Hello Friends,
I came across a case and regarding that, I need your suggestions, please. The employer is not deducting PF on the grounds that an employee's basic salary has exceeded Rs.6,500/- per month. Now, what if the employee wants to contribute voluntarily for PF (he asks the employer to deduct the PF amount from salary)? Is there any specific limit on his contribution? Will the employer be questioned for his non-contribution to match the employee's contribution? Kindly explain the statutory obligations on the part of the employer in the above case. Is the employer liable to file any documents with the PF office?
Thanks in advance for your suggestions and clarifications.
Best regards,
Chakrapani
From India, Madras
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I came across a case and regarding that, I need your suggestions, please. The employer is not deducting PF on the grounds that an employee's basic salary has exceeded Rs.6,500/- per month. Now, what if the employee wants to contribute voluntarily for PF (he asks the employer to deduct the PF amount from salary)? Is there any specific limit on his contribution? Will the employer be questioned for his non-contribution to match the employee's contribution? Kindly explain the statutory obligations on the part of the employer in the above case. Is the employer liable to file any documents with the PF office?
Thanks in advance for your suggestions and clarifications.
Best regards,
Chakrapani
From India, Madras
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Hi Chakrapani,
Once the basic pay of an employee exceeds Rs 6,500, there is no compulsion for PF deduction to be made. However, if the employee is interested in voluntary contributions, they can opt for it, where only the employee's contribution will be deposited into the PF account, with the employer's contribution not included.
Even if the employee wishes to contribute more than 12% of their basic pay to the PF to avoid taxes, it can be deducted, but the employer will only pay 12%.
It's possible that your employer is assuming that if you request a deduction, they would also have to contribute their part (if you are paid based on gross salary), which may be the reason they are halting the PF contribution.
Any seniors, please correct me if I am wrong.
Sirisha Reddy
From India, Bangalore
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3Once the basic pay of an employee exceeds Rs 6,500, there is no compulsion for PF deduction to be made. However, if the employee is interested in voluntary contributions, they can opt for it, where only the employee's contribution will be deposited into the PF account, with the employer's contribution not included.
Even if the employee wishes to contribute more than 12% of their basic pay to the PF to avoid taxes, it can be deducted, but the employer will only pay 12%.
It's possible that your employer is assuming that if you request a deduction, they would also have to contribute their part (if you are paid based on gross salary), which may be the reason they are halting the PF contribution.
Any seniors, please correct me if I am wrong.
Sirisha Reddy
From India, Bangalore
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Hi Sirisha,
Thank you for the clarification. Even if the employee voluntarily contributes 12% to the PF, the employer is not willing to contribute any amount. The employer simply deducts the 12% from the employee's salary and remits it to the PF office. Is this a valid scenario? Please clarify.
Regards,
Chakrapani
From India, Madras
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Thank you for the clarification. Even if the employee voluntarily contributes 12% to the PF, the employer is not willing to contribute any amount. The employer simply deducts the 12% from the employee's salary and remits it to the PF office. Is this a valid scenario? Please clarify.
Regards,
Chakrapani
From India, Madras
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As per the Act, in case the member wants to contribute more than this, voluntarily, he can do so at any rate he desires, i.e., up to 100% of basic and D.A. However, the employer is not bound to contribute at the enhanced rate.
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Apologies for reading your question incorrectly.
An "exempt" employee is one whose salary is over the INR 6500 limit. However, it is considered a safe practice for the organization to have a consistent approach regarding PF. If some employees are eligible and some are not, then the employer may choose from the following options:
1. Clearly not contribute (both employer and employee) for the exempt employee.
2. Contribute up to INR 6500 for the exempt employees, maintaining the contribution at Rs. 780 for the employee and employer. The employee can contribute higher, and the employer does not need to match.
3. Contribute as per the entire basic salary without restriction.
Of all the above three options, the third is the safest. The PF Commissioner can open the case and raise an objection on the top two scenarios (the second is safer than the first). The effort spent in justifying the above will be higher than the cost involved in paying the PF. The MD of the establishment is personally liable for lapses in following the EPF and MP Act.
