Dear All,
Today in the newspaper, we saw an EPFO circular dated 30-11-2012. I don't know if it has been approved yet, but I would like to discuss it with professionals who have a better understanding of PF.
1. Any idea when this may come into action? They mention that PF should not be calculated in Basic; it should be Basic + all allowances. This change could significantly reduce the take-home amount, which may have serious repercussions for junior staff.
2. Is it possible for employees who are currently part of PF and have had their salary increased to a basic of 6600/- to opt out of PF within the same organization? Please check and respond.
I need help from all the professionals as this may impact most of us.
Best Regards,
Monika Marwah
From United States, Duluth
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9Today in the newspaper, we saw an EPFO circular dated 30-11-2012. I don't know if it has been approved yet, but I would like to discuss it with professionals who have a better understanding of PF.
1. Any idea when this may come into action? They mention that PF should not be calculated in Basic; it should be Basic + all allowances. This change could significantly reduce the take-home amount, which may have serious repercussions for junior staff.
2. Is it possible for employees who are currently part of PF and have had their salary increased to a basic of 6600/- to opt out of PF within the same organization? Please check and respond.
I need help from all the professionals as this may impact most of us.
Best Regards,
Monika Marwah
From United States, Duluth
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Attached is the document for your reference. Thanks - Monika
From United States, Duluth
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From United States, Duluth
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Hi Monika No it doesn’t mean as employee shall be exempted from Contributions. For calculation of PF now we should calculate Basic+DA, Conveyance, HRA & other allowances too.
From India, Bangalore
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From India, Bangalore
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Dear Jeevarathnam,
I agree with the calculation, but setting aside this news, could we offer this option to employees who are not interested in taking home less pay and prefer more statutory benefits? Is it possible to exempt them from PF deductions if their basic salary is Rs. 6600/-?
Please advise! I am currently encountering an issue with my packers who are taking home Rs. 6000 after all deductions. We only deduct PF from the basic salary. If we adjust the calculation based on the entire salary, their take-home pay would reduce to around Rs. 4500/-, which could make it extremely challenging for them to continue working with us or any other company at a similar level. This issue would impact all our employees.
I need urgent assistance!
Thanks,
Monika Marwah
From United States, Duluth
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I agree with the calculation, but setting aside this news, could we offer this option to employees who are not interested in taking home less pay and prefer more statutory benefits? Is it possible to exempt them from PF deductions if their basic salary is Rs. 6600/-?
Please advise! I am currently encountering an issue with my packers who are taking home Rs. 6000 after all deductions. We only deduct PF from the basic salary. If we adjust the calculation based on the entire salary, their take-home pay would reduce to around Rs. 4500/-, which could make it extremely challenging for them to continue working with us or any other company at a similar level. This issue would impact all our employees.
I need urgent assistance!
Thanks,
Monika Marwah
From United States, Duluth
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Dear All,
I actually had a conversation with the PF Authority, and they are saying that except for HRA, all other allowances + Basic should have 12% deducted for PF, with a ceiling limit of Rs. 6500. Employers may choose to contribute more than Rs. 6500 if they wish.
Thank you.
From India, Chennai
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I actually had a conversation with the PF Authority, and they are saying that except for HRA, all other allowances + Basic should have 12% deducted for PF, with a ceiling limit of Rs. 6500. Employers may choose to contribute more than Rs. 6500 if they wish.
Thank you.
From India, Chennai
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Hi, Ms. Monika.
I do understand the situation. But we have no other option. This impact will not be limited to a particular industry; it will affect all manufacturing and service industries, except for a few IT/ITES industries. Even for them, there will be a slight impression as well.
From India, Bangalore
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I do understand the situation. But we have no other option. This impact will not be limited to a particular industry; it will affect all manufacturing and service industries, except for a few IT/ITES industries. Even for them, there will be a slight impression as well.
From India, Bangalore
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Dear Mahalakshmi,
Thank you so much; I really appreciate your response. If an employee has a basic salary of more than Rs. 6500/-, can the employer submit PF or not? That's okay, but what about the employee? Is it compulsory for him, or is it discretionary?
My major concern is if someone is submitting regular PF every month (e.g., till Dec '12) and from Jan '13, we stop submitting the PF by stating that we are not doing so as his salary is already above Rs. 6500 basic and he is already exempted, will that create any issues?
