PF Deduction For Employee Drawing Salary More Than 6500/-

Hi,

I would like clarification from experienced HR professionals on the following:

1. An employee drawing a salary of more than Rs. 6500/- per month, i.e., his basic salary is Rs. 12,000/- per month. What will be the PF deduction? The employer needs guidance on this.

2. Another employee drawing a CTC of 18 lacs per annum. How should his salary be structured to ensure PF statutory compliance?

Kindly clarify.

Hi Shridhar,

As per your query, the answer is as follows:
1. Mandatory PF contribution of 780 from the employer's side. Employee may contribute 12% of Basic or an equal amount as the employer.
2. Basic salary will be 50% to 60% of Gross.
PF is the answer to point number 1.

Regards,
Rajvir Singh

Hi Rajveer,

Is there any provision for a basis of 50% and 60%? I am facing the same problem. What should be the basis amount?

Hi Dheeraj,

It depends on your company policy but not less than 50% of your gross standard HR practice.

Regards,
Rajvir Singh

Dear Sridharhyd,

The replies for your query are as follows:

1. Currently, the wages ceiling for EPF Contribution is Rs. 6,500. So, if an employee's Basic + DA is more than Rs. 6,500/-, then his contribution will be made on the maximum, i.e. Rs. 6,500/-. Both the contribution, i.e. for Employer (maximum 239/- & 541/-) as well as for Employee (maximum 780/-) will be calculated on the basis of Rs. 6,500/-, till the further revision of the EPF Wages Ceiling.

2. To fix one's salary after keeping the EPF Compliance in mind is not very hectic, as the maximum contribution towards EPF from the company will be Rs. 780 (239 + 541 = 780). So, totally it comes to Rs. 9,360 annually, which can be accordingly assumed as part of CTC and the Salary can be fixed on a ratio basis as per your company policy.

Hope this will help you. Cheers.

Hi,

You need not worry about people receiving more than 6500. You can pay 780 as a nominal rate, and no one is going to question that.

In my company, we have a ceiling for fixing a salary. The basic we set for any employee up to 20k is 50%, with the rest between 10k to 30k (minimum gross is 20k). This depends on the company's discretion.

Thank you.

1. Whatever be his basic, first find out the basic + DA that he received when entering your company. If that amount exceeds Rs. 6500.00, there are no statutory implications for PF; otherwise, he is immediately exempted. However, if his total for the first month is below Rs. 6500.00, you must deduct both EPF and FPF at a rate of 12%, with the maximum deduction being Rs. 780.00.

2. Keep the basic salary above Rs. 6500.00 and apply the first instance.

Dear Seniors,

The same query has been raised in my company: what if an employee (managerial level) wishes to contribute more from their salary to the PF?

Our PF consultant has suggested that in such cases, EPFO has a provision called a Voluntary Provident Fund (VPF). Here, the employee can contribute a maximum of 6,500 rupees from their salary, while the employer's share will remain the same, up to 780 rupees.

I kindly request the seniors to share your views on this matter. Thank you in advance.

Dear Neelam Ma'am,

Your consultant is right. As per the current wages ceiling, an EPF member contributes 12% of the Basic+DA, up to the current wages ceiling, i.e., Rs. 6,500/-, which is a maximum of Rs. 780/-, and the same is contributed by the employer. However, if any member wants to contribute more than the specified contribution rates, then, in this case, the member can contribute up to 100% of the wages ceiling in EPF, but the employer will have to contribute at the rate of 12% on the current wages ceiling, i.e., Rs. 6,500/-.

Hope this will help you.

Thank you, Bhuwan, for the clarification.

My employer started his business in July 2013. Although ESI and PF have been deducted from the employees, the amounts have not been remitted. Can we make a consolidated remittance for PF and ESI, covering all the months from July to November? Will there be a penalty?