Rehiring Retired Employees: Is PF Deducted Again on Their Contract Salary?

We rehire retired employees after the settlement of PF and gratuity under the contract of employment. Is PF applicable again when the salary is paid to those employees?

Hi, Retired employees: I hope you are referring to employees who attained the age of 58 and were relieved. When you rehire them as Retainer Consultants with a Retainer fee subject to TDS at 10%, there is no need for PF. They will not be considered regular employees.

It depends upon the nature of the appointment. If the employee is expected to come to the office and remain there for regular office hours, apply for leave like any other employee, follow the company's dress code (if any), and adhere to other formalities and protocols to avail certain benefits, he will have the status of an employee regardless of the designation given.

Case Study: Wockhardt Hospitals Ltd Vs Department of Income Tax

In the case of Wockhardt Hospitals Ltd Vs Department of Income Tax, doctors whose income from the hospital (employer) was subject to deduction of tax at source under section 194J were treated as employees, and their income was made deductible under section 192 as salary. This was based on the finding that these doctors followed HR protocols regarding timing, leave rules, etc.

Rehiring Retired Professionals

Many organizations rehire retired professionals without assigning them a professional capacity. A professional may not be required to come to the office daily at the same time as other employees and may not need to request leave when absent for any reason. Restricting the person from engaging in other profit-making activities does not change their status as an "employee." Therefore, if the person is expected to work like any other employee, it would be appropriate to offer them employment rather than a retainership.

Age Limit for PF Membership

There is no age limit for PF membership as per the EPF Act 1952. However, no contribution would go to the EPS account after 58, and the entire PF contribution of the employee would go to the EPF corpus.

Issue with Wage Revision for Retired Employees

We encountered a problem that is relevant here. Many employees had retired from service pending wage revision, and their PF, gratuity, and F&F were settled much before the wage revision came. After the wage revision, the retired employees were given a salary revision with the PF contribution and the employer contribution shown distinctly in the payslip issued for the purpose. Since the accounts were already closed, the employer paid the amount directly to the employees. Such retired employees later agitated the matter, arguing that had their PF amounts been routed through the PF Account, they would have received related Income Tax relief. The PF authorities ruled in favor of the retired employees and held that the PF account of the employees could have been reopened. The appeal before the Appellate Tribunal didn't help the employer.

If the rehired retired employee was a member of EPFO and subsequently settled his PF and EPS, if any, then the employee is an excluded employee under PF & Misc. Act. There is no need to continue as a member of EPFO. If it is otherwise (not a member of EPFO, etc.), he will continue to be an EPFO member as nicely explained by Madhu TK, and the conditions of employment are like a regular employee. Only if the age is more than 58, the entire contribution will be deposited to PF only, and no contribution to EPS.

S K Bandyopadhyay (WB, Howrah)
CEO - USD HR Solutions
[Phone Number Removed For Privacy-Reasons]
[Email Removed For Privacy Reasons]
http://www.usdhrs.in - USD HR Solutions – To strive towards excellence with effort and integrity

Yes, PF will be applicable for rehired retired employees even if they have already received PF and gratuity settlements. The employer must continue to contribute to the employee's PF account during the period of their employment, as long as they are eligible for PF contributions.

However, if the employee has already withdrawn their PF balance or transferred it to a new account, then the new contributions will go towards the creation of a new account. In such cases, the employer must provide the employee with a new PF account number.

It is important to note that the rules regarding PF contributions and eligibility may vary depending on the specific circumstances of the employee and the organization. Therefore, it is advisable to consult with a qualified financial advisor or HR expert for guidance on how to handle PF contributions for rehired retired employees.

I hope this information helps. Let me know if you have any further questions.

Excluded Employees Under PF & Misc. Act

PF will not be eligible if the employee is an excluded employee under the PF & Misc. Act. As per the definition of an excluded employee, the following are the excluded employees:

1. At the time of first-time employment, if the PF gross is more than ₹15,000 per month as of the date.

2. An earlier member of PF who subsequently left the job, closed the PF account, and then rejoined with a higher PF gross is also considered an excluded employee.

3. If an individual was a member of EPFO, retired after attaining the age of 58, settled PF & EPS, and then rejoined with PF coverage salary, they are also considered an excluded employee.

Please refer to the definition under the Act for further clarification.

If the employer is interested in paying PF even for excluded employees, it is at the discretion of the employer.

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

Dear Lakshmi Narayanan, After the age of 60, PF will not be applicable to a contract employee even if his basic salary is less than Rs. 15,000.

Regards,
Sanjay Tiwari
Dy. GM (HRD & IR)
M: [Phone Number Removed For Privacy-Reasons]

Dear S. Tiwari, age is not a criterion for coverage, but an employee who joins your establishment with a salary of less than Rs 15,000 will have to be covered if he is not an excluded employee. An excluded employee is one who has withdrawn his PF accumulations and is in receipt of a pension from the Employees' Provident Fund Organisation. Even a person who is receiving a government pension should be covered by EPF if his salary is within Rs 15,000. The same treatment applies to a contract employee as well.

Pension Fund Deposit After Age 58

1. If an employee attains 58 years of age, will the deposit in the pension fund continue?

Ans: No, after reaching 58 years, the entire fund will be deposited in PF Accounts, not in the Family Pension fund.

EPF Deposit After Age 60

2. If an employee is engaged in any establishment after reaching the superannuation age of 60 years, is EPF deposit mandatory?

Ans: EPF deposit is not mandatory after 60 years of service.

Pension Fund Contribution After Age 58

As per the PF Act, if an employee reaches 58 years of age, will the deposit in the pension fund continue?

Ans: No, after turning 58, the entire fund will be deposited into the PF accounts, not the Family Pension fund.

EPF Deposit After Superannuation

If an employee is engaged in any establishment after reaching the superannuation age of 60 years, is EPF deposit mandatory?

Ans: EPF deposit is not mandatory after 60 years of service.

Regards, Sanjay Tiwari

Hi, According to EPFO guidelines, an employee shall cease to be a member of the Pension Fund from the date of attaining 58 years of age or from the date of vesting admissible benefits under the scheme, whichever is earlier. However, in cases of continuation of service, the employer needs to pay the Employees' Provident Fund contribution until the date of his or her leaving the service, irrespective of the age of the member. Overall, the contribution can continue if the member is a full-time employee on a company's payroll. Employees who cease to be EPS (pension) members (as defined above) will get the employer's 8.33% contribution in PF.

Understanding Pension Fund Contributions

Your understanding of the Pension Fund is correct. After 58 years, if the employee continues in service, the entire 12% share payable by the employer for that employee shall be contributed only to the PF account, rather than bifurcating it as 8.33% to the Pension Fund and the remaining 3.67% to PF. However, if the employee desires to defer his pension, he can contribute to the Pension Fund until he attains 60 years of age. By deferring the pension, he can also receive an increased pension.

Provident Fund and Superannuation Age

There is no superannuation age for the Provident Fund. If an employee joins your organization at the age of 60, whether to exclude him or not will depend on certain other factors, such as whether he is a Provident Fund Pensioner or whether he has withdrawn his PF accumulations. An employee who has never been a member of PF, if employed in your company on a salary of not more than Rs 15,000, should be covered by EPF irrespective of his age. Similarly, a person drawing a pension to exclude from the coverage of EPF means a person drawing a pension from the Employees Provident Fund Organization only and not from any government service pension. Therefore, if you employ a person who is a government pensioner or a railway pensioner, he should be given PF with sole contribution to PF only.

There is no such rule that extends your retirement age from 58 to 60. What I have discussed above is all about 'deferring' the PF pension. Please find the attachment.

In the PF and Miscellaneous Act, it is clearly mentioned that after attaining the age of 58 years, there will be no contribution to the EPS account, but the entire amount should be deposited to EPF. Nowhere in the Act is it mentioned that upon attaining 60 years or any other age, there should be no contribution to EPF as well. Only in the case of excluded employees, as I mentioned in my earlier post, will there be no contribution to PF.

Suppose a person was in business throughout his life and at the age of 60, he joined an organization with a PF gross of 15,000/- or below per month; in that case, he will be covered under EPF only.

For those who disagree, I request them to refer to the circular or section under the act that supports their demand.

Wrong postings can be confusing, especially for young members who are learning from different posts.

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

Can anyone share the notification or any information on how to deduct the PF contribution of a worker after 58 years of age?

PF & Misc. Act and EPS Contributions

The PF & Misc. Act clearly states that no contribution is to be deposited to the EPS Account after the age of 58. The entire contribution is to be deposited into the EPF Account. As per Sec-2 (ix) of The Employees' Pension Scheme under explanation, an employee shall cease to be a member of the Pension Fund from the date of attaining 58 years of age.

There are no provisions mentioned for EPF. Therefore, irrespective of age, an employee may continue as a member of EPF. After attaining 58 years of age, EPF deductions can be made, and the entire amount is to be deposited in the EPF fund only—no EPS contribution.

Regards, S K Bandyopadhyay

Thank you for your valuable response. However, I want to clarify on which rule we will deduct his EPF amount after the age of 58 years. Is there any rule, or is it at the company's discretion to deduct?

Thanks,
Jayanta

Dear Jayanta, You have not followed my last post properly. Your question is under which rule or circular you will deduct EPF for one employee who has attained the age of 58 years. Why have you restricted yourself to 58 years? There are several organizations in India where employees retire from the organization's services after reaching the age of 60 years. PF is deducted and deposited, but there is no deposition in the EPS account.

PF Deduction After Age 58

The PF & Misc. Act does not state anywhere that there will be no PF deduction after reaching the age of 58; rather, it is mentioned for EPS. Therefore, no circular or rule is required to deduct PF after reaching the age of 58 or older. It is a common confusion for many people that 58 years is the retirement age according to the PF & Misc. Act. This is a misconception.

EPS Contribution Cessation

Only EPS contribution will cease after reaching the age of 58. Therefore, it is perfectly fine to continue as a PF member after turning 58 if the employee is not an excluded employee according to the PF & Misc. Act.

Thanks & 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 http://www.usdhrs.in

Dear Sir, If any employee joins after 58 years, can we keep him on parole, or do we have to keep him as a consultant? If kept on parole, what compliance deductions will apply? Please guide me.

Regards, Amod

Amod Kumar Singh, you can engage a person aged more than 58 as a consultant. But what is the meaning of keeping him as a consultant? A consultant cannot be 'employed' like a regular employee. He cannot be required to come to your office every day at 9 am and remain there till 5:50 or 6 pm. You cannot ask him to take prior permission to take a leave, and you cannot ask him to wear a uniform that all others are wearing. A consultant should be one who is giving advice to management and not merely to workers. If your intention is to keep him away from the operation of labor laws, you are wrong. If he is expected to work in a regular manner, with overtime engagement, taking leave after approval, then he will fall under the definition of an employee under any labor legislation. He should be given his rights conferred under various laws applicable.

Accounting for Consultant Remuneration

The second question is relating to the head of account under which the remuneration payable to such persons should be accounted. It should be accounted under salary only. If he is a technical or managerial consultant who will come occasionally to advise your team members on matters connected with his line of activity, then you can account it under "professional fees." If salary, the deduction of TDS should be as per section 194J. But if he is an employee, obviously, his tax deduction at source should be as per section 192.

Labor Law Coverage for Directors and Proprietors

An owner or a director of a company form of establishment receiving a salary from the organization shall be covered by all labor laws applicable subject to the wage ceiling as provided under each Act. As such, if the Director's salary does not exceed Rs 21,000, he should be covered under ESI. If he is an existing member of EPF, then he should be covered under EPF also. If he leaves after a service of five years, he should be paid gratuity also. However, the proprietor of a sole proprietorship and partner of a partnership firm are not employees, I understand.