if all employees start at a salary above Rs 15,000?

Request clarification.

In this case, you will not be able to add this experience to the upcoming continuous service of 10 years for PF.