EPF Contribution Dilemma: Does Employer Still Pay When Salary Exceeds Rs. 6500?

Respected Seniors,

I need your help to settle whether EPF contribution of Employer will continue when the salary of an employee exceeds Rs. 6500 (basic) by virtue of an increment given to him. Is the employer liable to contribute its share? Please enlighten me with your knowledge and experience. I shall be grateful.

Regards,
ARUN PALTA

If you have paid EPF contributions for an employee and if his salary exceeds Rs. 6500 after a few months due to an increment, it doesn't give you the option to stop his EPF contributions. You need to continue making EPF contributions for that employee as long as he stays with your company. This does not mean that you have to contribute to the EPF for his entire salary. It is sufficient if you contribute only for Rs. 6500.

Regards, Michael Joseph

Dear Arun,

Yes, Michael is perfectly on point. By virtue of the provision under the EPF Act, a covered employee retains his membership even if his salary exceeds 6500/- and should not, in any condition, be an excluded employee. The only option available is for the employer to stop his contribution up to 6500/- until his service ends with that company.

Regards,
KIRAN KALE

If, at the time of appointment, the employee's basic pay is above Rs 6500, do we have to deduct the PF? We pay a consolidated salary of Rs 15000. How should we handle this?

Thanks,
Raj

Dear Raj,

If an employee's basic salary at the time of appointment is more than 6500, then they can be excluded from the act.

Secondly, if, as per management policy, such an employee is offered PF, the following steps can be taken:

1. Employee contribution can be deducted on the total fixed salary including basic, V.D.A., OR D.A., fixed D.A., etc., but not on allowances. The employer contribution, if permitted, can be remitted accordingly.
2. Employee contribution as stated above in point 1, but the employer's contribution should be restricted to 6500.
3. Both contributions can be based on 6500.

You can choose one option from the three above. Please note that if an employee receives a consolidated salary, PF should be applied to it as per options 1 and 2 regarding the employee's contribution.

Regards,
KIRAN KALE