Regards,
Priya
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An "exempt" employee is one whose salary is over the INR 6500 limit. However, it is considered a safe practice for the organization to have a consistent approach regarding PF. If some employees are eligible and some are not, then the employer may choose from the following options:
1. Clearly not contribute (both employer and employee) for the exempt employee.
2. Contribute up to INR 6500 for the exempt employees, maintaining the contribution at Rs. 780 for the employee and employer. The employee can contribute higher, and the employer does not need to match.
3. Contribute as per the entire basic salary without restriction.
Of all the above three options, the third is the safest. The PF Commissioner can open the case and raise an objection on the top two scenarios (the second is safer than the first). The effort spent in justifying the above will be higher than the cost involved in paying the PF. The MD of the establishment is personally liable for lapses in following the EPF and MP Act.
Regards,
Priya
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Hi Priya,
Thanks for the information. As you mentioned, the 3rd option may be the safest, but it does not align well with the company since they are not interested in the additional payout. The company is following the 1st option, as you have mentioned, i.e., not to contribute on account of PF. However, they increased the pay package and left the option in the hands of the employees to opt for a PPF.
What I wanted to know is if an employee wants the employer to open an account for him, deduct and remit the PF amount (only his contribution), will the employer be questioned by the PF authorities for not contributing an equal amount?
P.S. (Company has an account running with the regional PF office, but doesn't remit any amount as there is no employee who falls under the mandatory category)
Regards,
Chakrapani
From India, Madras
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Thanks for the information. As you mentioned, the 3rd option may be the safest, but it does not align well with the company since they are not interested in the additional payout. The company is following the 1st option, as you have mentioned, i.e., not to contribute on account of PF. However, they increased the pay package and left the option in the hands of the employees to opt for a PPF.
What I wanted to know is if an employee wants the employer to open an account for him, deduct and remit the PF amount (only his contribution), will the employer be questioned by the PF authorities for not contributing an equal amount?
P.S. (Company has an account running with the regional PF office, but doesn't remit any amount as there is no employee who falls under the mandatory category)
Regards,
Chakrapani
From India, Madras
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Hi Chakrapani,
There is no compulsion that the employer's and employee's contributions should match (obviously if the employee is making any voluntary contribution, it doesn't match). So, if the employer does not want to contribute any amount from its part, only the employee can contribute the required percentage. But you should be cautious at the time of submission of annual contribution forms where you need to fill in the forms appropriately specifying the amount only in the employee's contribution.
Sirisha Reddy
From India, Bangalore
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There is no compulsion that the employer's and employee's contributions should match (obviously if the employee is making any voluntary contribution, it doesn't match). So, if the employer does not want to contribute any amount from its part, only the employee can contribute the required percentage. But you should be cautious at the time of submission of annual contribution forms where you need to fill in the forms appropriately specifying the amount only in the employee's contribution.
Sirisha Reddy
From India, Bangalore
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Hi,
To the best of my understanding (correct me if I am wrong), if an employee, when he/she joined the organization, had a basic salary of less than INR 6500, then the employer needs to make a 12% contribution and continue to make the contribution until the employee resigns, even if over the years of service, the employee's basic salary goes beyond INR 6500. The employer may not be able to stop contributing once the PF account is opened unless the employee leaves the organization.
Thank you,
Sherine
From India, Bangalore
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To the best of my understanding (correct me if I am wrong), if an employee, when he/she joined the organization, had a basic salary of less than INR 6500, then the employer needs to make a 12% contribution and continue to make the contribution until the employee resigns, even if over the years of service, the employee's basic salary goes beyond INR 6500. The employer may not be able to stop contributing once the PF account is opened unless the employee leaves the organization.
Thank you,
Sherine
From India, Bangalore
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Employer-PF-res trict to wages of Rs 6500.pdf
Employee Benefits.doc