Understanding the Legality of Splitting Minimum Wages and Its Impact on Provident Fund Contributions in Bhopal, India

My monthly salary is Rs 30,000. The company calculates the Provident Fund (PF) on a basic salary of Rs 15,000. For 15 days of work, a contribution of Rs 900 is added to the PF. I am curious to know if this practice of splitting the minimum wages is in violation of any regulations. Please get in touch if you need additional information.

In India, the Provident Fund (PF) is governed by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. According to this act, the PF contribution is calculated as a percentage of the basic wage, dearness allowance, and retaining allowance. The minimum PF contribution rate is 12% of the employee's basic wage. In the scenario described, where the PF is calculated on a basic salary of Rs 15,000 for a monthly salary of Rs 30,000, the practice of splitting the minimum wages may not comply with the regulations. By contributing only Rs 900 for 15 days of work, the company might be under-contributing to the PF, which could lead to legal implications. It is advisable to consult with the company's HR department or a legal expert to ensure compliance with the PF regulations. If needed, you can reach out to the Employees' Provident Fund Organisation (EPFO) for further clarification and guidance.

It does not matter whether your monthly salary is Rs 30,000 or Rs 40,000. The company will calculate the Provident Fund (PF) on Rs 15,000 as per the norms of PF. Therefore, for 15 days of attendance at 12% in Rs 7,500, a contribution of Rs 900 is not wrong but actual. This is not splitting of income.

Salary Threshold:

EPF contributions are generally mandatory for employees with a basic salary plus DA of up to ₹15,000 per month. For employees earning above this, the contribution is optional but subject to approval.

Voluntary Contributions:

Employees can contribute above the statutory 12% (subject to certain conditions).

EPS Contribution:

The employer's contribution towards EPS is limited to a ceiling amount if the employee's salary exceeds ₹15,000. For instance, if an employee's salary is above ₹15,000, the employer's contribution towards EPF and EPS combined is limited to 12% of ₹15,000.

The practice mentioned in your query is standard and does not seem to be in violation of any regulations. The Provident Fund (PF) contribution is calculated based on your basic salary, which in this case is Rs 15,000. This is in accordance with the Employee Provident Fund Act. The act mentions that PF is calculated on the basic salary which includes dearness allowance, retaining allowance, and cash value of food concession (if any). Further, it is mentioned that the PF contribution is 12% of the basic salary, which matches with the Rs. 900 contribution for 15 days that you mentioned.

However, with regards to splitting the minimum wages, the Supreme Court has ruled that splitting of minimum wages for the purpose of PF contributions is not permissible. The reason being that it would lead to a lower PF contribution and thus defeat the purpose of the act. But from your query, it seems like your employer is not splitting your minimum wage, but only considering the basic pay for PF calculation.

In case you wish to increase your PF contribution, you can do so voluntarily by informing your employer. This is subject to certain conditions and your employer's approval. For more detailed information, you can visit https://www.epfindia.gov.in.

In conclusion, your employer seems to be following the correct practice for PF contributions. If you have further doubts, consider consulting with the HR department of your company or a legal expert for personalized advice.