Hi friends,
Nowadays, I am facing a problem related to PF contributions in my company. We are a small-scale company, and our salary structure is as follows:
- Basic = 60% of gross
- HRA = 40% of Basic
- PF = 12% of Basic
Due to this structure, we have to pay $1800 for PF for one employee - $1800 from the employee, $1800 from the employer, and an additional $4000 for administrative charges. With over 50 employees, it has become increasingly difficult for the company to manage such a large amount.
I am seeking suggestions for cost-cutting in PF contributions. Are there any rules related to PF that would exempt the company from contributing to PF?
Thank you.
From India, Pune
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2Nowadays, I am facing a problem related to PF contributions in my company. We are a small-scale company, and our salary structure is as follows:
- Basic = 60% of gross
- HRA = 40% of Basic
- PF = 12% of Basic
Due to this structure, we have to pay $1800 for PF for one employee - $1800 from the employee, $1800 from the employer, and an additional $4000 for administrative charges. With over 50 employees, it has become increasingly difficult for the company to manage such a large amount.
I am seeking suggestions for cost-cutting in PF contributions. Are there any rules related to PF that would exempt the company from contributing to PF?
Thank you.
From India, Pune
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Your company is already covered under the EPF Act. There is no question of cost-cutting by not remitting EPF contributions, which may land your employer in big trouble. Think twice before you make any decision. You cannot avoid or ignore statutory contributions like EPF.
From India, New Delhi
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From India, New Delhi
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Hi,
As per the EPF rules, the contribution can have an ascending trend; it cannot be decreased. Moreover, the penalty and damages of EPFO are at a higher rate. Therefore, timely remittance is the cost-effective method.
From India, Madras
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As per the EPF rules, the contribution can have an ascending trend; it cannot be decreased. Moreover, the penalty and damages of EPFO are at a higher rate. Therefore, timely remittance is the cost-effective method.
From India, Madras
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Dear Preetiwankhede,
The EPF compliance is not only a statutory benefit but part of a Social Security System as well. As stated by experienced members, there is no way to escape from the liability. On the contrary, if it is found you are doing something which is against the Act, that could attract damages and penalties.
However, as mentioned by you, in your company more than 50 employees are working. You have considered Rs. 1800/- contribution for all. This means Rs. 15,000/- salary per head.
But there may be some employees whose salary structure may not be that high, so you can deduct EPF on a lower salary (Basic+DA). Please note, if you have already deducted and deposited PF at a higher rate, that can't be reduced. However, you can take care of this point for fresh appointments (new employees). Please make them aware at the time of enrollment.
Moreover, the EPF % for employer contribution is at 13.36%, so on a Rs. 15,000 salary, the employee and employer contribution will be Rs. 3,804/-.
If your company really wants some cost-cutting, I would suggest focusing on other overheads (Staff Welfare, Printing, Conveyance, Traveling, etc.).
Please don't try to manipulate the statutory benefits. These are related to people (like us), their livelihoods, savings, and future security.
From India, Delhi
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The EPF compliance is not only a statutory benefit but part of a Social Security System as well. As stated by experienced members, there is no way to escape from the liability. On the contrary, if it is found you are doing something which is against the Act, that could attract damages and penalties.
However, as mentioned by you, in your company more than 50 employees are working. You have considered Rs. 1800/- contribution for all. This means Rs. 15,000/- salary per head.
But there may be some employees whose salary structure may not be that high, so you can deduct EPF on a lower salary (Basic+DA). Please note, if you have already deducted and deposited PF at a higher rate, that can't be reduced. However, you can take care of this point for fresh appointments (new employees). Please make them aware at the time of enrollment.
Moreover, the EPF % for employer contribution is at 13.36%, so on a Rs. 15,000 salary, the employee and employer contribution will be Rs. 3,804/-.
If your company really wants some cost-cutting, I would suggest focusing on other overheads (Staff Welfare, Printing, Conveyance, Traveling, etc.).
Please don't try to manipulate the statutory benefits. These are related to people (like us), their livelihoods, savings, and future security.
From India, Delhi
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You can rather concentrate on others' expenditure where you can reduce. Don't recruit new employees. Reduce electricity consumption, remove ACs, use stationery sensibly, etc. You can't reduce statutory expenses.
From India, Kolkata
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From India, Kolkata
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Hi,
Once covered under PF, one should continue contribution until he/she retires or leaves the organization. Discontinuing contributions can lead your organization into significant trouble.