Also, does anyone have a written document from the PF authority for further clarification?
Thanks,
Monika
From United States, Duluth
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Thank you so much; I really appreciate your response. If an employee has a basic salary of more than Rs. 6500/-, can the employer submit PF or not? That's okay, but what about the employee? Is it compulsory for him, or is it discretionary?
My major concern is if someone is submitting regular PF every month (e.g., till Dec '12) and from Jan '13, we stop submitting the PF by stating that we are not doing so as his salary is already above Rs. 6500 basic and he is already exempted, will that create any issues?
Also, does anyone have a written document from the PF authority for further clarification?
Thanks,
Monika
From United States, Duluth
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Hi Mahalakshmi,
Earlier, there was an exemption for HRA, but now even HRA is included. Shortly, they might update the same. The reason for telling so is that earlier there was some declaration from the Madras High Court stating that except HRA, all the components should be considered. However, this circular is different from that.
From India, Bangalore
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Earlier, there was an exemption for HRA, but now even HRA is included. Shortly, they might update the same. The reason for telling so is that earlier there was some declaration from the Madras High Court stating that except HRA, all the components should be considered. However, this circular is different from that.
From India, Bangalore
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Okay. You cannot stop deducting EPF even if his basic salary goes beyond 6500, so don't do it.
Regarding the written document about it, read the EPF scheme Sec 26; this will clarify the point. There is Sec 27 about exemption of an employee from EPF, but for that, you have to prove to the EPFO that he is receiving better benefits from other Industrial Acts. So don't even get into it.
Now about the notification about the inclusion of all allowances, it has no use until the act is amended. If not, then it will be challenged in the court of law and will be withdrawn, as it has happened before.
Stay Cool,
Atom.
From India, Phagwara
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Regarding the written document about it, read the EPF scheme Sec 26; this will clarify the point. There is Sec 27 about exemption of an employee from EPF, but for that, you have to prove to the EPFO that he is receiving better benefits from other Industrial Acts. So don't even get into it.
Now about the notification about the inclusion of all allowances, it has no use until the act is amended. If not, then it will be challenged in the court of law and will be withdrawn, as it has happened before.
Stay Cool,
Atom.
From India, Phagwara
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Copy of the circular (# 12 is about Wage and other allowances) Stay Cool, Atom
From India, Phagwara
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From India, Phagwara
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It is very much confusing. One more article is being circulated which attaching for further insight. Pls go through. Prashant
From India, Bhubaneswar
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From India, Bhubaneswar
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According to the provisions of the Employees Provident Funds Scheme, it is very clear that cessation of membership does not arise once the member reaches Rs. 6500. The member remains a member unless he quits the job or settles his account; otherwise, it is mandatory to contribute up to the mandatory limit. Regarding basic wages, it is still ambiguous, but as per the provisions of the Act, basic wages are clearly defined with certain exclusions, which are valid till date.
It is important to refer to the EPF scheme Section 26 to clarify this point. Additionally, Section 27 addresses the exemption of an employee from EPF, but proving that the employee is receiving better benefits from other Industrial Acts is necessary to qualify for this exemption. It is advisable not to pursue this exemption without thorough consideration.
As for the notification concerning the inclusion of all allowances, it holds no significance unless the act is amended. If not, any such inclusion may be challenged in a court of law and potentially withdrawn, as has happened previously.
Stay Cool,
Atom
From India, Hyderabad
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It is important to refer to the EPF scheme Section 26 to clarify this point. Additionally, Section 27 addresses the exemption of an employee from EPF, but proving that the employee is receiving better benefits from other Industrial Acts is necessary to qualify for this exemption. It is advisable not to pursue this exemption without thorough consideration.
As for the notification concerning the inclusion of all allowances, it holds no significance unless the act is amended. If not, any such inclusion may be challenged in a court of law and potentially withdrawn, as has happened previously.
Stay Cool,
Atom
From India, Hyderabad
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Hi Monika,
The ceiling limit of PF Eligibility amount Rs. 6500/- is not mandatory but rather optional. The PF contribution may be remitted for employees whose basic salary is more than Rs. 6500/-, and there is no upper wage limit on the basic salary mutually agreed upon by the employer and employee.
