Confused About PF Deductions: Should Employees Pay the Employer's Share Too?

Hi,

I had joined a company 6 months back. My salary earnings are as follows:

Basic salary: 2250

HRA: 1125

Conveyance: 800

LTA: 188

Medical: 1250

Special allowance is 1880, which makes it Rs 7500 pm in total.

This is my fixed pay per month. Apart from this, I have Rs 30000 p.a as variable expenditure which will be paid to me after I complete one year in this company. If I quit the company before the 1-year term, I wouldn't be eligible for this variable pay.

Apart from this, Rs 175 is deducted as professional tax. Everything went smoothly till December. But in the salary of December, they deducted PF from my salary. They deducted 24% of my basic+DA (12% employee contribution + 12% employer's contribution), stating that it is mentioned in the appointment letter. They deducted the PF without getting my signatures required for the PF application form. We got the appointment letter only in the month of October 2007, which is 3 months after joining the company.

1. Now my question is that they have deducted PF only for a few people and not for everyone. So, can anyone please tell me to whom the PF is mandatory and to whom it is not (I mean the salary range)?

2. Is it necessary for me to pay the contribution of PF on behalf of the employer too (as it is mentioned in the appointment letter)? Or is there any law stating it is illegal for an employee to bear the contribution of the employer?

Hi,

There is no way to deduct the employer's portion from the employee's salary. It is mandatory for the employer only because it is the company's liability, not the employee's. If the establishment comes under the PF Act, then the employer will be solely responsible for any disqualification in this regard.

Secondly, there is a PF exemption limit of Rs. 6,500/- (Basic). So, dear, ask them what the method of deduction is. You can only bear your deduction part in respect of PF. As per your salary, it will be Rs. 270 (12% of Rs. 2250/-). You can also inquire about the minimum wages because the PF department has already notified that PF should be deducted on the minimum wages amount.

Hope you now have some idea.

Regards,
Vikas Kumar

Hi,

Please verify your salary structure in your appointment letter. Most of the companies are deducting the PF at 12%+12% (Employer+Employee). For example, your salary structure is as follows:

Basic: xxxxx
DA: xxxxx
HRA: xxxxx
Conveyance: xxxxx
LTA: xxxxx
Medical: xxxxx
Gratuity: xxxxx
PF Employer Share: xxxxx
---------------------
CTC (A): xxxxxxxx
---------------------
Less Deductions
Professional Tax: xxxxx
PF Employer: xxxxx
PF Employee: xxxxx
Income Tax: xxxxx
Gratuity: xxxxx
Any other Deductions: xxxxx
---------------------
Total Deductions (B): xxxxx
---------------------
Net take-home Salary (A-B)

Regards,
Raplou HS

Employer's contribution of PF cannot be deducted from your salary. You are liable for a contribution of 12% of your basic salary only (since there is no DA), amounting to Rs 30,000 payable annually and conditionally (as you have to work for 1 year); this cannot be taken as a part of your salary. An appointment order empowering an employer to take their own share of PF from an employee will not stand and is void. You can challenge it.

It is not mandatory that all employees shall be under EPF; only those whose initial salary is not more than Rs 6,500 need to be covered by law. Presume that others, right at the time of joining, were drawing more than Rs 6,500 (not considering the HRA, CCA, etc).

Regards, Madhu.T.K