EPFO contribution above ceiling limit - If I want to reduce the contribution to the 15000/- limit?

Dear All, I joined an organization where EPFO is deducted on actual basic, i.e., above the 15000/- ceiling limit. If I want to reduce the contribution to the 15000/- limit, what are the process & consequences?

Thanks in Advance
Sanjay Paul

If your question is from the employer side, that you have joined an organisation as the Personnel Manager and would like to bring a practice of deducting the PF to statutory ceiling of Rs 15000, then I would say that there is no legal issues in brining the contribution from actual salary to Rs 15000. This is supported by a Supreme Court verdict also in which the Court said that an employer who had earlier contributed on actual salary can reduce the PF contributing salary to Rs 15000 (at the time of verdict it was Rs 6500) and the EPFO cannot challenge saying that PF qualifying salary cannot be reduced.

But in this exercise you have to take the employees in to confidence. Obviously, contribution to PF on actual salary having been accepted as one of the terms and conditions of employment when you change it, you should given them notice, preferably in the prescribed form following section 9A of the Industrial Disputes Act. You can offer the employer contribution lost by reducing the PF qualifying salary in other forms of benefits. Without notice (21 days before implementation) and without taking them in to confidence you should not do it.

If your query is not from the employer's side but as an employee who is not interested in getting your PF deducted on actual salary then it is a policy matter. You need to check what others are doing. Legally, you can very well say that your contribution to PF should be restricted to 12% of Rs 15000 only. The employer would also restrict his contribution accordingly. But why should you require the deduction to be made on Rs 15000 if the employer is ready to contribute it on actual salary?

Dear Sir,

Thank you for the information provided, I am asking from employer side & would like to reduce the PF limit to 15000, keeping into considerations as suggested.
The same can be done in case of ESI contributions, i.e. deducting & paying only for those employees whose gross salary below 21000/-. What about the employees whose deductions are still in practice even if they are drawing higher wages? Can we stop contributing for them?

Thanks & Regards

Yes, if the employees agree that the employer's contribution shall be restricted to 12% of Rs 15000, you can do it.

In ESI you cannot cover an employee whose salary is more than Rs 21000. The employee whose salary exceeds Rs 21000 should be excluded from the start of next contribution period and there is no option that you can continue to contribute it. if you have employees with more than Rs 21000 but contributing to ESI, you should stop it because you can not keep then under ESI. The system would accept the contribution because the ESi is contributed on the gross salary (less some components like traveling allowance and washing allowance) but that salary shall include overtime wages also. As such the ESI contribution salary may exceed Rs 21000 (because of overtime wages) but if the salary without overtime wages and the allowances specifically excluded like travelling allowances and washing allowances (permitted only if uniform is provided) exceeds Rs 21000, he will become an uncovered employee from the next contribution period onwards.

If you have employees who is contributing to PF on higher salary than Rs 15000, that can be withdrawn only with the request of the employee concerned. This is because his contribution to PF will not cost the employer anything. Therefore, if he wishes that his PF should be deducted on actual salary he can very well contribute it as a voluntary contribution.