Can Employers Deduct EPS on a 15k Limit for a 50k Salary? Seeking Clarity on EPS and EPF Rules

Namaskara Professionals,

1. If an employee's basic salary (excluding HRA) is 50k, can the employer deduct the employer's contribution to EPS based on a wage limit of only 15k? In this case, is it possible to deduct EPS for an employee whose joining date is 30.07.2024?

2. Also, can the employer deduct EPS on a wage limit of 15k and EPF on a basic of 50k?

Please clarify. Thank you in advance.

EPF and Pension Fund Contributions

If the employee is already a member of the EPF, you should also cover him under EPF even if the salary exceeds Rs. 15,000. However, if he is a fresher or was not covered by EPF in the past, you can either exclude him from PF or cover him under PF for EPF only. Additionally, if you are showing Rs. 15,000 as the basic salary as opposed to Rs. 50,000, then you can also contribute to his Pension Fund. However, under both EPF and Pension Fund, the gross salary should be Rs. 15,000. It is important not to show Rs. 50,000 as salary under EPF and Rs. 15,000 as salary under PS.

I do agree on the following two points advised by Madhu. If an employee is already covered under EPF & EPS, then it is mandatory to cover them under EPF & EPS. If a first-time member joins EPF and their salary is above Rs. 15,000/-, the employee may be considered an excluded employee.

But I would like to differ from Madhu on the following point. If an employee is a first-time member of EPF and if their wage is above Rs. 15,000/-, even though EPF is restricted to the ceiling limit of Rs. 15,000/-, EPS is not applicable. If the same is contributed, the employee will face challenges in transfer/claims.

True, but does the EPF Organisation have any power to see what the employee's total salary is? NO. They can only see whether an employee is covered or not, and if not covered, why they are not covered. They are only concerned with the PF qualifying salary and not the gross salary. The EPF & MP Act, being a social security enactment for the benefit of the employees, I don't think that EPFO can interfere and question why an employee, whose gross salary is more than Rs 15,000, is given coverage.

It is true that the EPFO is putting the members in a lot of trouble and making it difficult for them to transfer or claim amounts from PF. But if you fight properly, this will come to an end. Even though the Kerala High Court decision that the 2014 amendment was unconstitutional was not approved by the Apex Court, the controversies have not ended. I know companies that restrict PF payments to Rs 15,000, contributing to EPS as well. The members have managed to get their accounts transferred too. But if the employer shows the actual gross under the Gross salary for EPF and Rs 15,000 under EPS in the ECR, then the system will reject it. Otherwise, it will accept, I understand.

At the time of inspection, they have the right to check the wages. Anyhow, while generating/linking UAN in the organization, we need to mention the gross wages. Even at the time of monthly returns, we need to mention the gross wages. In the gross wages, we can't declare wages as Rs. 15,000, but yes, in EPF & EPS wages, we can restrict it to Rs. 15,000.

Please check whether it is monthly EPF wages as on joining or gross salary. I believe it is EPF qualifying wages, and not gross wages. Then you can very well put Rs 15,000 there.

As part of EPF monthly returns, we need to mention gross wages along with the EPF, EPS, and EDLI wages.

Dear Professionals,

Thank you so much for your guidance. You have been incredibly helpful, and I don't know who else I would have asked. Let me elaborate on my query some more. Here are the details:

Employee's Past Employment (2017 at a large MNC):

- Basic Salary: ₹50,000
- Employee's EPF Contribution: ₹6,000 (12% of gross wage of ₹50,000)
- Employer's EPS Contribution: ₹1,250 (considering EPF wage of ₹15,000 - This is mentioned in the employer EPS contribution sheet)
- Employer's EPF Contribution: ₹4,750 (unclear on the wage amount considered)

According to Madhu sir, if we cannot have two wage limits for EPS and EPF, did the company deduct EPF at a higher percentage rate to match the employer's total contribution (EPF and EPS) with the employee's total EPF contribution? Can't ask the old company for any details as they left the company a long time ago.

As asked by Madhu sir:

- When applying for UAN, they ask for EPF wages, not gross salary.
- However, when calculating EPF returns for the month, both gross salary and EPF and EPS wages are required.

Director's UAN Issue:

The Director had a UAN number which he surrendered. Now, in his own company, he is eligible for PF registration as the employee count has exceeded 20. When his Aadhaar number is entered, no UAN number is visible during registration. We are certain he had an old UAN number which is now not visible. Should we create a fresh UAN number for him, and should we deduct EPS if his gross salary exceeds ₹15,000? EPS was getting deducted in his old company.

Coverage Under EPS and EPF:

- How can I determine whether employees in any previous office were covered under both EPS and EPF or only under EPF? They have left their old company long back and can't contact their old company for these details.

Thank you for your assistance.

As per your information, the employee in question had worked in another organization before joining your establishment. You have mentioned 2017; is this his date of joining that company, or was he already a member of EPS having joined the EPF prior to September 2014? If he was a member of EPF prior to 2014, the contribution made by the company is perfect. If he was not a member before 2017 (or even prior to September 2014), the employer should not have contributed Rs. 1250 (8.33% of Rs. 15000) to EPS but should have contributed the entire 12% of Rs. 50000, i.e., Rs. 6000 to EPF alone. Now, if the ECR was filed showing Gross salary for EPF as Rs. 50000 and EPF salary for PF for Rs. 50000 and PS salary as Rs. 15000, and the same was accepted, it should only be understood that he was already a member of EPS. If not, that company could not have succeeded in filing ECR by showing Rs. 50000 as gross salary.

We can certainly have two Gross salaries for EPF and EPS because only EPS is restricted to Rs. 15000, and PF can be contributed on a higher salary. But concerning employees who joined later than September 2014, if the gross salary shown is higher than Rs. 15000, say Rs. 50000, then you cannot put an amount in the Pension Fund. This is how the software should be designed as per the EPF & MP Act. If so, naturally, in respect of a person who joins now, with a gross salary of Rs. 50000, the employer will not be able to contribute to the Pension Fund. For instance, if the system accepts contribution to the Pension Fund, then it should be a system error for which the EPFO is solely responsible.

Regarding your question 3, I understand that there is no Gross salary for coverage but for generating UAN, what is required is only PF salary. But for ECR, we need both gross salary as well as PF salary. If the Gross salary is Rs. 15000, and out of 15000 Rs. 2000 is HRA, obviously, the PF salary would be Rs. 13000 only. At the same time, if the Gross salary is more than Rs. 15000, but the employer will only consider the statutory threshold salary for EPF matters, then for all purposes relating to PF, the salary should be Rs. 15000 only, right? That is why I suggested that if the pension fund is to be contributed, you can show Rs. 15000 as Gross salary against PF also.

The employee had surrendered the UAN. I don't know how it is possible to surrender UAN. I presume he would have withdrawn the amounts available in the account when he left the company. He should have left the Pension Fund untouched. You can either get the PF passbook and verify what is the status. Sometimes his UAN would not have been linked to Aadhar, and that may be another reason why the same is not shown as active. In the new member registration page, if you put the UAN, it may accept. Please try that.

If you generate a new UAN for him, you can proceed with the steps first mentioned above to make contributions. If you put 50000 as Gross salary, you cannot contribute to the Pension Fund because the date of generation of UAN is today's. At the same time, if you show it as Rs. 15000, you can contribute to both PF and PS.

You can find out whether the employee was covered by PS by verifying the member passbook. You can generate a password by using the forgot password field available and getting an OTP from the employee.