Dear all,
I work as HR in a SME. My query is regarding PF contribution as per Gross OR CTC. The situation in which I am stuck is as follows:
Till August 2014, we had around 15 employees on company payroll. Here Employer (my company) contributed 12% to employee's PF and another 12% was contributed by Employee. The employees who did not want to register under PF were made "off-roll" (we were making them cash payment of salaries on voucher).
Now from 01st September 2014, as the PF ceiling increased, we had to compulsorily deduct PF from contract workers' salary also. We have around 75 contract workers. Now this is also applicable to the workers who were taken off the role. But now our Director has asked me to deduct 24% of PF from employees' salary itself. Unlike earlier, he instructed me that now company will not contribute to PF of newly enrolled employees in PF. Whole 24% will be contributed by the employee.
Is it possible that a company who was contributing 12% to PF suddenly asks employees to contribute whole 24% to PF? I doubt this or I might be wrong but I do not think that company can change its policy from Gross to CTC.
Moreover this will also create a room of difference between the newly joined off-roll employees to and contract workers.
Please help me and guide me on this.
Thanks in advance!
From India, Ahmadabad
13I work as HR in a SME. My query is regarding PF contribution as per Gross OR CTC. The situation in which I am stuck is as follows:
Till August 2014, we had around 15 employees on company payroll. Here Employer (my company) contributed 12% to employee's PF and another 12% was contributed by Employee. The employees who did not want to register under PF were made "off-roll" (we were making them cash payment of salaries on voucher).
Now from 01st September 2014, as the PF ceiling increased, we had to compulsorily deduct PF from contract workers' salary also. We have around 75 contract workers. Now this is also applicable to the workers who were taken off the role. But now our Director has asked me to deduct 24% of PF from employees' salary itself. Unlike earlier, he instructed me that now company will not contribute to PF of newly enrolled employees in PF. Whole 24% will be contributed by the employee.
Is it possible that a company who was contributing 12% to PF suddenly asks employees to contribute whole 24% to PF? I doubt this or I might be wrong but I do not think that company can change its policy from Gross to CTC.
Moreover this will also create a room of difference between the newly joined off-roll employees to and contract workers.
Please help me and guide me on this.
Thanks in advance!
From India, Ahmadabad
Sir,
1. Deducting of employers' share of contribution from the wages of employees is an offence punishable under EPF & MP Act, 1952.
2. As an Officer of the employer, I hope you must have informed to your employer about consequences of such action.
From India, Noida
1. Deducting of employers' share of contribution from the wages of employees is an offence punishable under EPF & MP Act, 1952.
2. As an Officer of the employer, I hope you must have informed to your employer about consequences of such action.
From India, Noida
At the outset I would like to appreciate that your employer has paid PF contribution all your employees including contract employees. However, the following would like to comply.
1. Minimum wages has to be paid to all your contract employees as notified by the state government.
2. The PF act clearly addressed that the contribution towards PF should be equal i.e. both employer as well as employee.
3. It is clarified by the PF authority that the PF should be calculated only in gross salary and not CTC. However, HRA, OT will be exempted from the PF contribution.
4. If PF enforcement officer noticed about the 24% deduction from the employees, then employer has to face the legal consequences.
5. In case if you could not able to convince your management regarding 24% deduction from employees, it is suggested to get opinion from the lawyer and produce the same to your top management.
thanks with regards
S Rajasekaran
From India, Madras
1. Minimum wages has to be paid to all your contract employees as notified by the state government.
2. The PF act clearly addressed that the contribution towards PF should be equal i.e. both employer as well as employee.
3. It is clarified by the PF authority that the PF should be calculated only in gross salary and not CTC. However, HRA, OT will be exempted from the PF contribution.
4. If PF enforcement officer noticed about the 24% deduction from the employees, then employer has to face the legal consequences.
5. In case if you could not able to convince your management regarding 24% deduction from employees, it is suggested to get opinion from the lawyer and produce the same to your top management.
thanks with regards
S Rajasekaran
From India, Madras
First, I think your query was write, but not clearly written.
There are 2 clear amounts here - gross salary and ctc.
Labour law does not recognise ctc. It only refers to gross salary.
In case of PF, it's basic + DA that is considered.
You need to deduct 12% of basic and da from employees and contribute 12% from the company. You can not deduct all 24% from the employees salary (that is from his gross salary)
However, you can very well compute his CTC to include the employers contribution to PF when negotiating salary of any employee
One point to be noted is sec 11 of the act clearly states that under no condition can the gross salary of any employee be reduced to partly or wholely pay for employers PF contributions. You can adjust it in ctc from the next increment, you can not adjust it at this point of time at current salaries.
From India, Mumbai
There are 2 clear amounts here - gross salary and ctc.
Labour law does not recognise ctc. It only refers to gross salary.
In case of PF, it's basic + DA that is considered.
You need to deduct 12% of basic and da from employees and contribute 12% from the company. You can not deduct all 24% from the employees salary (that is from his gross salary)
However, you can very well compute his CTC to include the employers contribution to PF when negotiating salary of any employee
One point to be noted is sec 11 of the act clearly states that under no condition can the gross salary of any employee be reduced to partly or wholely pay for employers PF contributions. You can adjust it in ctc from the next increment, you can not adjust it at this point of time at current salaries.
From India, Mumbai
Sir, Thanks for appreciation. To be more specific in the situation as mentioned by you, please refer to Para 76(a) of the EPF Scheme, 1952 as well as Section 14 of EPF & MP Act, 1952.
