Confused About PF Deductions? Help Me Understand If My HR Manager's Calculation Is Right

Dear All, I am aware that the PF ceiling limit for deduction is Rs. 15,000. I have recently received my first salary slip from the employer, which includes the following bifurcation of the salary:

Earnings:

Basic = 9357

Conveyance = 1600

Bonus = 584

Special Allowance = 5391

Total Gross = 16,950

Deductions:

PF = 1800

ESIC = 297

PT (Madhya Pradesh) = 208

My argument with HR is that my PF should be deducted on the Basic salary, i.e., 9357 * 12% = 1125. However, our HR Manager argues that since the ceiling of PF is Rs. 15,000, it will be deducted on Rs. 15,000 as my total earnings exceed Rs. 15,000.

In case my Basic Salary were Rs. 15,000 or more, then the PF deduction would have been Rs. 1800. But since my basic is only Rs. 9357, it should only be Rs. 1125.

Kindly help me with this. Am I correct, or is my HR Manager correct?

Thanks in advance.

HR is considering all amounts except conv for PF deductions. By doing this, the employee is receiving extra benefit from the employer's contribution side.

Employers' contribution is also deducted from the employee's salary. Even though in that case, the total amount deducted should be 1125 + 1125 and not 1800.

Dear PF Contribution should be on Basic+DA. In your case, Basic is 9357, and the deduction should be made from this amount. Please ask HR to review and study the definition of "Wages" in the Bare Act EPF & Misc. Prov. Act 1952.

Dear experts,

I (HR executive) joined a new company some time ago. I am facing a problem understanding the salary breakup here, as I know that as per the rule, the basic salary should be 50% of the gross salary and HRA should be 40-50% of the basic salary, with other allowances like conveyance, LTA, and others included in the salary breakup. However, in my company, the salary breakup is different. Additionally, PF is deducted based on either the minimum wage or Rs. 15,000.

Could you please help me understand if this salary breakup is correct or not? Attached is a document for your reference.

Thank you.

Rinki,

This site shall answer most of your concerns in payroll. It would be a good idea to understand salary components along with labor law workings the way they are done in a company. I am not endorsing any brand. My colleague worked his way up with payroll nuances from an experienced person. Should you want, I can connect you. Good luck!

Calculating PF and Pension Contributions

If an employee's basic salary is 18,000 Rs, then we have to calculate pension and EDLI on only 15,000 Rs.

Employee PF Contribution: 12% on 18,000 = 2,160

Employer Pension Contribution: 8.33% on 18,000 = 1,250

Employer PF Contribution: 2,160 - 1,250 = 910 (Here we don’t take 3.67%)

Note: When you use the ECR Excel, it will calculate automatically. We just need to enter the basic salary of the employee.

Read more details @ How To Calculate PF Of Basic Salary More Than 15000

As per the attachment, the employer has set Rs. 15,000/- as the upper limit of Basic for all employees for PF contribution calculation. For employees whose Basic is above Rs. 15,000/-, the PF contribution is Rs. 1800/-, which is 12% of Rs. 15,000/-.

Hi, @Rinki,

Salary breakup should be in a structured way. In your attachment, the breakup like conv & hra is variable but not in a fixed %. Basic + DA should never be less than 50% of gross. HRA cannot exceed 50% of basic and 30% of gross. All other allowances can be defined as per need but in a proper grade-wise structural way.

In case of any queries, feel free to call me at 9810654048.

Salary Details and PF Deductions

You have not correctly posted your salary details. Your basic salary may be Rs. 9,375/- and not 9,357 as mentioned by you. So be very careful while furnishing the details. Besides, we do not know the terms and conditions of your appointment. However, looking at your post, the following are my views.

If your employer or the "Human" Resource Manager is deducting both the PF contributions (Employee's & Employer's) from your salary, tell them not to do any charity for you. Deduct only 12% contribution on your earned basic salary, which is prescribed in the EPF & MP Act, 1952. If he is not listening, write an email to his superior or the management.

Also, inform your HRM that PF contribution is not payable on the bonus amount. First of all, a bonus is not payable on a monthly basis. It's totally dependent on the profit and loss account of the company as per the provisions of the Bonus Act. The company cannot just pay you only 8.33% bonus. He has calculated a minimum bonus amount of Rs. 7,000/- per annum, which is also not correct. You are eligible for a minimum amount of bonus of Rs. 782 per month @ 8.33% (as per minimum wages).

If what you stated in your post is correct, then you are right, and your HR Manager is not suitable for the HR department. He doesn't know basic things about HR.

Regards, Suresh

PF will be deducted on basic and DA.

In most cases, special allowances are the same as DA, so PF will be deducted on the total of both. The PF department is already fighting the matter in the Supreme Court where it is stating that the act says it is to be given on the entire fixed component, and there is a good chance of the Supreme Court giving the judgment in favor of the PF department. So they are being careful, and the final difference in any case is small.