Dear Saikumar
Appreciate your joining this discussion since we all want to clear this confusion for the benefit of our fraternity.
I am reiterating my views once again to which you may reply pointwise, if possible:
1) Para 29(2) first line itself emphasizes that the "it is employees contribution which shall be equal to employers contribution" & no where vice versa. So if contributions have to be equal , base has to be equal. How can employee contribute on 10k while employer contribute on 6.5k. Either of the one bases can only be considered.
2) Proviso to 29(2) talks only about exceeding the percentage of 10/12% & not about two different basic salaries. In my opinion, it clearly signifies that only ONE base salary is being talked about (whether upto or above 6..5k) & only the employee's percentage on that base salary is subject to increase.
3) Proviso to Para 26-A too emphasizes that "contribution for both member AND employer to be limited to Rs 6500" but nothing about two basic salaries.
4) All said & done, I am looking for a practical calculation sheet which can justify this. Since EPFO software also has provision for only one base salary, there is no way you can input two bases. Hope if you can make a xl & present to clear this point.
Looking forward to your inputs.
Regards
From India, Mumbai
5Appreciate your joining this discussion since we all want to clear this confusion for the benefit of our fraternity.
I am reiterating my views once again to which you may reply pointwise, if possible:
1) Para 29(2) first line itself emphasizes that the "it is employees contribution which shall be equal to employers contribution" & no where vice versa. So if contributions have to be equal , base has to be equal. How can employee contribute on 10k while employer contribute on 6.5k. Either of the one bases can only be considered.
2) Proviso to 29(2) talks only about exceeding the percentage of 10/12% & not about two different basic salaries. In my opinion, it clearly signifies that only ONE base salary is being talked about (whether upto or above 6..5k) & only the employee's percentage on that base salary is subject to increase.
3) Proviso to Para 26-A too emphasizes that "contribution for both member AND employer to be limited to Rs 6500" but nothing about two basic salaries.
4) All said & done, I am looking for a practical calculation sheet which can justify this. Since EPFO software also has provision for only one base salary, there is no way you can input two bases. Hope if you can make a xl & present to clear this point.
Looking forward to your inputs.
Regards
From India, Mumbai
Dear Sunil
Thanks for your response and your interest in resolving the issue.In my honest view as wells as the views expressed by the hon'ble courts of this country, EPF Act is a beneficial and a social welfare legislation and needs to be interpreted in a way that advances the objectives and spirit of the legislation. It being so, the various provisions of the P.F Scheme 1952 cannot be interpreted in isolation but in conjunction with one another so that one provision does not nullify the benefit accorded by another provision to the employee. Besides, if a provision consists of sub-paras and provisos, again, while reading that provision, these sub-paras shall not be read in isolation but in conjunction with one another.
Now, Sec.29(1) exclusively deals with the rate at which the contribution is payable by the employer and specifies such rate as 10% or 12% of the Basic +DA+ retaining allowance etc. Sub-Para (2) lays down that the contribution payable by the employee shall be equal to the contribution payable by the employer, meaning thereby that if the employer contributes at 12% of the wages, the employee too shall contribute at 12% of the wages. Then Sub-Para (2) again cannot be read in isolation as there is proviso which controls Sub-Para(2).The proviso permits the employee to contribute at a rate higher than 10% or 12% of wages but the employer is not obliged to contribute more than 10% or 12% as the case may be. There is Sub-Para (3) which is not relevant to the current issue.
Thus the reading of Para.29(1) & Proviso and 29(2) & proviso together(not isolated) imply that P.F contribution shall be payable at the rate of 10% or 12% of the stipulated wages and though the employee shall contribute at the same rate as employer, he can nevertheless contribute at higher rate than the employer but in that event the employer is not obliged to contribute more than 10% or 12 % of the wages. Thus you may observe that even in respect of the rate at which the contribution is calculated, there can be two different rates i.e one for employee and another for employer.