From India, Noida
From India, Noida
Dear Mr. Harshavardhan,
First of all, you did a major mistake when you segregate people who do not want and who want to get deduction of PF. Employees are not having option to take a decision on this. It is statutory to comply with. May be the importance of PF is not known to your employees or yourself also. It is mandatory to deduct from all the employees and make them eligible for the benefits as per EPFO. CTC is inclusive of all allowances direct and indirect expenses on an employee. Gross salary means the amount which is paid / shown on payslip. PF is deducted only on the "Basic" pay and "DA" (if paid). However the Labour dept or PF authority will look at Minimum wages paid or not !. In modern CTCs both the PF contributions are shown in the final CTC for which few employees raise objection after joining the organisations. CTC concept has come up recently in practice. Earlier, Co's was spending from their end which were not shown to employees. Present CTC concept is far better than the past practice.
Secondaly, the management cannot deny, you need to make the total expenses to the company as per previous practice and based on the revised practice. However, he should accept the burden on the management will increase Rs.780/- and Rs.1800/- maximum. Earlier the ceiling of applicability of PF was on Rs.6500/- now increased to Rs.15000/-.
You need to serve revised CTC statements to all your employee and obtain acknowledgement from them for your records. And for your future audit purpose.
Hope it is clear now.
Regards
From India, Hyderabad
First of all, you did a major mistake when you segregate people who do not want and who want to get deduction of PF. Employees are not having option to take a decision on this. It is statutory to comply with. May be the importance of PF is not known to your employees or yourself also. It is mandatory to deduct from all the employees and make them eligible for the benefits as per EPFO. CTC is inclusive of all allowances direct and indirect expenses on an employee. Gross salary means the amount which is paid / shown on payslip. PF is deducted only on the "Basic" pay and "DA" (if paid). However the Labour dept or PF authority will look at Minimum wages paid or not !. In modern CTCs both the PF contributions are shown in the final CTC for which few employees raise objection after joining the organisations. CTC concept has come up recently in practice. Earlier, Co's was spending from their end which were not shown to employees. Present CTC concept is far better than the past practice.
Secondaly, the management cannot deny, you need to make the total expenses to the company as per previous practice and based on the revised practice. However, he should accept the burden on the management will increase Rs.780/- and Rs.1800/- maximum. Earlier the ceiling of applicability of PF was on Rs.6500/- now increased to Rs.15000/-.
You need to serve revised CTC statements to all your employee and obtain acknowledgement from them for your records. And for your future audit purpose.
Hope it is clear now.
Regards
From India, Hyderabad
Dear Mr.Date,
Please go through this forum on this subject and your query as there are number of advices from our earned contributing members including me.immediately when the gazette notification was published and wage ceiling increased w.e.f. 1-09-2014. Repeating the same on similar subject which is nothing but unnecessary repetition. Since you are member of this forum since 2012 and obviously you must have gained adequate knowledge. . Better we can learn more new which help for us.
Adoni Suguresh
Labour Laws Consultant
From India, Bidar
Please go through this forum on this subject and your query as there are number of advices from our earned contributing members including me.immediately when the gazette notification was published and wage ceiling increased w.e.f. 1-09-2014. Repeating the same on similar subject which is nothing but unnecessary repetition. Since you are member of this forum since 2012 and obviously you must have gained adequate knowledge. . Better we can learn more new which help for us.
Adoni Suguresh
Labour Laws Consultant
From India, Bidar
Dear Mr. Suguresh,
I totally agree with your points mentioned below. But I haven't come across the situation that "Whether to deduct PF or not" in the earlier organization(s) I have worked in. And hence, I did not search for the same. This time I searched for my query/confusion and as usual I got proper guidance on this. I am grateful to those members. I am member since 2012, but my practical exposure to HR/IR is since June 2013 only.
I never bothered you, particularly, to answer queries for me and neither did I intend to waste anybody's precious time.
Thanks!
From India, Ahmadabad
I totally agree with your points mentioned below. But I haven't come across the situation that "Whether to deduct PF or not" in the earlier organization(s) I have worked in. And hence, I did not search for the same. This time I searched for my query/confusion and as usual I got proper guidance on this. I am grateful to those members. I am member since 2012, but my practical exposure to HR/IR is since June 2013 only.
I never bothered you, particularly, to answer queries for me and neither did I intend to waste anybody's precious time.
Thanks!
From India, Ahmadabad
The discussion is to and fro. Under any circumstances, no deduction of employer's share of 12% (Actually it is 13.61% inclusive of other ingredients) from employee. CTC is not applicable to Contract Workers. For Contract workers as is now, it is only Basic Wage and living allowance and this is qualified amount for deduction of PF. We are confusing ourselves.
From India, Nellore
From India, Nellore
Der Mr.Harshwardhan,
The last sentence of your post is not digested by me. In this forum we are sharing our experience for the mutual benefits in improving our knowledge on case by case and advising our opinions as we think fit and it is not binding on any body to must follow our opinions. This is purely at the interest of individuals who are seeking advices in this forum to follow or not to follow. If not happy on the posts no force from any body.
My advice is hurting to you, then, I am sorry.
Adoni Suguresh
Labour Laws Consultant
From India, Bidar
The last sentence of your post is not digested by me. In this forum we are sharing our experience for the mutual benefits in improving our knowledge on case by case and advising our opinions as we think fit and it is not binding on any body to must follow our opinions. This is purely at the interest of individuals who are seeking advices in this forum to follow or not to follow. If not happy on the posts no force from any body.
My advice is hurting to you, then, I am sorry.
Adoni Suguresh
Labour Laws Consultant
From India, Bidar
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf