Can Employers Legally Change EPF Contributions Mid-Employment Based on Wage Ceiling?

Dear All,

Can an employer change the employer contribution of EPF in the middle of employment? For example, earlier Basic+DA was 20,000, and PF remitted from the employer's side was 20,000*12% = 2,400 (1,250 in EPS and the remaining in PF). After referring to the wage ceiling judgment of February 2019, the employer has started remitting contributions based on 15,000 Basic+DA (i.e., 15,000*12% = 1,800, with 1,250 in EPS and 550 in PF) in the middle of employment. Is this legally valid or not?

May you please incorporate your valuable opinion on the matter.

Yes, the employer can reduce the PF qualifying salary from Rs 20,000 (or any amount) to Rs 15,000. However, the employer cannot reduce it further. In Marathwada Gramin Bank's case, the Supreme Court of India has stated that the EPFO cannot demand a contribution above the threshold limit fixed. Rs 15,000 is the threshold ceiling for salary; hence, the EPFO cannot demand a contribution on a salary exceeding Rs 15,000.

In a scenario where the "CTC" for the upcoming year is typically predetermined with a contribution payable by the employer as part of it, reducing the contribution without providing any compensation to the employee could lead to a dispute and might be considered a violation of the ID Act. A unilateral decision by the employer to alter the contribution can be contested. Contribution is a fundamental condition of service, and any changes to it would necessitate a notice under Section 9A of the Industrial Disputes Act.