FYI, the current circular published on 30th Nov 2012 in the newspaper has not been enforced or approved by the relevant Government authority to date.
Regards,
Rajib Mondal,
Dy. Manager-HR,
CIAL, Durgapur
9333563905
From India
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The ceiling limit of PF Eligibility amount Rs. 6500/- is not mandatory but rather optional. The PF contribution may be remitted for employees whose basic salary is more than Rs. 6500/-, and there is no upper wage limit on the basic salary mutually agreed upon by the employer and employee.
FYI, the current circular published on 30th Nov 2012 in the newspaper has not been enforced or approved by the relevant Government authority to date.
Regards,
Rajib Mondal,
Dy. Manager-HR,
CIAL, Durgapur
9333563905
From India
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Dear Monika,
The latest news has not yet been updated by the PF Authority for all concerned individuals. If an employee's basic salary exceeds Rs. 6500 and they do not wish to continue, you can mark their name as resigned for this month in the PF records. Subsequently, you can rejoin their name in the register. Upon rejoining, only ESI deductions up to a gross salary of Rs. 15000 should be made, with the employee's basic salary exceeding Rs. 6500 indicating an exemption from PF contributions.
Thank you.
From India, Chennai
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The latest news has not yet been updated by the PF Authority for all concerned individuals. If an employee's basic salary exceeds Rs. 6500 and they do not wish to continue, you can mark their name as resigned for this month in the PF records. Subsequently, you can rejoin their name in the register. Upon rejoining, only ESI deductions up to a gross salary of Rs. 15000 should be made, with the employee's basic salary exceeding Rs. 6500 indicating an exemption from PF contributions.
Thank you.
From India, Chennai
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You cannot act like that. Once a member of the fund transitions to new employment, they must submit Form 11, which is mandatory. This form requires the furnishing of previous service details. Similarly, you cannot simply depict the situation as a resignation and new joining, as this could lead to legal proceedings against both the employee and the employer. Do not take compliance with statutes lightly. Edify compliance planners.
From India, Hyderabad
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From India, Hyderabad
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To All,
Best of knowledge, I would like to shed light on the above issue. I hope the copy of the PF or Circular released has any worth. Any change in the Act or Amendment should be passed by Parliament; only then will it be considered. Until then, there is no need to worry about the issues mentioned in the Times of India newspaper.
I hope you all understand my point. Until Parliament releases the Government Order (GO), the situation will continue the same way.
Regards,
B. Anand Kumar
From United Kingdom, London
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Best of knowledge, I would like to shed light on the above issue. I hope the copy of the PF or Circular released has any worth. Any change in the Act or Amendment should be passed by Parliament; only then will it be considered. Until then, there is no need to worry about the issues mentioned in the Times of India newspaper.
I hope you all understand my point. Until Parliament releases the Government Order (GO), the situation will continue the same way.
Regards,
B. Anand Kumar
From United Kingdom, London
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Actually i have informed what the PF Enrollment Officer informed to us when there was an inspection in our organisation. I didnt mention my own ideas...
From India, Chennai
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From India, Chennai
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Dear All,
This entire week was panic not only to HR commodity but to all working community. I will say that the TOI has created this panic by publishing the article on front page giving broad headline “Save more in PF, take home lower salary every month” and that too without studying all this aspect of EPF&MP Act 1952. The article is misleading with examples which created panic amongst all.
In our CiteHr there are many postings in different threads on this topic. Many viewer viewed the postings. I appreciate the posting by the members but very few discussions I found to be really meaningful.
By this time many experts have given their opinion on this subject. Shri. B.C. Prabhakar, President- Karnataka Employers’ Association who came out with Circular to its members. The said circular is posted in our CiteHr by Shri. Sasidharan Kollery, which is available to us. Shri. Vivek Sang who has posted clipping of Hindu dated 13.12.2012 which says maintain status quo on the circular- said by Union Labour and Employment Minister.
With this, the matter is now clear to all. But still I wish to give some points. This points I wish to give in every thread which I came across on this topic. This may be repeated but helpful in easy understanding.
The Circular in this context is an internal circular giving guidelines to its officers for quasi-judicial proceedings under section 7A. The Sr. 12 in this circular on splitting of wages is an explanation or clarification on the definition of Basic wages which is bit confusing one and probably half way attempt by the officer who signed on his last day of retirement.
