Dear Sonia,
There is no need to deduct P.F. on notice pay being paid to an employee in lieu of the notice period.
Because P.F. deduction made on earned wages, since notice pay is not earned wages therefore no needs to consider wages for P.F. Deduction.
for more clarification go through the definition of wages under the Employee Provident Fund & Misce. Act 1952.
Thanks
Mohd.Arif Khan
13There is no need to deduct P.F. on notice pay being paid to an employee in lieu of the notice period.
Because P.F. deduction made on earned wages, since notice pay is not earned wages therefore no needs to consider wages for P.F. Deduction.
for more clarification go through the definition of wages under the Employee Provident Fund & Misce. Act 1952.
Thanks
Mohd.Arif Khan
Dear Friends,
Thank you all for your views on the topic.
However, the point is still not clear as there are mixed opinions on whether PF is to be deducted / recovered on notice pay.
Kind Regards,
Sonia
From India
Thank you all for your views on the topic.
However, the point is still not clear as there are mixed opinions on whether PF is to be deducted / recovered on notice pay.
Kind Regards,
Sonia
From India
To
Ms Sonia
as per appointment order every organization mention the notice peroid.
pf deduction will not occur in notice peroid amount, this amount directly deducted from the employee full & final settlement, and during the notice peroid how many days employee attended, how much salary prepared on particular amount pf will be calucated and deducted from his salary & send to PF contrubution along with all current employees.
Example:
Employee notice peroid 1 month,
his basic 5000,
he resinged 1 st nov, & asking relieveing 15 th nov.
PF deduction:
=5000/30*15=2500 (for 15 days basic)
=2500*12/100=300 (pf Contrubution)
& 2500 rupees directly deduct from his full & final settlement on behalf of noitce peroid.
Best Regards
James....
Dear Friends,
Please clarify if employer needs to deduct the PF on the notice pay that is given to the employee in lieu of the notice period.
Many thanks for your help and support.
Kind Regards,
Sonia[/quote]
From India, Jammu
Ms Sonia
as per appointment order every organization mention the notice peroid.
pf deduction will not occur in notice peroid amount, this amount directly deducted from the employee full & final settlement, and during the notice peroid how many days employee attended, how much salary prepared on particular amount pf will be calucated and deducted from his salary & send to PF contrubution along with all current employees.
Example:
Employee notice peroid 1 month,
his basic 5000,
he resinged 1 st nov, & asking relieveing 15 th nov.
PF deduction:
=5000/30*15=2500 (for 15 days basic)
=2500*12/100=300 (pf Contrubution)
& 2500 rupees directly deduct from his full & final settlement on behalf of noitce peroid.
Best Regards
James....
Dear Friends,
Please clarify if employer needs to deduct the PF on the notice pay that is given to the employee in lieu of the notice period.
Many thanks for your help and support.
Kind Regards,
Sonia[/quote]
From India, Jammu
Hi All,
I think the SC has laid down clearly what constitutes wages for PF Contributions in the case of Manipal Academy of Higher Education V/s PF commissioner. Looking at it from that point of view, PF should not be applicable on Notice pay. I am attaching the details of the said SC judgement for reference.
Regards
Ravikiran
From India, Mumbai
I think the SC has laid down clearly what constitutes wages for PF Contributions in the case of Manipal Academy of Higher Education V/s PF commissioner. Looking at it from that point of view, PF should not be applicable on Notice pay. I am attaching the details of the said SC judgement for reference.
Regards
Ravikiran
From India, Mumbai
If you are paying the amount under the salary head "Notice Pay" then no need to deduct PF contribution.
If you pay the notice pay amount under the salary head "Basic Salary", they yes, PF needs to be deducted.
Regards
Nitin Asalkar
If you pay the notice pay amount under the salary head "Basic Salary", they yes, PF needs to be deducted.
Regards
Nitin Asalkar
Dear Friends, It is a part of full and final settlement. PF SHULD NOT BE DEDUCTED. Regards Dabas
From India, Delhi
From India, Delhi
Dear Friends, Thanks a lot for your expert guidance. The point is crystal clear along with proper reasoning. I am thankful to all who have contributed in this discussion. Kind Regards, Sonia
From India
From India
Dear All,
For the benefit of all, I hereby qoute the Bombay High Court Judgement in the matter of "India United Mills Ltd. v. RPFC" that a pyment made in lieu of notice by way of consideration for terminating the contract of employment of a permanent employee does not constitute "basic Wages" under section 2(b) of the PF Act.
