Is It Fair to Set Basic Salary Above Rs. 15,000 to Avoid PF Deductions?

Respected All,

Is it necessary to show the basic salary of each and every employee? If an employee does not want to have PF deducted from their salary, and management keeps their basic salary more than Rs. 15,000, is it fair?

Regards,
Arihant

Hi Arihant, what I understand from your query is that the salary is bifurcated into certain allowances in your establishment, and someone is not interested in the deductions of EPF. You want to fix his all-inclusive wages/salary as the Basic wage to avoid EPF.

Unfair Practice of Avoiding EPF Deductions

First of all, if an employee insists on non-deduction, you should convince him, and even if he is still adamant, consider otherwise, but it cannot be termed as fair. It is definitely termed as an unfair practice, and moreover, the inspecting authority can raise a demand for contribution at any later stage.

You have to obtain EPF Form 11 (New) from employees at the time of joining. Exclusion of employees from the purview of EPF will be as per the genuine information provided in the form. Employers have to follow due procedure before excluding an employee under EPF.

There is no rule that states the salary needs to be broken into smaller components. So there is nothing to stop you from putting all salary in basic. However, the same must match with your salary structure. If others have 5 components and this one employee has just basic, it will not be accepted by the department. Also, remember that items like bonus and gratuity are on basic. So you get a cascade impact on it later.