No Employers Contribution On PF

Hi All,

I work in an IT company registered in India, located in Chennai. I have been here for 2 years. I have a question regarding PF deduction. In my company, I bear both the employee and employer's contribution of PF plus some administration charges every month if I opt for PF. I hear the same is being followed by many small or mid-level companies.

I inquired about this with people I know who work in small companies, and they say that the PF policies have changed now. Companies can avoid contributing towards PF, and the same can be deducted from the employee's salary because it's included in the CTC.

Is it legal for the organization not to contribute its part and deduct both from the employee's salary? Is this practice followed by many companies?

I was with a different company until 2010, and during that time, I did not face any issues with PF because a certain amount was deducted from my salary, and the same amount was contributed by the company. After joining this company, I am not on a contract role; I am a permanent employee.

Even my payslip shows two PF deductions as employee contribution and employer's contribution plus admin charges (the employer's contribution is more than that of the employee's contribution; when I asked HR, they told me it's for administration charges), which exceeds what I could claim on tax benefits. I am actually not benefiting from the PF concept or tax benefits.

Could you please provide me with some insights on whether this practice is legal and fair to the employees?

Regards,

Dolly

Dear Ms. Dolly,

As per the Statute Laws, the employer has to contribute its part from the employer only and not from the employee. We have discussed the same a couple of days back. Please click on the following link to understand the matter at its best.

CiteHR Attribution: https://www.citehr.com/455791-force-...ml#post2041731

Thank you, Sharmila,

I have a question. In your reply, you mentioned that if the basic is more than Rs. 6500, then the employee must pay PF. However, in my company, the employee can opt either to go for PF or not even if the basic is higher than Rs. 6500.

One of my colleagues opted for no PF, and she has opened a PPF in a bank for the same amount, and her basic is around Rs. 17000.

If it's illegal not to contribute towards PF, how does the company still run? I mean, these are very basic employee benefits. Can the company deviate from basic benefits and still be in business? Is there not some kind of audit run by the government every year on companies to check if they follow the basic things?

What bothers me is that not only my company, but many companies in India follow the same policy on PF. The public has started to talk like it's also legal for companies not to contribute towards PF. Because I have had many arguments with my own company staff when I asked them to join me to talk to the management about it. Can something be done on this issue nationwide?

Even my other friends in other companies have the same issue, and they say that it's all legal now. How did this situation come about, and how are companies doing such illegal things very boldly (by mentioning both the deductions on the pay-slip)?

Once again, thank you so much for your reply. I didn't post it to hurt anyone, just to clarify things that have been bothering me for many months.

Regards,

Dolly

You haven't read the point clearly, have you? Let me reframe it once again: If the employee has not withdrawn his PF from the previous employer and his salary is <= Rs. 6500, he would still remain a member of PF.

If the employee has no previous EPF account or has just joined the services, he/she is still exempted.

If the company has 20 or more employees, the employer is required to contribute towards PF. Are you sure that the employer is filing Monthly/Annual returns? - PF Monthly Return is for employees to monthly remit contributions, and PF Annual Returns are for the accounting year starting from March to February for your employees. The employer should provide the contributory slips on or before the end of May for the employees to know their balances. Please check with the HR department if they are filing such returns and if all the contributions are sent to the EPFO. A copy of these returns is filed for audit purposes.

The real issue arises when employees face difficulties due to not contributing towards PF. You and your company staff (if inclined) should approach your area Labor Commissioner and file a complaint if you feel inflated by the employer-employee contributions.

As per the procedure mentioned above, you may consult a conciliation officer to get answers from the employer.

There is nothing to feel hurt or good about here. This forum provides a platform for people to help each other fulfill their obligations. Members in this group discuss and remember they are here to help, not to get hurt. Cheers!

Thank you once again, Sharmila.

As far as I have inquired, entry-level employees who do not have a previous PF account and the most experienced employee who had PF from a previous job and joined here, all have to go through the same PF structure in my company. They can either opt for it or avoid paying PF.

My company's strength is 500+, and they should be filing returns because they do deduct the money from our accounts. They may show it on audits that they contribute towards PF with the money they deduct from us, but I don't know the exact process. I have checked with my HR many times, but they are not transparent in providing information, such as about annual returns and other details.

I posted my query to understand how PF works and if there have been any recent changes in the PF policy. Your post has answered all the doubts I had.

Thank you so much once again, Sharmila.

Regards,
Dolly

Hi Dolly,

When it comes to EPF or Employee PF, we have two sides of contributions:

1. Employee's Side: This is deducted from your salary, i.e., from your monthly gross. The minimum contribution as per the PF Act is 12%, and you can voluntarily scale it up to a maximum of 20%.

2. Employer's Side: This is not deducted from your salary. This is included in your CTC to show the transaction. (I shall explain how it should be reflected). As per the PF Act, the employer is supposed to contribute 12% of your Basic + DA to your PF & Pension Account. Out of this 12%, 8.33% goes to the Pension Account, and only 3.67% goes to the PF Account.

In addition to the 12% contribution made by the Employer, he is also liable to pay:

- Administrative Charges: Handling for PF/Pension account
- Employee Insurance Charge
- Employee Insurance Handling Charge

However, if the company provides a better insurance scheme, they can opt out of the insurance scheme in the PF Act.

Now, to see how the PFs should be reflected in your CTC:

Basic

DA

HRA

Conveyance

Medical Allowance

Other Allowances (if any)

=========================

GROSS

==========================

Gratuity (Calculated as 15/26 * 1 * Last drawn salary, i.e., basic + DA and this amount is contributed to the gratuity account that the company has with some LIC or related firm)

PF (This is the employer's contribution)

ESIC (if applicable - again employer's contribution)

Annual Bonus

LTA (if provided by your company)

=============================

CTC (i.e., cost to company)

Now from your monthly gross:

Gross (basic + DA + HRA + conveyance + medical allowance + other allowances)

(less) PF (This is the employee's contribution)

(less) Professional Tax

(less) TDS

===================

MONTHLY IN-HAND

===================

So, if you see that PF contribution can be deducted only once from your gross.

The PF that was mentioned in your CTC is very much correct as that amount is also deposited in your PF account.

I hope if this was the doubt it was cleared.

================================================== ====

Again, as mentioned by the Act:

1. A firm becomes eligible for the PF Act only when it has more than 20 employees. Once the firm has more than 20 employees and is covered under the PF Act, then even if the employment reduces to below 20, the firm still has to go on contributing to the PF account.

2. A person is eligible to be covered under the PF Act only if his Basic + DA is less than or equal to 6500.

3. If a person is in the firm and was appointed at a basic + DA less than or equal to 6500 and hence was covered under the PF Act, and if this worker is, for example, given an increment so that now his basic + DA is more than 6500, the person continues to be applicable under the PF Act. The contributions to be made 12% on the 6500 ceiling amount. If the contribution is made on the actual basic + DA, any excess amount over 12% of 6500 is taxed.

4. If you are covered under the PF Act in this firm. Now you change your employment. Your new employer is also covered under the PF Act. But because of the change in employment, your salary is revised and now your basic + DA is more than 6500, and hence in the new employment you do not become eligible for the PF contribution.

Yet I would want seniors to clarify this point as from Ms. Sharmila's post it seems that if I am covered under PF, even if I change my employer I continue to be covered, and my employer is obliged to contribute to my PF.

Hope this helped to clarify your doubts.

Hi,

Ms. Ankita has covered various facets of CTC and EPF provisions. Now to add:

A) When a person becomes a member under the EPF & MP Act, he continues to be a member until withdrawal of the contribution due to separation from service on various grounds. In such a case, the contribution along with the employer contribution and administrative charges, irrespective of his salary being less or more than Rs. 6500, is to be remitted.

B) The instance of recovery of employer contribution and administrative charges may be brought to the notice of EPFO with proof of payslip. This is a violation of provisions of the Act on the part of the employer. You can later file an RTI application with EPFO seeking information on action taken on your complaint against the employer. This way you can discipline the employer as well as EPFO officials.

Further, regarding the remittance of contributions, you may visit the EPFO site and get the information by registering.

Yes, Ankita. The exemption is available only to those whose starting salary in the company is above 6500 and who do not have an existing PF account at the time of joining the new company.

PF is applicable to every employee, whether permanent, contract, or temporary. The only exemption is for apprentices who are not considered as employees. However, for that exemption to apply, they must be apprentices under the apprentice act or specified in the standing orders.