One option is to hire any new fresher candidate (from the most recent batch) or employee who has not made previous PF contributions. For them, fill out Form 11 and pay a basic salary of more than Rs. 15,000/- to exclude them from PF contributions.
Do you agree with me? Am I right or wrong? Kindly advise.
Thank you.
From United Kingdom, London
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Once covered under PF, one should continue contribution until he/she retires or leaves the organization. Discontinuing contributions can lead your organization into significant trouble.
One option is to hire any new fresher candidate (from the most recent batch) or employee who has not made previous PF contributions. For them, fill out Form 11 and pay a basic salary of more than Rs. 15,000/- to exclude them from PF contributions.
Do you agree with me? Am I right or wrong? Kindly advise.
Thank you.
From United Kingdom, London
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It will be wise to cut corners on wasteful expenditure. Why don't you look around your office and see where costs can be saved? Maybe you are using paper cups, which is a colossal waste. Instead, porcelain cups can be reused after a proper wash. Did you know that four liters of water are used to make one paper cup? Similarly, reconsider sending courier mail. You can scan and send attachments. Except where a physical document is mandatory, in other cases, use email, WeTransfer, etc., effectively. Nowadays, there are various options available. Private courier costs are now three times higher than Postal Speed Post. While it may take a lot of time to get a Proof of Delivery from a courier agent, with Speed Post, you can receive an SMS once your post is delivered.
There may be other expenses that we are incurring but not really focusing on, such as electricity, water, unnecessary and avoidable overtime, conveyance, and hiring vehicles for each employee instead of combining assignments. Smart Working is a widely prevalent concept in the industry these days. Do not compromise on employee welfare, as it is one of the many important factors. Take care of your employees first, and they will take care of your customers.
Best wishes
From India, Bengaluru
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There may be other expenses that we are incurring but not really focusing on, such as electricity, water, unnecessary and avoidable overtime, conveyance, and hiring vehicles for each employee instead of combining assignments. Smart Working is a widely prevalent concept in the industry these days. Do not compromise on employee welfare, as it is one of the many important factors. Take care of your employees first, and they will take care of your customers.
Best wishes
From India, Bengaluru
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Dear Pritee,
Other members have given their valuable comments. Now let me suggest something different. You may perform the exercise in MS Excel. Find out the employer's contribution for PF if the basic pay is at 35%, 40%, 45%, 50%, 55%, and 60%. Discover if any pattern emerges.
Lastly, I echo the views of Mr. NK Sundaram. What you have calculated is only the visible "cost" (even if we consider PF as a "cost" as such). While running an organization, there are several invisible costs. What about curtailing those costs?
Thanks,
Dinesh Divekar
From India, Bangalore
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Other members have given their valuable comments. Now let me suggest something different. You may perform the exercise in MS Excel. Find out the employer's contribution for PF if the basic pay is at 35%, 40%, 45%, 50%, 55%, and 60%. Discover if any pattern emerges.
Lastly, I echo the views of Mr. NK Sundaram. What you have calculated is only the visible "cost" (even if we consider PF as a "cost" as such). While running an organization, there are several invisible costs. What about curtailing those costs?
Thanks,
Dinesh Divekar
From India, Bangalore
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Thank you all for your valuable suggestions. I will try to implement such practices in my office. Working as an HR professional is really important to me as I need to take care of my employees and my company. I am a fresher in this field and do not have much experience in legal matters like PF and others. I will try to solve these issues. Thanks.
From India, Pune
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From India, Pune
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You can change the salary structure like a lot of companies follow:
1) Basic - 35% - 50% of Gross
2) HRA - 40% of Basic for Non-metro & 50% of Basic for Metro
3) Con - Max Rs. 800/ PM, which is a maximum of Rs. 9600 PA
4) Medical Reim - Max Rs. 1250 / PM, which can be a maximum of Rs. 15000 PA
5) Spl Allow - Balance of Gross will be provided as Special Allowance
This change will automatically reduce the employer's contribution.
From India, Pune
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1) Basic - 35% - 50% of Gross
2) HRA - 40% of Basic for Non-metro & 50% of Basic for Metro
3) Con - Max Rs. 800/ PM, which is a maximum of Rs. 9600 PA
4) Medical Reim - Max Rs. 1250 / PM, which can be a maximum of Rs. 15000 PA
5) Spl Allow - Balance of Gross will be provided as Special Allowance
This change will automatically reduce the employer's contribution.
From India, Pune
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