EPF Contributions Below INR 15,000: Can We Challenge Auditor's Observations on Compliance Risks?

Dear experts,

Any advice on EPF here?

EPF Contribution Policy at XYZ Company

XYZ company is contributing EPF on actual basic wages higher than the wage limit of INR 15,000/- as a universal policy for all employees. However, there are scenarios where PF basic wages are reduced below INR 15,000/- due to loss of pay, unpaid days, employees leaving early due to settlements, or new joiners joining in later stages of the month.

Auditor's Observation on Reduced PF Wages

An auditor observed this and mentioned that if PF wages are reduced below INR 15,000/- due to the mentioned scenarios, the contribution should include all allowances (excluding HRA or variable pays) and continue contributions up to INR 1,800/-. Is this observation in line with the PF Act? Can we challenge these observations if compliance risks arise?

Thank you in advance for sharing your points of view.

EPF Contribution on Wages

EPF is contributed on EPF wages, which means Basic, DA, and other allowances as well. If the total EPF wages exceed Rs. 15,000, there is no constraint. However, if the amount is reduced, it is advisable to consider including DA and other allowances in the calculation as well.

PF Deduction on Reduced Basic Wages

The auditor is right. However, there will be cases when it will be difficult. For example, if the Basic is ₹20,000 per month and HRA is ₹10,000 per month, making the monthly gross ₹30,000 per month. Due to a half-month LOP, the Basic comes down to ₹10,000 for the month, HRA to ₹5,000 for the month, and the monthly gross to ₹15,000 per month.

In the above case, PF will be deducted on the ₹10,000 basic, which is less than the ₹15,000 per month statutory limit.

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

Hi, my first company's basic pay was Rs. 15,000 exactly, and the gross pay was Rs. 18,333. Will I be eligible for EPS?