Understanding PF Deductions: How Are Employees Over the 15,000 Salary Limit Affected?

Clarification on EPF and Miscellaneous Provisions Act

1. PF Deduction
Is PF deduction done for employees based on the Basic Salary and VDA fixed by the company, or only on PF? Have any other allowances been recently added for the deduction of PF?

2. PF Coverage for Employees Crossing 15,000 PF Salary
Is it mandatory for management to cover employees who cross the PF salary limit of Rs. 15,000/-, or can such employees be taken out of the coverage of the PF Scheme? We have covered all employees, including managers, but their employer contribution will be limited to Rs. 15,000/-, i.e., Rs. 1,800/- per month.

3. PF Deduction Rates
According to my knowledge, PF deduction is at 12% for all establishments covered under PF, and in those establishments where less than 10 employees are on rolls, PF deduction can be at 10%. Apart from the above, are there any other establishments like hospitals and nursing homes where PF deduction can be done at 4% of wages or salary?

4. PF Coverage for Managerial Staff
In my experience, I see almost all companies extend the facility of PF coverage to all employees, including senior managers and managerial staff. In your experience, what is the percentage of companies that have excluded such coverage and kept higher-salary employees out of the PF Scheme?

Kindly provide me with your valuable feedback on the above points.

Location: Bangalore, India

In response to your queries:

1. PF Deduction:
- PF deduction is typically calculated on the Basic Salary and Dearness Allowance (VDA) as fixed by the company. However, recent changes have brought certain allowances under the purview of PF deduction. It's essential to review the specific guidelines laid out by the EPF and Miscellaneous Provisions Act to ensure compliance.

2. PF Coverage for Employees Crossing 15,000 PF Salary:
- When an employee's salary crosses the PF limit of Rs. 15,000, it is not mandatory for the management to continue covering them under the PF scheme. Employers have the option to exclude such employees from PF coverage, although many companies choose to cover all employees irrespective of salary levels. In cases where high-salary employees are covered, the employer's contribution is limited to the statutory cap of Rs. 1,800 per month.

3. PF Deduction Rates:
- As per the standard guidelines, PF deduction stands at 12% for establishments covered under PF. In establishments with fewer than 10 employees, the deduction rate can be reduced to 10%. Additionally, certain industries like hospitals and nursing homes may have specific provisions allowing for a reduced PF deduction rate of 4% of wages or salary. It's crucial to verify the applicability of such provisions in your specific industry.

4. Coverage of Higher-Salary Employees:
- While most companies opt to extend PF coverage to all employees, including senior managers and managerial staff, some organizations may exclude higher-salary employees from the PF scheme. The percentage of companies following this approach varies depending on industry practices and organizational policies.

For detailed and accurate information on these matters, consulting the EPF and Miscellaneous Provisions Act and seeking guidance from legal experts or HR professionals well-versed in Indian labor laws is advisable.