Hi HR colleagues!
I would like to mention a situation where a company is deducting PF on the encashment amount of compensatory off for its factory employees. The company has an internal policy of encashment of compensatory off if not availed within the next six months.
My argument is that, as per the Factory Act, it's mandatory to give a break after continuous working of 48 hours. By deducting PF on the encashment of compensatory off, the company itself claims that it has not been following the act.
Kindly shed light on your comments on the above situation. My urge is that we should not deduct the PF on the encashment of compensatory off and should only pay in cash.
Looking forward to an expert view on the above situation.
From India, Delhi
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I would like to mention a situation where a company is deducting PF on the encashment amount of compensatory off for its factory employees. The company has an internal policy of encashment of compensatory off if not availed within the next six months.
My argument is that, as per the Factory Act, it's mandatory to give a break after continuous working of 48 hours. By deducting PF on the encashment of compensatory off, the company itself claims that it has not been following the act.
Kindly shed light on your comments on the above situation. My urge is that we should not deduct the PF on the encashment of compensatory off and should only pay in cash.
Looking forward to an expert view on the above situation.
From India, Delhi
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Hello Devendra,
Your company is deducting your PF from your Compensatory Work (CW) and not from your Compensatory Off (CO). As per EPFO guidelines, PF has to be deducted from all your earned wages (Basic+DA+TA) for particular months up to the limit of 6500 (Basic+DA+TA), i.e., 780 Rs. According to the Factory Acts Section 52, leave should be utilized in the particular month or the following two months only. It is possible that your company has obtained prior approval from the Factory Inspector for a period of six months.
The company can pay the amount in cash, by cheque, or through the salary account.
Regards,
Ashish
From India, Pune
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182Your company is deducting your PF from your Compensatory Work (CW) and not from your Compensatory Off (CO). As per EPFO guidelines, PF has to be deducted from all your earned wages (Basic+DA+TA) for particular months up to the limit of 6500 (Basic+DA+TA), i.e., 780 Rs. According to the Factory Acts Section 52, leave should be utilized in the particular month or the following two months only. It is possible that your company has obtained prior approval from the Factory Inspector for a period of six months.
The company can pay the amount in cash, by cheque, or through the salary account.
Regards,
Ashish
From India, Pune
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Dear Dev,
Kindly clarify the point raised by Ashish: is your company paying for Compensatory Work or is it against Compensatory Off?
If it is against Compensatory Off, then it is unlawful and shows ignorance of the health and safety of the employees. Therefore, the employee has to take a leave for rest.
From India, Mumbai
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Kindly clarify the point raised by Ashish: is your company paying for Compensatory Work or is it against Compensatory Off?
If it is against Compensatory Off, then it is unlawful and shows ignorance of the health and safety of the employees. Therefore, the employee has to take a leave for rest.
From India, Mumbai
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I think the question is whether PF should be deducted from the encashment amount or not and not about the legality of accumulating or allowing the employees to encash the compensatory off earned by working on a holiday. The latter is to be dealt with separately since it has nothing to do with PF.
Now to the original question, I would say that since the amount earned by an employee by way of encashing the compensatory off shall not attract PF because it is an amount earned by encashing leave and not as per terms and conditions of employment but working for additional days or hours. If it is paid to compensate the overtime worked, it should have the attributes of overtime wages which are excluded from payment of PF. If it is taken just as a leave encashment, then the Supreme Court ruling in Manipal Academy of Higher Education Vs. PF Commissioner, in which the Court has said that leave encashments will not attract PF contributions, will apply. Therefore, encashment of leave, whether PL, CL, or whatever leave is available, will not attract PF.
Regards,
Madhu.T.K
From India, Kannur
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Now to the original question, I would say that since the amount earned by an employee by way of encashing the compensatory off shall not attract PF because it is an amount earned by encashing leave and not as per terms and conditions of employment but working for additional days or hours. If it is paid to compensate the overtime worked, it should have the attributes of overtime wages which are excluded from payment of PF. If it is taken just as a leave encashment, then the Supreme Court ruling in Manipal Academy of Higher Education Vs. PF Commissioner, in which the Court has said that leave encashments will not attract PF contributions, will apply. Therefore, encashment of leave, whether PL, CL, or whatever leave is available, will not attract PF.
Regards,
Madhu.T.K
From India, Kannur
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Hello,
If your organization will not deduct the PF on overtime (compensatory work), then it will attract penalties under section 7A. Any paid leave will attract PF deductions. Compensatory off is not LOP. It's not a leave encashment. I am attaching some of the previous discussions on the same points. https://www.citehr.com/442057-pf-com...-loss-pay.html
Moderator, please confirm from your end.
Regards,
Ashish
From India, Pune
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If your organization will not deduct the PF on overtime (compensatory work), then it will attract penalties under section 7A. Any paid leave will attract PF deductions. Compensatory off is not LOP. It's not a leave encashment. I am attaching some of the previous discussions on the same points. https://www.citehr.com/442057-pf-com...-loss-pay.html
Moderator, please confirm from your end.
Regards,
Ashish
From India, Pune
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The member has a different interpretation about section 7A, I believe. 7A is the section empowering the authorities to determine the amount due and in pursuit call for records and registers of the company.
Now PF is payable to wages payable for leaves, holidays, etc. But that does not mean that you should deduct it for encashment also. If during a month, the employee had remained absent, and for that day, if wages are paid (that is, if that day is a paid leave day), for that day, the said amount will attract PF. But the present case is different; it is an amount claimed separately and is encashment of leave. Please go through the verdict in Manipal Academy's case also.
I also disagree with the comment "if your organization is not deducting PF on overtime wages..." because overtime wages will not attract PF.
Madhu.T.K
From India, Kannur
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Now PF is payable to wages payable for leaves, holidays, etc. But that does not mean that you should deduct it for encashment also. If during a month, the employee had remained absent, and for that day, if wages are paid (that is, if that day is a paid leave day), for that day, the said amount will attract PF. But the present case is different; it is an amount claimed separately and is encashment of leave. Please go through the verdict in Manipal Academy's case also.
I also disagree with the comment "if your organization is not deducting PF on overtime wages..." because overtime wages will not attract PF.
Madhu.T.K
From India, Kannur
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Dear Friends,
I would also like to share my experience on this subject.
1. An employee who is asked to do overtime (OT) would be paid double the wages/salary.
2. OT wages/salary are paid along with his monthly wages/salary, showing the amount earned separately.
3. As shown in the wage/salary slip, it is subject to deduction for Provident Fund (PF).
4. If an employee is asked to work on a holiday/Sunday, OT is not paid but the employee is given an option to take compensatory time off, which should be either three days before his weekly off or the following three days.
5. Compensatory time off is treated as paid leave.
I would like to invite your comments on this, and any updates are most welcome. I have also noted that some are still quoting the PF ceiling as Rs. 6500/-, whereas it was amended nearly a week ago and increased to Rs. 15000/-. Please pardon me for the oversight.
Regards,
Selvaraj Ponnuswamy
From India, Coimbatore
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I would also like to share my experience on this subject.
1. An employee who is asked to do overtime (OT) would be paid double the wages/salary.
2. OT wages/salary are paid along with his monthly wages/salary, showing the amount earned separately.
3. As shown in the wage/salary slip, it is subject to deduction for Provident Fund (PF).
4. If an employee is asked to work on a holiday/Sunday, OT is not paid but the employee is given an option to take compensatory time off, which should be either three days before his weekly off or the following three days.
5. Compensatory time off is treated as paid leave.
I would like to invite your comments on this, and any updates are most welcome. I have also noted that some are still quoting the PF ceiling as Rs. 6500/-, whereas it was amended nearly a week ago and increased to Rs. 15000/-. Please pardon me for the oversight.
Regards,
Selvaraj Ponnuswamy
From India, Coimbatore
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If the company where Mr. Selvaraj works deducts PF on OT wages, it is a wrong practice and should be corrected. The PF qualifying salary is still Rs 6500, and the amendment to make it Rs 15000 is on paper only but likely to be approved in a week or two, as understood.
Madhu.T.K
From India, Kannur
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Madhu.T.K
From India, Kannur
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PF is to be deducted on canteen allowance - Delhi HC 22.7.2013.pdf