There is no mention in this circular as regards to Paragraph 2(f) and or Paragraph 26A. This means both this Paragraph are unchanged.
There is no change in Paragraph 2(f) and or Paragraph 26A. EPFO can not make change in this Paragraph. Any amendment in law can not be done by such kind of internal circular. No one has any right to do it.
The said paragraphs are given below for ready reference:
Paragraph 2(f) of the EPF scheme defines an excluded employee as an employee whose pay at the time he is otherwise entitled to become a member of the Fund, exceeds Rs. 6,500/- per month. The explanation to the paragraph defines the pay to include basic wages with D.A, Retainers allowance if any and cash value of food concession admissible thereon.
Paragraph 26A which contains the provisions with regard to retention of PF membership stipulates that where a monthly pay of a member exceeds Rs.6500/- per month the contribution payable by him and in respect of such employee by the employer, shall be limited to the amounts payable on a monthly pay of Rs.6500/- including D.A, Retention Allowance if any and cash value of food concession.
The question of whether the allowances should be taken into account for the purpose of PF contribution is still pending adjudication before the Supreme Court.
According to me the inclusion of all allowances for the purpose of EPF contribution will not affect much to majority. It will affect to those who are paying basic less than minimum wage rate.
Hope, now there remain no doubts in the mind of any body.
Thank and regards.
Keshav Korgaonkar
From India, Mumbai
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This entire week was panic not only to HR commodity but to all working community. I will say that the TOI has created this panic by publishing the article on front page giving broad headline “Save more in PF, take home lower salary every month” and that too without studying all this aspect of EPF&MP Act 1952. The article is misleading with examples which created panic amongst all.
In our CiteHr there are many postings in different threads on this topic. Many viewer viewed the postings. I appreciate the posting by the members but very few discussions I found to be really meaningful.
By this time many experts have given their opinion on this subject. Shri. B.C. Prabhakar, President- Karnataka Employers’ Association who came out with Circular to its members. The said circular is posted in our CiteHr by Shri. Sasidharan Kollery, which is available to us. Shri. Vivek Sang who has posted clipping of Hindu dated 13.12.2012 which says maintain status quo on the circular- said by Union Labour and Employment Minister.
With this, the matter is now clear to all. But still I wish to give some points. This points I wish to give in every thread which I came across on this topic. This may be repeated but helpful in easy understanding.
The Circular in this context is an internal circular giving guidelines to its officers for quasi-judicial proceedings under section 7A. The Sr. 12 in this circular on splitting of wages is an explanation or clarification on the definition of Basic wages which is bit confusing one and probably half way attempt by the officer who signed on his last day of retirement.
There is no mention in this circular as regards to Paragraph 2(f) and or Paragraph 26A. This means both this Paragraph are unchanged.
There is no change in Paragraph 2(f) and or Paragraph 26A. EPFO can not make change in this Paragraph. Any amendment in law can not be done by such kind of internal circular. No one has any right to do it.
The said paragraphs are given below for ready reference:
Paragraph 2(f) of the EPF scheme defines an excluded employee as an employee whose pay at the time he is otherwise entitled to become a member of the Fund, exceeds Rs. 6,500/- per month. The explanation to the paragraph defines the pay to include basic wages with D.A, Retainers allowance if any and cash value of food concession admissible thereon.
Paragraph 26A which contains the provisions with regard to retention of PF membership stipulates that where a monthly pay of a member exceeds Rs.6500/- per month the contribution payable by him and in respect of such employee by the employer, shall be limited to the amounts payable on a monthly pay of Rs.6500/- including D.A, Retention Allowance if any and cash value of food concession.
The question of whether the allowances should be taken into account for the purpose of PF contribution is still pending adjudication before the Supreme Court.
According to me the inclusion of all allowances for the purpose of EPF contribution will not affect much to majority. It will affect to those who are paying basic less than minimum wage rate.
Hope, now there remain no doubts in the mind of any body.
Thank and regards.
Keshav Korgaonkar
From India, Mumbai
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EPF-Circular-da ted-23-May-2011 -Splitting-of-M inimum-Wages-fo r-the-Purpose-o f-PF-Contributi on-Not.pdf
Salary Sheet & PF PT Calculation & Challan Nov 2010.xls