Navigating PF Deductions for an Employee Who Resigned After Just 16 Days: What Should We Do?

Hi revered seniors, We are an organization registered under EPF, with our Head Office in Kolkata and Corporate Office in Guwahati. On 9th January, an employee joined our organization at a gross salary of 60K per month and then left on the evening of 24th January after submitting a resignation with immediate effect, which we have accepted. During this period, his Background Check (BGC) was ongoing, so we couldn't provide him with the appointment letter, which includes a clause regarding leaving without serving the notice period.

Technically, since he was not given the appointment letter, we cannot ask for one month's salary in lieu of from him. Therefore, we are unsure whether we will request him to repay us or pay him his dues for the 16 days he worked. This decision will be made by our Group Head, currently in Chicago, which may take some time. The employee has indicated his cooperation in either scenario.

Questions Regarding UAN and PF Contributions

My question is, if we decide that he must repay us one month of his basic salary for leaving, do we still need to create/link his UAN for PF? What should be shown in the ECR while uploading, considering no salary will be given and no EPF deduction will occur since he will be repaying us? Should the employer contribution still be deposited if the employee owes us money? How should the ECR be processed in this case? Alternatively, is it unnecessary to link/create UAN as he owes us money and will not receive any payment?

If we decide to pay him, a resolution will be made post-8th of next month (upon the Group Head's return), and processing will occur on 28th February. Can we deduct and deposit the PF in March in this scenario?

I would greatly appreciate any assistance from this community as I am new to my job and this profile.

Thanks in advance.

If an employee pays back, there is no point in deducting or paying PF. You don't need to link or generate UAN if the employee is paying. If the employer is paying, then you must calculate and pay it. Paying dues in full and final doesn't affect EPF rules. You should deduct and pay the EPF dues on or before 15th March, but if you pay in March, I don't think that would be a problem. You can do that.

But take suggestions from the veterans of this community.

So, I can upload the ECR in March instead of February if we decide to pay him, right?

And if he pays, then no UAN generation/linking is required, right?

60k salary, and you are bothered about EPF UAN generation? Leave it. Without UAN, as over 15k exemption can be availed. As he has already left the service, you need loads of records and data to generate UAN and pay contribution, and it should be done by 15th February or earlier if the employer wants to make his UAN and pay January month's contribution. Contributions for January cannot be paid with February contributions.

Over 15K it's exempted? But he had submitted Form 11. Is there any problem that we can face in the future if we don't deduct the PF in this case?

And if at all we have to deduct and pay, can't we pay it in March with maybe some fine? I don't know in detail, but I have heard that there is a provision for that, certainly with some fine. Please confirm. In that case, we won't go with deducting PF at all.

And most importantly, he was earlier a member of the EPF scheme. So, aren't we supposed to deduct and pay him the PF amount? We also have to link it with his UAN. But can we do it in March?

If Form 11 is submitted, then the employer has to link his previous UAN immediately after joining, with all data required as per the portal, such as bank details, Aadhaar details, PAN details, and mobile (balance data is generated from his old account and cannot be altered).

Do it right now, and file the return of January payable in February within the due date. You can make an exit of an employee immediately after the ECR generation and finalize the challan.

The return filing date is up to 15th February for the salary of January. From 8th Feb to 15th Feb, there is plenty of time. It seems that for just a minor issue, management is going to withhold the whole employee's EPFO return pending for their own choice.

Samir, you are forgetting one thing. Forget about fines; you have to give it anyway. But suppose the employee joins an organization in February and gets his UAN linked there. Then when you link your establishment ID with the same UAN in March to contribute to EPF, his current employment will get delinked. In that case, how do you justify that?

Payroll Point of View

If an employee works even for one day, the employer is liable to pay the salary/earnings, and the PF has to be deducted from the earnings. Deductions, including notice period recovery, should be calculated separately.

The best way is to calculate the January salary and deduct the PF accordingly. Keep the net ON HOLD/WITHHELD. Pay the PF payment.

During full and final settlement, put the notice period recovery as a deduction (whatever is decided by your management) and add the previously held salary. You will receive a minus figure as a settlement (recovery). Recover it and close the account.

This is the proper way of accounting for payroll and statutory compliance.

I want to ask and suggest my viewpoints as below:

Employee Turnover and Professionalism

People joining and leaving organizations in their own way is a normal routine. People join based on their potential and intellectual assets, and at the same time, they bring in some deficiencies that they aim to improve at the new organization. You have not issued an appointment letter, and before this candidate resigned, there was no scope to create or act in a way that is wrong, mischievous, or damaging. You should have acted with integrity and honesty towards both the company and the candidate. Don't you think that this is a dishonest act you want to play as a game, which was not permitted earlier and never will be? I fail to understand why you are even considering it. Who will gain or who is at a loss, and why are you attempting to step beyond the limits of professionalism? The problem-solving approach here is not only incorrect but also objectionable on both moral and legal grounds. Against the proposed demand of notice pay, the gentleman is accepting your punishment. So, there is scope and opportunity available to you to correct the action. Treat it as a normal issue without any intention to harm the employee when there is no fault on his side. I doubt you will earn any credit or respect from a superior if he believes in a fair and firm formula.

PF and EPS Considerations

Since his gross salary is Rs. 60,000 per month, please do not make him a PF/EPS member. Design his PF-able salary in such a manner that it becomes more than Rs. 15,000, and he leaves happily, and you comply in the right manner. There is a good scope available to you to exempt him from PF coverage. Form 11 is not required, and he will thus be in the list of exempted members.

Thanks and best regards,

RDS Yadav

Dear Seniors,

I have a query regarding this topic. I have heard that in order to establish an employee-employer relationship, an appointment letter must be issued and accepted by both the employer and employee. Since the appointment letter was not issued, is there any legal requirement for the employer to pay the salary? Also, do they have any legal right to ask for recovery?