Is It Okay for Small Companies to Skip PF Deductions for Employees? Let's Discuss

Dear All,

I am very new to this particular setup which has only 40-plus employees. Here, the PF has not been deducted from employees. Is this the right way of doing things? Is PF deduction optional for a small company?

Please share your thoughts.

Thank you.

Regards,
Siva

If the employee strength is more than 7, it is compulsory to maintain statutory requirements. Hence, please know the procedure of registering yourself with EPFO and start paying PF. If this continues, and an employee who is aware of rules and regulations intimates EPFO, then action will be taken against the company. To avoid these kinds of problems in the future, please speed up the process.

This is what I would say to the best of my knowledge.

Dear Seniors,

Please clarify my doubts here. I want to know the PF rules and how to break the salary structure. Also, what are the minimum wages in Maharashtra state?

Thank you.

Hello,

Our newly started recruitment consultancy has a staff of less than 7. How should we design the salary structure? Should we include PF/ESI in the salary or not?

Dear Supriyamd,

Where did you get the number of "7" employees for applicability of the statutory requirement? I would like to know the act to which you are referring. PF is applicable only to companies with 20 or more employees. ESIC applies in case of 20 or more employees (10 or more in some states). I am not aware of any act that applies from 7 or more.

ProximHR Placement,

PF, ESIC is not applicable to your company, so there is no need to add it to the salary of your employees. There are lots of discussions on salary structure in this forum; search for the relevant thread and proceed.

In reality, for a small company like yours, the salary structure does not matter, except that employees get some tax benefits for conveyance allowance (up to Rs. 1600 per month) and HRA (a complicated working your CA/Auditor will be able to explain).

PF Compliance Challenges in the Construction Industry

I have a query regarding PF. I work in the construction industry, where the availability of labor is a difficult task. We pay them in cash as they are:

1. Casual & Migratory Workers
2. Most of them don't have bank accounts or any photo ID for opening bank accounts
3. They work under a labor contractor.

PF authorities are issuing notices and forcing us to enroll these casual workers under EPF, or else they are serving us notices. According to them, even if a worker worked for a day, PF needs to be deducted. While making it compulsory, workers are threatening to leave the work. We are in great trouble. After convincing, we could get the IDs of a couple of workers who had Aadhar and address proof. Obviously, we are paying that above the committed amount (from our pockets).

Recently, I heard that if a person has worked for more than 60 days, then only they should be made a member of PF. I am not sure how true this is.

Kindly advise.

Regards,
Satya

Siva,

PF and ESI are applicable to your firm as you have more than 20 employed persons. ESI will be applicable only if the company is in an implemented area. After five years, Gratuity will be applicable.

Thank you.

That rule you are referring to was removed more than 10 years ago. Currently, if a person has worked for you even for a day, you are required to pay PF for that individual. The action taken by the PF authorities is absolutely correct.

Today, almost every person possesses an Aadhaar card, voter ID card, or some other form of ID. Through the PM Jan Dhan scheme, banks are mandated to open bank accounts with just a single document. Hence, in the current scenario, obtaining their bank account details is easily achievable.

Negotiating the salary is crucial in making the job attractive to the individual. You can offer a higher amount and either deduct the PF or directly pay the PF on their behalf.

Please let me know if you need further assistance or clarification.

No, it is not the right way. Provident Fund (PF) is not optional; it is a mandatory statutory deduction from employee salaries and also mandatory for employers' contributions. When your employee strength exceeds 19 in a particular month, you are liable to comply with the Employees' Provident Fund (EPF) & Miscellaneous Provisions Act, 1952. It is mandatory for all establishments whose employee strength is 20 or more.

I have a doubt. Till now, my company was not having PF, and only PT was getting deducted. But now they want me to start up with PF. How will I do the salary breakup as there is no other deduction done? Kindly help me with a solution.

Regards,
Sonal Gupta

Applicability of the Scheme

This scheme applies to all companies or establishments that employ 20 or more individuals. Remember, once the employee strength reaches 20 or more, the company must continue with this scheme, regardless of whether the number of employees falls or rises. However, if a company or establishment stops its operations or continues without any employees, this scheme is not applicable. Additionally, employees considered as trainees or apprentices will not be covered under this act.

Regards,
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