Can We Reduce Our PF Contribution from 12% to 10% for Our Small Team?

Hello Members, we are an organization with fewer than 10 employees since inception until now. We voluntarily opted for PF in 2016 and have been contributing 12% to PF since then.

Contribution Rate Discrepancy

According to the contribution rate specified on the EPFO website, a 10% contribution rate is applicable to organizations with fewer than 20 employees. We recently learned about this discrepancy and would like to inquire if we can henceforth contribute 10% instead of 12%.

Thank you.

Once you have opted to contribute to the Fund at a higher rate (both employees and employer), you cannot reduce the contribution on your own.

Reference to the Employees Provident Fund Act

In this connection, please also refer to Sec-12 of the Employees Provident Fund & Miscellaneous Provisions Act, 1952. No employer in relation to an establishment to which any Scheme or the Insurance Scheme applies shall, by reason only of his liability for the payment of any contribution to the Fund or the Insurance Fund or any charges under this Act or the Scheme or the Insurance Scheme, reduce, whether directly or indirectly.

Please verify the PF Code Number Allotment letter to determine the rate of EPF contribution based on the type of industry. Kindly confirm if your industry falls under the 10% EPF rate of contribution.

Thank you.

EPF Contribution Rate for Schedule II Establishments

Whether your establishment falls under Schedule II, which permits a contribution of 10% to EPF.

Dear Friends, I think our learned friend Nairji needs to reconsider his answer.

Statutory Rate of PF

The statutory rate of PF is 12% from 22.09.1997 onwards. The statutory rate of 10% is applicable to certain establishments only. I am not going into detail on that. You cannot opt for a higher rate for both employees and employers as stated by Nairji. Section 12 of the Act, which is on the employer not reducing wages, etc., has no relevance here.

Understanding the EPFO Website Information

What Baburaoji read on the EPFO website is not fully understood by him, in my opinion. Due to having less than 20 employees, he cannot have the statutory rate at 10%. It is stated in the 1997 amendment enhancing the rate from 10% to 12% that this amendment is not applicable to covered establishments with fewer than 20 persons on the date of the notification, as far as I recollect now. I may be wrong in quoting this, but I am sure that you cannot have the statutory rate at 10% due to having fewer than 20 employees. When you apply under section 1(4), you get the code draft for 12% and not for 10%.

Due to my professional commitments, I am unable to spend as much time on this forum as I was until last week. Therefore, I am posting this very hurriedly.