Navigating P.F Withdrawal Rejections and Higher Wage Contributions: Seeking Advice on Permissions and Eligibility Issues

Dear Professionals,

I need your valuable advice on the following issues:

P.F Withdrawal Rejection

One of our former employees applied for P.F withdrawal online through Form No. 19. However, it was rejected with the reason being that a "Claim rejected contribution received on higher wages required to submit a confirmation letter regarding permission acquired."

Permission for Higher Wage Contributions

1) The P.F Office informed us that under the P.F Act, we are required to obtain permission from the Assistant P.F Commissioner for higher wage contributions. They asked for joint consent from the employer and the employee, stating that the organization is ready to pay all the administrative charges. We questioned the relevance of this provision as we are already paying administrative charges when paying higher wage P.F contributions. Furthermore, the P.F Department has not objected to higher wage contributions to date and has settled all claims, even accumulated contributions exceeding Rs. 1.00 crore until the arrival of the new P.F Commissioner.

Eligibility for P.F Membership

2) We were also informed that a new employee cannot be a member of P.F if their Basic Salary is above Rs. 15000/-. In case the employer and employee submit a joint declaration for higher wage contribution, we cannot submit the ECR of the particular employee and thereby the P.F of such an employee until we receive the approval of the Assistant P.F Commissioner.

Discretionary Power of the Assistant P.F Commissioner

3) Does the Assistant P.F Commissioner have the discretionary power to accept or reject the joint consent by both the employee and employer?

Higher Contribution for Existing Members

4) If an employee is already a member of P.F with less than Rs. 15000/- and crosses the limit after an increment over time, do we need to take permission for a higher contribution for such an employee?

EPS Membership for New Employees

5) When registering an employee on the P.F site during their joining (1st time P.F Member - Fresher), the basic salary has to be entered. If the basic salary is more than Rs. 15000/-, the system denies EPS membership, and only EPF can be deposited through ECR, even though the member and organization are ready to contribute to EPS as well. In other words, a new employee (fresher) is not eligible for EPS for a lifetime? Currently, we are bypassing the system by entering an amount below Rs. 15000/-. Is this the correct practice?

Please give your feedback.

Regards,
Location: Mumbai, India Tags: City-India-Mumbai, Country-India, basic salary, new employee, confirmation letter,

The points raised by you are critical and touch upon the nuances of the EPF Act and its interpretation. Let me address each one of your concerns:

1) As per the EPF Act, the wage ceiling for EPF contribution is Rs. 15,000/-. However, an employee can contribute more than the statutory rate of 12% (voluntary PF), and an employer can also contribute at a higher rate but not more than the statutory ceiling of Rs. 15,000/-. Your organization can continue to contribute to PF at a higher rate, but it seems you will need to get approval from the Assistant PF Commissioner.

2) Employees drawing a basic salary of more than Rs. 15,000 at the time of joining the organization are termed as "excluded employees" and are not mandated to become members of the EPF. However, they can become members with a joint declaration by the employee and employer.

3) As per the EPF Act, the Assistant PF Commissioner does not have discretionary powers to reject or accept the joint consent by the employee and employer for higher contributions. But, the higher contributions are subject to the approval of the Assistant PF Commissioner.

4) If an employee, already a member of the EPF and drawing less than Rs. 15,000, gets an increment and his salary goes above Rs. 15,000, his EPF membership would continue as it is. There's no need to take additional permission for a higher contribution in this case.

5) In the case of a new recruit (fresher) with basic pay above Rs. 15,000/-, the system does not allow EPS membership, and only EPF can be contributed. This is as per the EPF Scheme and not a system error. Even if the individual and the organization are ready to contribute to EPS, it is not permissible as per the law. The method you are using to bypass the system is not the correct practice.

Always remember, it is essential to comply with the statutory requirements, and any non-compliance can lead to penalties. For more details, you can refer to the EPF Act and its various schemes.