Can We Skip EPFO for Employees Earning Over 15,000? Seeking Clarity and Form-11 Guidance

We have 100 employees, and everyone has a basic salary of more than 15,000 with DA. Also, we are not willing to pay EPFO. As far as I know, we can be exempt from EPFO for employees with a basic salary of more than 15,000 with DA. Please confirm this information and also provide me with Form-11 for the exempt declaration from the employee.

Excluded Employee and EPFO Contributions

An employer has no option to declare any employee as an "excluded employee" with wording suggesting that the employee does not want to participate in welfare contributions. If the employee has any past history with EPFO or an active UAN, then he/she cannot be excluded under any circumstances but must continue membership at all salary levels. Therefore, it is necessary to document this using Form 11 (EPFO) along with KYC details, where the employee declares their information and provides a declaration regarding previous relationships with the provident fund.

If an employee opts not to participate in EPFO contributions, they may submit an application to the HR department of the establishment along with the Form 11 submission to request exclusion in writing. Subsequently, the HR department can assess whether the criteria for defining an "excluded employee" can be applied to the employee based on the information provided in Form 11 and the KYC documents.

In standard practice, the employer must extend uniform EPF membership to all employees, regardless of their basic salary. However, the employer does have the option to set the ceiling level to a maximum of 15,000/-.

Everyone earning more than Rs. 15,000 Basic + DA and not interested in contributing to EPFO can be exempted or will need to pay. What is the new rule for EPFO exemption for new employees if they earn more than Rs. 15,000 Basic + DA?

If the employee has any past history with EPFO or has an active UAN, then he/she cannot be excluded in any case but has to continue membership at all salary levels. Form 11 is for employees, not for employers.

EPF Registration Requirement

I understand that the organization has not yet registered under the EPF Act, even though the number of employees is 100, with the impression that everyone is earning a salary above Rs. 15,000. If so, first of all, register the organization under EPF. The registration would take place with a retrospective date, i.e., the date on which your employee strength became 20. If that happened to be a date prior to September 2014, then for coverage, you would have to include all employees whose salary did not exceed Rs. 6,500. Since an employee, once covered, would continue to be covered even after their salary exceeds the threshold limit (i.e., Rs. 6,500 then and Rs. 15,000 now), they would continue to be covered.

Principle for New Joiners

In respect of new joiners, you can apply the principle of No PF if the salary exceeds Rs. 15,000.

What is the new rule for EPFO exemption for employees?

If they have more than Rs. 15,000, I came to know that irrespective of the Rs. 15,000/- ceiling limit, all the employees in the firm should be covered under PF but with a ceiling limit of Rs. 15,000/-. For example, if an employee is receiving a salary of Rs. 25,000, he/she should be considered for PF calculation with a limit of Rs. 15,000/-. Does anyone have clarity on this?

PF Coverage for Employees with High Salaries

If at the time of joining the company, the salary (P qualifying salary) is more than Rs 15,000, you can exclude him from P. However, if he was a member of PF in his earlier company and the same remains active, then he should be given coverage in your company also with a ceiling of Rs 15,000 for contribution.

EPFO Contribution and Membership Eligibility

If an employee's basic salary is increased from 14,000 to 16,000, his EPFO contribution is being deducted from his previous basic salary. Now the question is, after the increase in their basic salary, will he be a member of EPFO? If so, please share with me the EPFO notification or guidelines.

As per the Act, the employer will pay his contribution until Basic + VDA is Rs 15,000.

Please share your views.

Provident Fund Membership and Salary Threshold

Once enrolled as a member of the Provident Fund, he will continue to be a member even if his PF qualifying salary exceeds Rs 15,000. Therefore, if his salary becomes Rs 16,000, he will continue to be a PF member, and contributions of at least Rs 15,000 should be made in respect of him.

Some of our employees' PF is being paid on the actual basic, i.e., more than ₹15,000. Now, we would like to restrict it to ₹15,000, and the differential amount above ₹15,000 shall be credited to the bank accounts of the respective EPF members along with their monthly salary, instead of depositing the same in EPFO.

Please let us know if we can do this.

Regards, Ranjan Ku Dixit

Dear Colleague,

The provisions of the Employees' Provident Fund Act 1952 and the scheme thereof insist on a contribution of 15K. Some employers voluntarily contribute more than this amount. In the current situation, if you wish to limit the contribution to 15K, you need to consider several important aspects and follow the process:

1. If you plan to make this change for workmen covered under the Industrial Disputes Act 1947, you must involve the trade unions as this will affect existing terms and privileges that have been in practice for some time. Additionally, you must adhere to the Notice of Change Procedure, consult the Enforcement Officer, and obtain individual undertakings and consent forms from the affected workers.

Conditions of service where notice is required include aspects such as wages, contributions to provident or pension funds, withdrawal of concessions or privileges, and changes in usage.

2. For non-ID Act covered employees, changing the contribution amount will alter the agreed Contract of Employment or CTC structure. Therefore, seek consent from employees, issue a revised CTC structure for both parties to sign as an amendment to the previous structure.

3. It is advisable to consult with EPFO officers well in advance to maintain good liaison and ensure a smooth transition.

4. Conduct thorough internal communication with all stakeholders - trade unions, HODs, managers, and employees - before implementing this change. In my past experiences, lack of effective internal communication led to misunderstandings among employees, resulting in their refusal to cooperate and ultimately, project failure.

Please let me know if you need any further assistance or clarification.

Best regards

Hi Madhu Sir, you mentioned previously that if a PF member remains active, PF needs to be submitted without any salary bar in mind. My question is how to decide if PF is active or inactive for an employee who has a UAN in his previous company but has not been working for a few months or years.

You have misunderstood what Mr. Madhu had posted.

1. If an employee joins the company at a salary less than ₹15,000, he will be covered under PF.
2. If his salary at the time of joining is more than ₹15,000 and he does not have an existing PF account, he may be exempt if he files Form 11 seeking exemption.

The term "active PF account" basically means that he has a PF account from which he has not withdrawn his money and closed the account. I believe it can be verified if you check for the UAN. I think in your case, since the money does not seem to be withdrawn, it will be considered active, even if he was out of a job for a few months.

Hi Saswata Sir, I have a question: if an employee previously had a UAN and later withdrew their entire PF amount, and now joins a new firm with a salary above 15k, will they be considered an active PF member or not? I believe that a UAN member cannot close their account until they receive their PF pension amount, which typically happens at retirement age. Could you please clarify this doubt for me? Thank you.

EPF Account Status and Exemption

Yes, if he has withdrawn his PF money, then he is inactive. However, if he has not withdrawn his EPF account, then he has not closed his account, and he remains active. Typically, people do not withdraw their EPF balance unless they have worked for more than 10 years, in which case they cannot withdraw it.

In summary, if he has withdrawn both PF and EPF balances, then he can be considered exempt. In other cases, he will need to be a part of the PF system.

Eligibility for EPFO Exemption and EPS Contribution

If the salary increased to more than 15K and you joined a new establishment with a salary greater than 15K (Basic + DA), and your previous company has not paid the contributions for the last 3 years, can the new establishment exempt you? If you have to pay your contribution, will you be eligible for EPS, as for the new establishment, you are a new employee and your salary is above the threshold?

You can do it. You can reduce the PF qualifying salary to Rs 15,000. In Marathwada Gramin Bank Karamchari Sanghatan Vs Management of Marathwada Gramin Bank, the Supreme Court has ruled that the EPF cannot demand a contribution on an amount of wages above Rs 6,500. Now this 6,500 ceiling may be replaced by Rs 15,000. In the Marathwada Bank's case, the Bank was earlier contributing on actual salary but later decided to restrict it to Rs 6,500. The Union opposed, and the EPFO also objected, saying that as per Section 12 of the EPF & MP Act, an employer cannot reduce the salary of employees so that the employer's liability towards PF can be reduced. But the court said that the reduction of PF contributing salary to a level equal to Rs 6,500 will not attract Section 12 of the Act, and EPFO cannot demand any contribution on salary above Rs 6,500. The wages ceiling having increased to Rs 15,000, the same can be applied in your case, and you can very well reduce the PF qualifying salary to Rs 15,000 with the consent of employees.

However, if the cost-to-company is equal, whether we should adopt such a step or not is my question. Contributing a higher amount to PF is beneficial to the employees anyway because of various reasons. The interest that EPFO pays is anyway higher than what one can gain from other sources of investments. There is a verdict from the Apex Court accepting the order of the Kerala High Court that an employee is eligible to get a pension based on actual PF contribution. It is true that this verdict is being reviewed by the Court. If, by chance, the review court also stands in favor of the Kerala High Court decision, then your employees would get the benefit of a higher pension, that is, a pension based on their actual PF contribution, and that would be a lifelong benefit. Therefore, if the cost-to-company is the same, I would say that you should continue to contribute to PF on the actual salary.