Confused About EPF Contributions During Leave Without Pay? Let's Clarify Together

I am writing to seek clarification on EPF calculations based on the PF Wages limit, which is Rs. 15,000 per month at present as illustrated below.

A member's basic wage plus all allowances (except HRA) is Rs. 16,506 per month. His monthly PF is calculated as 15000*12% = Rs. 1,800.

Example - In the month of September '22, this member receives wages for 29 days due to one day without pay (loss of pay).

His earned basic wage is Rs. 16,506 / 30 * 29 days = Rs. 15,956.

What should be his EPF Contribution?

Option 1: 12% on his earned basic of Rs. 15,956, i.e., on 15000*12% = Rs. 1,800

or

Option 2: 12% on his earned PF Wages calculated as (15000 / 30 * 29 days) = Rs. 14,500, i.e., on 14500*12% = Rs. 1,740

We are paying PF Contribution always on Rs. 15,000, but in the case of leave without pay, the contribution is done according to the EPF Wages ceiling up to Rs. 15,000 only (15,000 / particular month * number of payable days).

Please give me some advice on which option out of the above is correct. We need to clarify the same to one of our clients with documentary evidence.

Thank you.

Regards, Dwarika P Nautiyal

If, for the purpose of PF contributions, your salary is Rs. 15,000, the loss of pay should be based on this Rs. 15,000. Therefore, your second option should be followed in LOP cases.

So long as an employee earns more than 15,000/- per month, the contribution should be based on 15,000/-. Only when the earnings are below 15,000/- per month, then it will be based on the actual amount.

PF Wages and Ceiling Limit

PF wages have not been mentioned anywhere as 15,000/-; rather, it has been restricted to making payments up to 15,000/- for organizations interested in following the ceiling limit. Some employers pay above the ceiling limit, and in those cases, the contribution will be calculated after adjusting the Leave Without Pay (LWP), i.e., based on the actual PF gross amount after adjusting LWP. However, if the PF gross of an employee is more than 15,000/- per month, and after LWP the amount remains above 15,000/- per month, while the employer is paying PF contributions up to the ceiling limit, then the PF contribution should be based on 15,000/-.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] USD HR Solutions – To Strive towards excellence with effort and integrity