New Recruits Earning Over 15,000: How Can We Exclude Them from PF Deductions?

Hello, In my organization, there are many new recruits who have salaries of more than 15,000/- and do not want any deduction or contribution to the PF. I have heard that there is a provision by which these employees can be excluded. Can the experienced members please guide us on these provisions and the procedure?

Methods for PF Deduction

As far as PF deduction is concerned, you can follow the following methods:

a) If any of the first-time employees (entry-level after education) have a basic salary of more than Rs. 15,000 per month, you can exempt them from being covered under the PF Act. Instead, you can include the Employer Contribution value in their CTC.

b) For existing employees whose basic salary is higher than Rs. 15,000 per month, you can restrict the PF deduction up to Rs. 15K, which is mandatory.

c) When considering annual increments, you can slightly increase the HRA component if it is very low right now, so that you can exempt HRA from PF coverage. This will be beneficial only if the basic salary is less than Rs. 15K. Otherwise, in the normal course, you can't do anything to cover employees under the clutches of the Provident Fund.

Regards,

Importance of Collecting Form 11 for New Employees

When a new employee joins your organization, you should collect Form 11 to confirm that they were not covered by EPF earlier. In the absence of Form 11, you cannot ensure that, in the future, the same employee will not demand PF coverage, claiming they were previously covered under EPF. Therefore, to err on the side of caution, collect Form 11, which will indicate whether the employee was a member of EPF in their previous employment.

If the employee declares previous PF membership, you should not exclude them from PF. Conversely, if they declare no PF membership, you can exclude them from PF provided their PF qualifying salary exceeds Rs 15,000.

EPFO Coverage and Exclusion Conditions

If the monthly gross salary (PF Gross), excluding HRA and any other productivity-linked payment (such as production incentives), is 15k or less as declared by the employee through Form-11, they must be covered under the EPFO as a member. If the employee was not a member of the EPFO earlier and is joining with a PF Gross of more than 15K, or was a member of the EPFO but left the service and is again joining with a gap at a salary level of more than 15K or after attaining the age of 58 years, settled EPF & EPS is considered an excluded employee. Excluded employees may be out of the purview of the EPFO, but voluntarily, they may become a member.

No employee or employer has the right to exclude any employee from the coverage of the EPFO if he/she fulfills the above coverage conditions.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] www.usdhrs.in