Opting Out of PF and ESI: Should Employers Add Back Their Contribution to Salary?

CTC and Opting Out of PF and ESI

X was offered a salary in CTC during his joining, and X opted out of PF and ESI as he is eligible to do so under all conditions. Since CTC is informed, will X get the employer's contribution to PF & ESI added to the salary? Yes or No, please provide valid reasons or case law.

From the opinion of CAs, I found that the difference amount has to be paid to the employee as CTC is mentioned. So, the question is not on the employer's contribution to be added back to the salary. For example, an employee is offered 35,000 CTC and the net pay is 31,250. But in this case, the employee opted out of PF. So, CAs inform that the difference amount has to be returned to the employee, and there is no possible deduction that can be made except for Professional Tax and IT. This will lead to an audit issue.

In the candidate's offer, it was mentioned 35,000 CTC. But even after opting out, his net salary is 33,050. Since the employer's contribution is missing, his CTC is getting reduced. As the employee has the weapon of the offer letter, what should the employer do?

Opting Out of PF: Conditions and Implications

An employee has the option to opt out of PF under certain conditions:

1) If the employee has not enrolled in PF to date.
2) If the employee has PF and is transitioning to a new company, they have the option to choose to opt out. If they choose to opt out, Form 11 must be filed. An employee is eligible to opt out only if the Basic > 15000. Therefore, I mentioned that the employee is eligible to opt out under all conditions.

In my case, the employee has not been enrolled in PF to date and does not wish to have PF.

Regards,
Srikanth

Hi,

As per my understanding, an employee can opt out of PF, which is purely the employee's decision as the employer will always try to include it in the PF. Furthermore, the government has given the leverage of opting out of PF. However, in my case, the employee, till date, has no PF and is not willing to take PF.

Regards, Srikanth