Understanding PF Deductions: When Should They Apply to Employee Allowances?

Dear Seniors,

When do we need to implement the PF deduction on other allowances from an employee's salary?

You can start paying PF on gross salary (less HRA) from now itself. There is no need to wait for any more notification from EPFO because this is only a clarification of what is said in the law. If you do not start paying it on actual salary, you will have to pay it with interest and damages. It is understood that lawyers have started canvassing the employers, saying that this verdict applies only to the establishments involved in the case and there is scope for a 7A enquiry and therefore no need to pay it now. This is a marketing tactic because once you are asked to show the records by the EPF officials, they will only compute the contribution as per the guidelines of the Supreme Court, and at that time neither your consultant nor your advocate can defend saying that the court order does not apply to you.

Definition of Basic Pay

When the definition of Basic Pay itself is the whole emoluments that an employee gets while on work or on "leave," how can you say that salary means that basic salary that you have fixed? If that is the case, when you take leave, you should be paid only the rate as per basic pay, but you are paid salary for that leave day considering the whole salary.

https://madhu-t-k.blogspot.com/2019/...ary-and_6.html

Can we deduct employee contribution towards PF from the backdated period? I mean, we would like to align with the Supreme Court verdict effective from April 2019. Now, salaries and wages from April to June have already been paid. Under these circumstances, can we deduct the differential employee contribution towards PF? Or is there any rule or verdict that prohibits us from recovering the amount retroactively?

Regards,
R K Dixit

So far, there has been no direction from the EPFO in this regard. If you were not served a notice under section 7A of the Act, you need not go back to a previous period. Instead, you can start deducting and contributing to the PF on the gross from the coming month onwards. Delaying further may invite complications in the future. You can pay the old balance as a contribution on omitted wages once the EPFO releases an official notification.

Legal Recovery of EPF Contributions

Legally, we cannot recover the difference amount from the employees. However, the EPFO will not have any objection, nor do they have any say in it if you recover it from the employees. In one case, I had a discussion with the employees and made a settlement that whatever the employer pays in addition to their already paid contribution shall be recovered from the employees in installments along with their current month's contribution.

Since that company is a new company started in the middle of 2018, the arrears will be less. When I advised that we should contribute the difference starting from the date of coverage, the management agreed to it. I then had a discussion with the employees, and they agreed that over 13 months, their old amount can be recovered. However, the payment is still pending because some practicing advocates intervened and told them that it is not required. They mentioned that as long as an enquiry under section 7A is initiated by the EPFO, there is no need to pay it.

When such a suggestion comes from the advocates, it is natural that the employers will hold it.

Hello,

Thank you, sir. I would like to know what it means that legally we cannot recover. Are there any laws, rules, or judgments regarding this issue, not limited only to PF recovery but any other type of recovery from back wages?

Regards

Dear All,

I have a query on PF deduction on gross salary (excluding HRA). My management does not agree to deduct PF on the gross; they have said to obtain a notification from the PF Office. When I went to the PF office, none of the officers clearly explained this matter.

Please suggest how I can convince the management on this issue.

Dear All,

I have a query on PF deduction on the gross salary (excluding HRA). My management does not agree to deduct PF on the gross amount. They have said to obtain a notification from the PF Office. However, when I visited the PF office, the officers there did not provide clear information on this matter.

Thank you.

Clarification on Supreme Court Judgment Impact

In view of the change due to the recent judgment of the Honorable Supreme Court regarding the definition and clarification of basic wages for the purpose of calculating PF contributions, the following clarifications are sought:

Impact on Gratuity, Leave Encashment, and Overtime

Q. Will this judgment affect the calculation of Payment of Gratuity, Leave Encashment, and Overtime? Also, please clarify with supporting Supreme Court judgments which components should be considered for the calculation of Gratuity, Leave Encashment, and O.T.

Currently, we are calculating based on Basic and D.A. for all purposes such as Gratuity, Leave Encashment, and Overtime.

Regards,
R K Dixit