The issue in this thread of discussion is not with reference to the admissibility of calculating contribution at higher rate for the employee but admissibility of calculating at the same rate (12%) but on wages higher than Rs.6500/-p.m. The relevant provisions, in my view, that cover this issue are contained in proviso to Sub-Para (2) of Para 26-A which states that where the monthly wages of an employee exceeds Rs.6500/-p.m, the contributions payable by him and the employer shall be restricted to Rs.6500/-p.m. However this proviso is not to be read in isolation as it is subject to sub-Para (6) of Para 26 which states that the P.F Authority can permit an employee to contribute on more than Rs.6500/-( I regret that I have forgotten to refer to Par(6) of 26 in my earlier post which would have made things more clear.) Thus Para 26(6) and Proviso to 26-A read together imply that though an employee’s and employer’s contribution is restricted to rs.6500/p.m, an employee nevertheless can contribute with the permission of P.F authority at wages higher than Rs.6500/- and in that event, the employer is not obliged to contribute on more than Rs.6500/-p.m.
Thus in order to have complete understanding on the issue of contributions, one needs to read Paras 26, 26-a and 29 together but not in isolation. This is my view and interpretation.
B.Saikumar
HR & Labour law Advisor
Mumbai
From India, Mumbai
Thanks for your response and your interest in resolving the issue.In my honest view as wells as the views expressed by the hon'ble courts of this country, EPF Act is a beneficial and a social welfare legislation and needs to be interpreted in a way that advances the objectives and spirit of the legislation. It being so, the various provisions of the P.F Scheme 1952 cannot be interpreted in isolation but in conjunction with one another so that one provision does not nullify the benefit accorded by another provision to the employee. Besides, if a provision consists of sub-paras and provisos, again, while reading that provision, these sub-paras shall not be read in isolation but in conjunction with one another.
Now, Sec.29(1) exclusively deals with the rate at which the contribution is payable by the employer and specifies such rate as 10% or 12% of the Basic +DA+ retaining allowance etc. Sub-Para (2) lays down that the contribution payable by the employee shall be equal to the contribution payable by the employer, meaning thereby that if the employer contributes at 12% of the wages, the employee too shall contribute at 12% of the wages. Then Sub-Para (2) again cannot be read in isolation as there is proviso which controls Sub-Para(2).The proviso permits the employee to contribute at a rate higher than 10% or 12% of wages but the employer is not obliged to contribute more than 10% or 12% as the case may be. There is Sub-Para (3) which is not relevant to the current issue.
Thus the reading of Para.29(1) & Proviso and 29(2) & proviso together(not isolated) imply that P.F contribution shall be payable at the rate of 10% or 12% of the stipulated wages and though the employee shall contribute at the same rate as employer, he can nevertheless contribute at higher rate than the employer but in that event the employer is not obliged to contribute more than 10% or 12 % of the wages. Thus you may observe that even in respect of the rate at which the contribution is calculated, there can be two different rates i.e one for employee and another for employer.
The issue in this thread of discussion is not with reference to the admissibility of calculating contribution at higher rate for the employee but admissibility of calculating at the same rate (12%) but on wages higher than Rs.6500/-p.m. The relevant provisions, in my view, that cover this issue are contained in proviso to Sub-Para (2) of Para 26-A which states that where the monthly wages of an employee exceeds Rs.6500/-p.m, the contributions payable by him and the employer shall be restricted to Rs.6500/-p.m. However this proviso is not to be read in isolation as it is subject to sub-Para (6) of Para 26 which states that the P.F Authority can permit an employee to contribute on more than Rs.6500/-( I regret that I have forgotten to refer to Par(6) of 26 in my earlier post which would have made things more clear.) Thus Para 26(6) and Proviso to 26-A read together imply that though an employee’s and employer’s contribution is restricted to rs.6500/p.m, an employee nevertheless can contribute with the permission of P.F authority at wages higher than Rs.6500/- and in that event, the employer is not obliged to contribute on more than Rs.6500/-p.m.
Thus in order to have complete understanding on the issue of contributions, one needs to read Paras 26, 26-a and 29 together but not in isolation. This is my view and interpretation.
