Is the Employer's 12% PF Contribution Included in the Employee's CTC? Seeking Clarity and Proof

1. For PF contribution, the employer needs to contribute 12% from their end. I want to know if this amount is part of the employee's CTC or if it will be separate and added additionally for PF contribution from the employer's end.

2. Also, please share the proof of government records related to your answer, as I will have to show that to management.

3. Are there any latest amendments? Kindly share the relevant documents/links.

Hi, Strictly speaking, the employer contribution to PF should be separate and is in addition to the salary offered to employees. However, many corporations have now included it as part of the CTC, whereby whatever salary is fixed, the employer's PF contribution is added to the salary out of the Gross salary as the total cost to the company.

Hi, thanks for replying. So, if an employer adds the PF amount in CTC, is it legal?

I was just going through the FAQ on EPFO, and the first point says wages cannot be reduced. As per Point 12 of the EPFO Act, 1952, the employer cannot reduce the wage for their contribution.

Hello, I presume you did not grasp the crux of the matter. CTC means Cost to Company. Whatever amount a company offers you shall be the cost to the company. This also includes the company's contribution towards PF and/or ESI on behalf of the employee. It is a cost from the company's perspective. Thus, employer contribution is also an element of CTC.

Understanding CTC Components

CTC is not defined in any act. It depends on the company's internal system regarding which additional components they will include in CTC. Most companies only consider the employer's side PF and ESI contributions, but some companies also incorporate other benefits such as bonuses, gratuity, uniform allowances, transport costs, etc.

It is essential to ascertain which components are covered in CTC and subsequently determine the bank transfer amount.

Regards, Sandeep Tomar
Head - HR, Legal, IR
Gurgaon