Can I Lower My Company's EPF Contribution Without Needing Approval?

If my employee has a basic salary of Rs. 25,000/- per month and I am continuously paying my company's provident fund contribution at 12%, i.e., Rs. 3,000/- per month, while the employee himself is contributing Rs. 3,000/- per month.

Can I reduce my company's contribution?

Can I reduce my company's contribution to the upper limit, which presently is Rs. 1,800/- per month max, i.e., 12% of Rs. 15,000/- per month according to the act, without taking any permission from anyone? Please advise.

Regards, Suresh J

Dear Colleague,

As long as you are complying with the PF coverage and deduction for Rs 15,000/-, then you are complying with the provisions of the Employees' Provident Fund Act 1952. The law does not expect the employer to overdo it. It is mandatory to meet the required legal provisions. It is easy to implement for all new recruits.

But when it is implemented for any of the existing employees, then you are altering the terms of appointment, which has to be done with mutual consent between the employer and the employee concerned. If the said employees are "Workmen" under the Industrial Disputes Act 1947, then you need to comply with the 9A Notice provision and process. If the employees are not covered under the Industrial Disputes Act 1947 as "Workmen," then you need to refix the terms of appointment by mutually entering a fresh contract of appointment with both sides' consent for the revised system of Provident Fund Contribution.

It is suggested to have abundant caution by consulting the PF Enforcement Officer concerned attached to the EPFO of your area.

Reducing PF Contribution: Considerations and Implications

PF contribution can be reduced to the statutory amount at any time, and it does not affect the enforcement of the PF Act. However, as Dr. Shivakumar explained, it may affect the terms of employment and the Industrial Dispute Act.

It is best to get the concurrence of the employee. But if the employee is not a worker, you have better flexibility.

For the rest, consult a labor expert who can provide you with the answer, considering all the relevant facts of the case.