B.Saikumar
HR & Labour law Advisor
Mumbai
From India, Mumbai
The views of M/s Madhu and Saikumar is legally right. Varghese Mathew
From India, Thiruvananthapuram
From India, Thiruvananthapuram
Dear Saikumar
Thanks once again for your important views!
The points enumerated are well taken & I have understood from your commentary that the possibility of two bases exists. However again one important question still is unanswered:
1) The bigger question is how will we calculate admin charges even if we consider two bases. Because admin charges will have to be deducted on one base only. In that case what base we should take. Also as told earlier, EPFO software only has provision for 01 base salary. How can that be addressed?
I think I am fairly convinced about the possibility of two bases & thanks to you & Mr Madhu for your assertive commentary.
Now only if we can solve this one problem, it would do great help to our fraternity.
regards
From India, Mumbai
Thanks once again for your important views!
The points enumerated are well taken & I have understood from your commentary that the possibility of two bases exists. However again one important question still is unanswered:
1) The bigger question is how will we calculate admin charges even if we consider two bases. Because admin charges will have to be deducted on one base only. In that case what base we should take. Also as told earlier, EPFO software only has provision for 01 base salary. How can that be addressed?
I think I am fairly convinced about the possibility of two bases & thanks to you & Mr Madhu for your assertive commentary.
Now only if we can solve this one problem, it would do great help to our fraternity.
regards
From India, Mumbai
Dear Sunil
with reference to administrative charges, I once agin draw your attention to Sub-para(6) of para (26) of the P.F Scheme which states that the employee is permitted to contribute on wages higher than Rs.6500/-, provided the employer undertakes to pay administrative charges at the stipulated rate on such higher wages.Thus if the employee is willing to contribute @12% of Rs. 10000/-, the employer shall contribute administrative charges at the stipulated rate on Rs.10000/-.
B.Saikumar
HR & labour Law Advisor
Mumbai
From India, Mumbai
with reference to administrative charges, I once agin draw your attention to Sub-para(6) of para (26) of the P.F Scheme which states that the employee is permitted to contribute on wages higher than Rs.6500/-, provided the employer undertakes to pay administrative charges at the stipulated rate on such higher wages.Thus if the employee is willing to contribute @12% of Rs. 10000/-, the employer shall contribute administrative charges at the stipulated rate on Rs.10000/-.
B.Saikumar
HR & labour Law Advisor
Mumbai
From India, Mumbai
Dear Sainath
Agreed to your point but what about EPFO software which doesn't have provision of 02 bases?
Anyway I have had a word with the local IT people from EPFO & they seem to be puzzled about this. They will let me know on this facility if it exists & I will update this thread accordingly.
Thank you & Regards
From India, Mumbai
Agreed to your point but what about EPFO software which doesn't have provision of 02 bases?
Anyway I have had a word with the local IT people from EPFO & they seem to be puzzled about this. They will let me know on this facility if it exists & I will update this thread accordingly.
Thank you & Regards
From India, Mumbai
This is probably a technology issue..XL sheet can dictate law..Please update us on this. B.Saikumar HR & LabourLaw advisor Mumbai
From India, Mumbai
From India, Mumbai
The Employer is not wrong, If employee contribute on 10000/-, employer can limit to his statutory liability ie Rs.6500/-. Just check the Employee details you have to fill before uploading the monthly ECR. There the provision is available. Even the employer can contribute more to a particular person or group. Thats' the employer discretion .
From India, Bangalore
From India, Bangalore
Sunil,
You have complicated the matter for your self and confused your self by thinking in the confines of the software.
The easiest way out is to consider the difference as voluntary p f and process the payment accordingly. That way you don't have 2 different salary slabs. Hope this helps
From India, Mumbai
You have complicated the matter for your self and confused your self by thinking in the confines of the software.
The easiest way out is to consider the difference as voluntary p f and process the payment accordingly. That way you don't have 2 different salary slabs. Hope this helps
From India, Mumbai
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf