PF in case of gross salary less than ceiling limit - Will it be 12% of gross salary for both employer and employee contributions?

When the Salary for the purpose of PF is Rs 15000, the LOP should be proportionate to 15000 and then only the equity will be met. If we contribute it on Rs 15000 itself for reason that even after the deduction the salary would be above Rs 15000, then employer would be doing an injustice to those who have worked for all the days. For example, in respect of an employee whose actual gross salary is Rs 60000, the employer will contribute Rs 1800 even if he has worked for 8 days, because still his earned gross will be above Rs 15000 (it should be Rs 16000 for 8 days) but in respect of an employee whose salary is low, say, Rs 15000 per month, for each day of absence your contribution will be less and less. Moreover, if you show PF qualifying salary at Rs 15000 when there are leave without pay, you cannot show any NCP days. If there is loss of pay, certainly the employee should suffer by way of NCP.

When, in the records of EPF, the salary of an employee is Rs 15000, why do the EPFO insist that the PF contribution should be on Rs 15000 when there are non contributory days?

It is true that the Enforcement will issue 7A enquiry based on the records but I don't think that they can demand full contribution on 15000 when the employee has not earned full salary. If your Payroll system is linked to attendance and PF monthly returns (now ECR) there will certainly be mismatch in NCP. In the past we used to generate NCP days to be sent along with pension requests of the employees. If we take it directly from the payroll, it would show NCP days but in the PF records there would be no NCP as the employer had remitted PF on Rs 15000 itself whenever there were NCPs. Now the ECR has separate column for NCP. I believe that we can show the non contributory periods only if we show the PF qualifying salary less than 15000, ie, proportionately deducting the LOP from 15000.

Thank you Madhu for reply. So this 4000 rupees contribution will be from employer and 4000 rupees from employee side, is that correct?

Gross Salary for 30 days: 45,000
Worked for 8 days, Therefore, Gross salary: 12000
PF ceiling limit is: 15,000
PF: (15000/30)*8 days = 4000

LOP days are applicable for those employees whose contribution for EPS will be less than 15,000/- due to effect of LOP to calculate pension properly. Even after LOP if basic is more than 15000/- and PF contribution is made up to 15,000/- along with EPS -there will be no effect of LOP.

Therefore, there will be no effect on PF and EPS contribution and accordingly no effect of LOP until basic is below 15,000/- and contribution is less in PF & EPS.

In case the employee & organization are contributing on higher salary PF & EPS, then any LOP should be considered both for PF & EPS.

The above is bit complicated and difficult to understand. I had a detailed discussion with several Asst.PF Commissioner where one/two of them clarified the items stating that in case of LOP if the Basic is more than 15,000/- and the contribution is restricted to 15,000/- , then LOP should not be considered as the contribution is paid on 15,000/-.

S K Bandyopadhyay ( WB, Howrah)
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Thank you so much for all the responses. This is very interesting. For our one employee below is the salary component.

Basic: 10800
HRA: 5400
Other allowance: 10800
Gross: 27000

In this case PF contribution by employer and employee is 1800 rupees each (ceiling limit 15,000). Is this correct?

Let's say if this employee started working at the end of the month and worked only for 3 days out of 30 days. in that case below is the salary component.

Basic: 1080
HRA: 540
Other allowance: 1080
Gross: 2700

In this case PF contribution by employer calculated on ceiling limit: = (15000/30)*3days, which will be 1500 rupees. Also, employee contribution will be 1500 as well.

Please let me know if I am correct.

PF contribution will be on 1080 + 1080 = 2160/- not on 15,000/- .


S K Bandyopadhyay (WB, Howrah)
CEO-USD HR Solutions
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Mr Nanu should have discussed the issues with so many APFCs but did they ever answer one question, that is, how can the contribution be same for two employees whose PF qualifying salary is the same, ie, Rs 15000, when one person has not worked for all the 30 days or when there is some non contributing periods?

@Madhu Sir, Thank you for your quick responses.

Can you please let me know if this is correct?

For us, one employee salary component are below.

Basic: 10800
HRA: 5400
Other allowance: 10800
Gross: 27000

In this case PF contribution by employer and employee is 1800 rupees each (ceiling limit 15,000). Is this correct?

Let's say if this employee started working at the end of the month and worked only for 3 days out of 30 days. in that case below is the salary component.

Basic: 1080
HRA: 540
Other allowance: 1080
Gross: 2700

In this case PF contribution by employer calculated on ceiling limit: = (15000/30)*3days, which will be 1500 rupees.
Also, employee contribution will be 1500 as well.

Please let me know if I am correct.

Yes. If the employee had worked only for 3 days then certainly the PF qualifying salary should be Rs 1500 and the contribution by the employee should be Rs 180 (12% of 1500) and the employer's share should also be Rs 180 bifurcated as Rs 125 towards EPS and Rs 55 towards PF.

PF Gross = Basic + DA +Other allowances ( except production related incentives , HRA etc.) as per Apex court verdict and definition of Basic Wages,

PF & EPS contribution is always determined based on actual earned PF Gross even if the organization decides to limit the contribution up to statutory limit ( at present 15000/-pm). When earned PF Gross exceeds 15000/- pm, then it is restricted up to 15000/-.

Under any circumstances the actual PF Gross of any employee can not be restricted to 15000/- pm as the contribution has been restricted to 15000/- pm - these two are different.

Now how to deal with the LOP cases. In case of any LOP, the concerned employee always get less salary from his notional salary which is loss to employee. Second question is how to show LOP days in EPFO Portal. So long the contribution is made on 15000/- pm , in EPFO portal there will be no LOP as the contribution has been made on 15000/-. But the moment PF and EPS contribution will come down below 15000/- or notional salary whichever is less, LOP days should be reflected to EPFO Portal for EPS calculation.

Let us take the example of Anonymous friend:-

Basic -10,800
HRA - 5,400
Oth.alw-10,800
Monthly Gross - 27,000/-

Here PF Gross is 10,800 + 10,800 = 21,600/- pm. The organization has been restricted PF & EPS contribution up to 15,000/- pm.

Let there is 5 days LOP then PF Gross will be 21600/30 x 25 = 18,000/- . Therefore PF and EPS contribution will be on 15000/- up to statutory limit as per organization's policy. There will be no LOP shown in EPFO portal as contribution has been made on 15,000/-pm.

Similarly in case of 3 days present the PF Gross will be 1080 +1080 = 2160/- which is far below 15000/- and his PF & EPS contribution will be on 2160/- and LOP days to be shown in EPFO Portal. The number of LOP days will be shown in EPFO portal will be 18 days instead of 27 days.
The calculation is (15000 - 2160 ) /720 ( per day PF gross ) = 18.

The all above are mathematical logic nothing subjective. In case 5 days LOP it will be shown in pay roll PF gross 18000/- but if we follow Mr. Madhu T K's logic it will be below 15000/- will not be accepted by the EPFO as well as employee.

In labor laws there are certain areas where strong mathematical logic is essential - Factories Act OT single hour and double hour concept and leave earing concept, Bonus Act for organizations have one balance sheet working more than one States and minimum wages random vary in different skill category in different states with good amount of allocable surplus to determine % of Bonus, Determination of wages as per new labor codes etc.

@Mr. Madhu T K -Lastly please do not address me as Nanu but address me as S K Bandyopadhyay or in short SKB which is my name.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
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USD HR Solutions – To Strive towards excellence with effort and integrity

Dear S K Bandyopadhyay,
Firstly, let me beg pardon for addressing you by your user name.

Your observations about PF qualifying salary is not correct if you view it from the ethical side as well as logical side. If your establishment has been paying contribution on Rs 15000 even if there is a few days LOP, then you continue it as directed by the PF Commissioners. But the process is incorrect and can be challenged in the court. The contribution payable by the employer in respect of an employee who has worked for 30 days should never be equal to the one payable in respect of an employee who has worked for 10 days. If you do contribute it on Rs 15000 to both these employees, it is against the ethics. The number of days non contributory period for an employee who has worked for all the days and for an employee worked just for 10 days is equal, there is an error as per law. The EPF Officers should have directed you to pay it on Rs 15000 by mistake because there cannot be any case law in support of their observation. This is because, whatever is the salary, for the EPFO, Rs 15000 is the salary when the employer is restricting the contributions on Rs 15000. The EPFO cannot demand a contribution on any salary over Rs 15000.

We will go through the landmark of Maratwada Gramin Bank case (Supreme Court) in another two days, not tomorrow because I will not be logging in to CiteHr tomorrow due to some preoccupied engagements.