Hi All,
Please let me know if the Basic Salary (fixed component) can be set at 100% of Gross rather than 30-60%, and can there be multiple salary slabs based on employment category?
Your urgent input will be appreciated.
Regards
From India, Kolkata
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Please let me know if the Basic Salary (fixed component) can be set at 100% of Gross rather than 30-60%, and can there be multiple salary slabs based on employment category?
Your urgent input will be appreciated.
Regards
From India, Kolkata
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You can fix the basic salary as 100% of gross salary. Salary is bifurcated into HRA, Conveyance, etc., so as to make the salary attractive to the employees with respect to income tax. For the employer, bifurcation will give lesser cost to the company because certain mandatory contributions to statutory funds and payments to employees are based on the basic salary. Therefore, if you put the salary as a consolidated amount without bifurcation into basic salary, HRA, conveyance, etc., all such payments like contribution to PF, payment of Bonus, gratuity, leave encashment, etc., will be based on that consolidated salary.
Regards, Madhu.T.K
From India, Kannur
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4483Regards, Madhu.T.K
From India, Kannur
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Hi Madhu, Thanks for your reply. Much appreciated. As you mentioned, if the Basic Salary is set at 100% of the gross, then PF contributions, etc., will be based on that amount itself. Now, we understand that PF contributions are up to a limit of Rs 6500 (fixed component). If we set the basic salary at 100% of the gross without any bifurcation, and if the employees' gross is Rs 6500, does that mean the PF contribution need not be deducted? Also, if the Gross salary is Rs 6500 for full attendance in a month, then for 90% attendance in that same month, the gross drops to Rs 5850/-. In this case, will this qualify for PF deductions? Or will it be on "gross before attendance deduction" rather than "gross after attendance deduction"?
From India, Kolkata
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From India, Kolkata
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It is true that in the case of PF, your liability is restricted to 12% of Rs 6500.
In the case of an employee getting more than Rs 6500 as a basic salary but at the same time due to leave without pay, he has earned less than the actual gross salary but more than Rs 6500, then PF needs to be calculated on this Rs 6500 itself and not on the amount arrived at after reducing it proportionately to the loss of pay. Obviously, if there was a basic salary and by means of a few days LOP, his basic pay has become less than Rs 6500, then you need to pay PF on that reduced amount only. For statutory payments, what is actually received or receivable is considered, and if the amount receivable is more than Rs 6500, PF should be calculated on Rs 6500. If it is less than Rs 6500 (also if the PF qualifying salary, i.e., basic salary, is less than Rs 6500), then PF should be on that lesser amount.
Madhu.T.K
From India, Kannur
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In the case of an employee getting more than Rs 6500 as a basic salary but at the same time due to leave without pay, he has earned less than the actual gross salary but more than Rs 6500, then PF needs to be calculated on this Rs 6500 itself and not on the amount arrived at after reducing it proportionately to the loss of pay. Obviously, if there was a basic salary and by means of a few days LOP, his basic pay has become less than Rs 6500, then you need to pay PF on that reduced amount only. For statutory payments, what is actually received or receivable is considered, and if the amount receivable is more than Rs 6500, PF should be calculated on Rs 6500. If it is less than Rs 6500 (also if the PF qualifying salary, i.e., basic salary, is less than Rs 6500), then PF should be on that lesser amount.
Madhu.T.K
From India, Kannur
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Hi Madhu, Thanks once again.
To sum it up, our understanding is that if the basic salary (100% of Gross) after LOP is less than Rs 6500/-, then PF contribution is mandatory on the prorated figure. If it is equal to or more than Rs 6500/- after LOP, then PF contribution is NOT mandatory since it would have crossed the limit of PF purview. Please correct me if I'm wrong.
From India, Kolkata
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To sum it up, our understanding is that if the basic salary (100% of Gross) after LOP is less than Rs 6500/-, then PF contribution is mandatory on the prorated figure. If it is equal to or more than Rs 6500/- after LOP, then PF contribution is NOT mandatory since it would have crossed the limit of PF purview. Please correct me if I'm wrong.
From India, Kolkata
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Let me say this: If PF qualifying salary (whether it is basic salary, basic + DA, or a consolidated sum) is less than 6500 after LOP deductions, then the contribution should be made based on that amount. If the PF qualifying salary remains above Rs 6500 even after LOP deductions, then the contribution should be calculated on the Rs 6500 amount. In the latter case, no proportionate deduction of salary on 6500 should be made for the LOP days to determine the PF qualifying amount.
Once PF contributions have commenced, they must be continued even if the salary surpasses Rs 6500.
Madhu.T.K
From India, Kannur
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Once PF contributions have commenced, they must be continued even if the salary surpasses Rs 6500.
Madhu.T.K
From India, Kannur
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Hi Madhu, there seems to be a slight confusion. As per our understanding, a basic salary of Rs 6500 exceeds the PF qualifying salary threshold, so PF contributions cease in such cases. For instance, if the basic salary (100% of the gross) is Rs 6500/- (PF contributions cease here as it exceeds the PF qualifying salary), and the employee is present for only 10 days in a month, the basic salary (100% of gross) reduces to approximately Rs. 3,300. Would it be appropriate in this scenario to deduct PF for one month (10 days) and then not deduct in the following month due to full attendance?
From India, Kolkata
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From India, Kolkata
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An employee once covered under PF will continue to be covered irrespective of any change in salary. Therefore, there is no question of non-coverage once the salary becomes more than Rs 6500. Of course, if at the time of joining, the PF qualifying salary is more than Rs 6500, you can exclude him right from the beginning, but it is not possible after giving coverage. This applies to an employee who was earlier covered by PF under his previous employer but remains unsettled upon leaving that establishment and joins your company at a PF qualifying salary of more than Rs 6500.
Regards,
Madhu.T.K
From India, Kannur
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Regards,
Madhu.T.K
From India, Kannur
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So if his PF qualifying salary is more than Rs 6500 at the time of joining, irrespective of LOP, he will NOT be covered under PF? But if at the time of joining his PF qualifying salary is less than Rs 6500, irrespective of LOP, there WILL be PF coverage? Am I right?
If yes then, what happens if the employee joins at 6000/-, gets an increment to 6500/-, and wishes to stop his PF contribution? Does he have the right to stop? As a company, are we required to get that in writing from the employee that he wishes to cease his PF contribution?
From India, Kolkata
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If yes then, what happens if the employee joins at 6000/-, gets an increment to 6500/-, and wishes to stop his PF contribution? Does he have the right to stop? As a company, are we required to get that in writing from the employee that he wishes to cease his PF contribution?
From India, Kolkata
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Dear,
If at the time of joining, the basic salary of the employee is more than Rs 6500/-, then he has the option of not opting for PF coverage. If he chooses not to do so, even if his basic salary is less than Rs 6500/- due to Leave without pay in any specific months, then we are not required to deduct his PF contribution.
Hope this will clear your doubt.
Thanks,
Santosh
From India, Mumbai
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If at the time of joining, the basic salary of the employee is more than Rs 6500/-, then he has the option of not opting for PF coverage. If he chooses not to do so, even if his basic salary is less than Rs 6500/- due to Leave without pay in any specific months, then we are not required to deduct his PF contribution.
Hope this will clear your doubt.
Thanks,
Santosh
From India, Mumbai
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If his salary at the time of joining was, say, Rs 6000 and later on he gets an increment, and his basic salary (PF qualifying salary) becomes more than Rs 6500, then we have to continue his coverage, and the employee or the employer has no right to discontinue the coverage of one who is already covered.
Madhu.T.K
From India, Kannur
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Madhu.T.K
From India, Kannur
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Salary Sheet & PF PT Calculation & Challan Nov 2010.xls
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