The Hon'ble court stated that the expression 'emoluments which are earned by an emplyee while on duty' represents the amounts actually earned by by an employee kduring the period of his employment while he is actually on duty. The payment in question is not a payment earned for duty done. It is not a payment earned while on duty. It is a payment by way of consideration for terminating the contract of employment of a permanent employee without notice. The payments made cannot in any sence be regarded as representing 'emoluments earned while on duty and are not and do not consitute 'basic wages' within the meaning of the definition given in the Employees' Provident Funds Act, 1952, and no percentage thereof is payable by way of provident fund contribution.
Therefore the emoluments towards notce pay do notattract pf.
Hope the above clarification will close the matter for further discussion.
Regards
anwar
For the benefit of all, I hereby qoute the Bombay High Court Judgement in the matter of "India United Mills Ltd. v. RPFC" that a pyment made in lieu of notice by way of consideration for terminating the contract of employment of a permanent employee does not constitute "basic Wages" under section 2(b) of the PF Act.
The Hon'ble court stated that the expression 'emoluments which are earned by an emplyee while on duty' represents the amounts actually earned by by an employee kduring the period of his employment while he is actually on duty. The payment in question is not a payment earned for duty done. It is not a payment earned while on duty. It is a payment by way of consideration for terminating the contract of employment of a permanent employee without notice. The payments made cannot in any sence be regarded as representing 'emoluments earned while on duty and are not and do not consitute 'basic wages' within the meaning of the definition given in the Employees' Provident Funds Act, 1952, and no percentage thereof is payable by way of provident fund contribution.
Therefore the emoluments towards notce pay do notattract pf.
Hope the above clarification will close the matter for further discussion.
Regards
anwar
Dear Sonia, Mr. Harshad is correct. PF is not to be deducted from Notice Pay. best wishes krk rao
From India, Jaipur
From India, Jaipur
Hi Sonia,
Notice pay paid to an employee will not attract PF deductions on his basic salary. The premises taken is that for any earnings by an employee "on duty", PF (if covered) is deductible and payable to the RPFC/PF Trust. Notice pay is not construed as serving on duty and hence is not "wages" in the strictest of definitions for the purposes of PF.
If notice pay is recovered from an employee either since he has not served the notice period or has served a short notice, he is obligated to as per terms of his employment, it can be recovered on the basic pay or gross pay as specified in his letter of employment. Normally, it is basic pay.
However, if it is gross pay, he needs to pay back to the Company the basic salary and all allowances. PF does not come into play since he has earned nothing; it is just the opposite. Clearly deductibles of PF, ESI (if applicable), Gratuity, etc are not recoverable.
Calculations for recovery are done accordingly.The Company can insist on the recovery or still waive it off, as deemed appropriate by the Management/HR department.
In short, no notice pay would attract deduction of PF or recovery in lieu thereof.
Hope the clarification helps.
Regards,
Rahul Kumar
From India, New Delhi
Notice pay paid to an employee will not attract PF deductions on his basic salary. The premises taken is that for any earnings by an employee "on duty", PF (if covered) is deductible and payable to the RPFC/PF Trust. Notice pay is not construed as serving on duty and hence is not "wages" in the strictest of definitions for the purposes of PF.
If notice pay is recovered from an employee either since he has not served the notice period or has served a short notice, he is obligated to as per terms of his employment, it can be recovered on the basic pay or gross pay as specified in his letter of employment. Normally, it is basic pay.
However, if it is gross pay, he needs to pay back to the Company the basic salary and all allowances. PF does not come into play since he has earned nothing; it is just the opposite. Clearly deductibles of PF, ESI (if applicable), Gratuity, etc are not recoverable.
Calculations for recovery are done accordingly.The Company can insist on the recovery or still waive it off, as deemed appropriate by the Management/HR department.
In short, no notice pay would attract deduction of PF or recovery in lieu thereof.
Hope the clarification helps.
Regards,
Rahul Kumar
From India, New Delhi
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PF notice to establishments 28082019.pdf
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Notice pay recovery certificate.doc