Hi all,
I need to work on the salary structure, with the maximum component heads excluded in the calculation of Employee PF (i.e., how can we deduct the minimum amount of PF from the salary)? Help me with the structure. Currently, we only have Basic, HRA, Conveyance, OT, and other components in the salary structure.
Thanks & Regards,
Deepak Adhikari
From India, undefined
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2I need to work on the salary structure, with the maximum component heads excluded in the calculation of Employee PF (i.e., how can we deduct the minimum amount of PF from the salary)? Help me with the structure. Currently, we only have Basic, HRA, Conveyance, OT, and other components in the salary structure.
Thanks & Regards,
Deepak Adhikari
From India, undefined
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Hello Deepak,
To structure the salary in a way that ensures minimum PF deduction, you need to understand the rules and laws governing the EPF (Employee Provident Fund) in India.
The statutory requirement by the Indian Government for PF contribution is 12% of the Basic Salary + Dearness Allowance. So, the amount of PF deduction is directly proportional to the Basic Salary. If you want to decrease the PF amount, you can consider reducing the Basic Salary component.
Here's a step-by-step guide:
1. 🔡Reconfigure the Salary Structure: You might need to reconfigure the current salary structure. The aim is to decrease the Basic Pay component while simultaneously increasing other components that are not included in PF calculations.
2. 🆈Increase Other Allowances: Increase components such as HRA, Conveyance, Medical Allowance, Special Allowances, etc. These components are not included in the PF calculation.
3. 🔊Basic Pay: Keep the Basic Pay around 40-50% of the CTC. This is a common practice in many organizations to reduce the PF deduction while ensuring it does not flout any laws.
4. 🕰️Revise the Salary Structure: After altering the components, revise the salary structure and ensure it aligns with the company's compensation philosophy and market trends.
5. 🔚Legal Aspects: Ensure your salary structure is in compliance with the Wage Code 2020, which states that the sum of Basic + DA + Retaining allowance (if any) should be 50% or more of the total remuneration.
6. 🤝Discuss with Employees: Communicate the changes to your employees and explain how it would impact their in-hand salary and future savings.
Remember, while reducing the PF deduction might increase the in-hand salary, it also reduces the retirement corpus of the employee. So, it's crucial to maintain a balance that benefits both the employee and the employer.
Please consult with a legal expert or professional tax consultant before making any changes.
I hope this helps! If you have any more questions, feel free to ask.
🍀 Good Luck!
From India, Gurugram
Acknowledge(0)Amend(0)
To structure the salary in a way that ensures minimum PF deduction, you need to understand the rules and laws governing the EPF (Employee Provident Fund) in India.
The statutory requirement by the Indian Government for PF contribution is 12% of the Basic Salary + Dearness Allowance. So, the amount of PF deduction is directly proportional to the Basic Salary. If you want to decrease the PF amount, you can consider reducing the Basic Salary component.
Here's a step-by-step guide:
1. 🔡Reconfigure the Salary Structure: You might need to reconfigure the current salary structure. The aim is to decrease the Basic Pay component while simultaneously increasing other components that are not included in PF calculations.
2. 🆈Increase Other Allowances: Increase components such as HRA, Conveyance, Medical Allowance, Special Allowances, etc. These components are not included in the PF calculation.
3. 🔊Basic Pay: Keep the Basic Pay around 40-50% of the CTC. This is a common practice in many organizations to reduce the PF deduction while ensuring it does not flout any laws.
4. 🕰️Revise the Salary Structure: After altering the components, revise the salary structure and ensure it aligns with the company's compensation philosophy and market trends.
5. 🔚Legal Aspects: Ensure your salary structure is in compliance with the Wage Code 2020, which states that the sum of Basic + DA + Retaining allowance (if any) should be 50% or more of the total remuneration.
6. 🤝Discuss with Employees: Communicate the changes to your employees and explain how it would impact their in-hand salary and future savings.
Remember, while reducing the PF deduction might increase the in-hand salary, it also reduces the retirement corpus of the employee. So, it's crucial to maintain a balance that benefits both the employee and the employer.
Please consult with a legal expert or professional tax consultant before making any changes.
I hope this helps! If you have any more questions, feel free to ask.
🍀 Good Luck!
From India, Gurugram
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