Is It Legal to Lower Basic Wage and PF Contribution from Rs. 15,000 to Rs. 10,000?

Dear Member,

The employee's monthly gross is Rs. 30,000 for PF contribution. The employee's actual basic wage is Rs. 15,000, and the PF amount is Rs. 1800.

Is it possible to reduce the actual basic wage from Rs. 15,000 to Rs. 10,000 and adjust the PF amount to Rs. 1200? Would this change comply with PF norms regarding the reduction of PF contribution amounts?

Thank you.

Ok, sir.

Employee's salary is gross Rs.20,000/-. In the case where the employee's present basic wage is Rs.14,000 (70%) and PF amount is Rs.1,680/- monthly, can we reduce the basic wage from Rs.14,000/- to Rs.10,000/- (from 70% to 50%) automatically reducing the contribution amount from Rs.1,680/- to Rs.1,200/- monthly? It is possible as per norms.

Once we start to pay PF on 15000/-, we cannot reduce it as this will be considered as evasion of PF by the PF Authorities.

Salary Structure and PF Compliance

This has to be decided during the Salary Structure Creation. Please maintain a uniform policy in deciding the Basic and other components for all employees. Suddenly, you can't increase or decrease the percentage of the Basic wages. Please don't think to act smart like this to evade PF, thinking you are saving some money for your company. You or your company will get caught soon, and the liability at that time will be double or triple your small savings now. Also, the company's reputation will be spoiled. If you want to do your company a favor, please follow the acts correctly, or it is okay to have a consultant in this regard.

Regards

PF amount, once fixed, cannot be reduced. However, for any further increments to the employee, you can keep the basic the same and increase other allowances. That way, the company will be able to save money in the future.

I have joined a school with a consolidated salary of Rs 28,000/-, and every month PF deduction is Rs 3360/- (28000*12%). Now, the school management has appointed me as a regular employee and is providing a salary as per the 7th pay scale. However, I have been appointed as a U.D.C with a basic pay of 25500 and 7% D.A. (1785), totaling 27285/-. PF is now being calculated on this amount (27285*12% = 3274). Previously, my PF contribution was 3360/-, which has now been reduced to 3274/-.

Question about PF Deduction

My question is whether the employer can reduce the PF amount as per PF Rules. Should the employer provide one more increment to me to avoid a lesser deduction of PF amount?

Kindly advise accordingly.

EPF contribution for one employee was paid on Rs. 22,000 for a few months. Can we reduce his EPF wages from Rs. 22,000 to Rs. 15,000?

Yes, you can bring it down to 12% of Rs 15,000 but not below that, provided the employees agree to such a reduced contribution. In the Marathwada Gramin Bank case, the Supreme Court has stated that an employer who has been contributing based on a higher salary can reduce it to Rs 6,500 (now read as Rs 15,000), and this would not violate section 12 of the EPF & MP Act. The court mentioned that the EPF authorities have no right to demand a PF contribution on an amount higher than the threshold limit.

Since the previous query was posted in 2018 (five years back...!) and was all about government PF schemes, not the EPF & MP Act, no comment is being made now.

As per the provisions of the EPF Act, 1952, the ceiling limit of wages is Rs. 15,000/-. It is up to the employer to choose to pay a contribution on wages over and above the ceiling limit. Further, as per the Supreme Court guidelines in the Vivekananda Vidya Mandir case, if the basic is less than the ceiling limit and the gross is higher than the ceiling limit, then you need to include all allowances which are paid uniformly to all employees. However, payments such as HRA, overtime payment, shift allowance, attendance bonus, etc.