Realize PF needs to be contributed on the basic wage, which should not be less than the minimum wage in effect in the state. It is also acceptable if PF is contributed on the prescribed statutory limit of 15000.00. What should be the contribution of PF in states where the minimum wage is greater than 15000.00?
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Disputes mainly arise over the splitting of wages into various allowances to avoid EPF contributions. The recent Supreme Court ruling has clarified that such splits should not be considered during EPF deductions.
If an establishment maintains the ceiling of Rs. 15,000, they can continue as both the employee and employer contribute Rs. 1,800 each for employees earning a salary of Rs. 15,000 or more per month. However, for employees earning less than Rs. 15,000, employers must provide evidence of allowances. Otherwise, they would be responsible for paying both shares of EPF on these split allowances.
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725If an establishment maintains the ceiling of Rs. 15,000, they can continue as both the employee and employer contribute Rs. 1,800 each for employees earning a salary of Rs. 15,000 or more per month. However, for employees earning less than Rs. 15,000, employers must provide evidence of allowances. Otherwise, they would be responsible for paying both shares of EPF on these split allowances.
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There is nothing wrong in paying PF contribution on a salary which is less than the statutory minimum wages fixed by the state, so long as there is no further reduction in the PF contributing salary. EPFO is not the authority to enforce minimum wages; for that, there is the labor department. EPF officials do not direct you to first pay the employees the minimum rates fixed and then pay PF on that wage. If you employ people on wages less than the minimum wages, it can be questioned by the labor department but not by EPFO. They can only ensure that the PF is paid on the entire sum agreed upon with the employees.
In respect of employees whose salary is above Rs 15,000, the same principle applies. The EPFO cannot demand contributions above Rs 15,000 as a legal right. There are a lot of employee grades whose minimum wages are above Rs 15,000, which is why EPFO failed to implement their decision to enforce payment of PF on minimum wages. Now, since the Supreme Court has clarified that it is the total salary that qualifies for PF contribution, there is no need to press for minimum wages. Employers are bound to pay contributions on the total wages paid or payable.
From India, Kannur
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In respect of employees whose salary is above Rs 15,000, the same principle applies. The EPFO cannot demand contributions above Rs 15,000 as a legal right. There are a lot of employee grades whose minimum wages are above Rs 15,000, which is why EPFO failed to implement their decision to enforce payment of PF on minimum wages. Now, since the Supreme Court has clarified that it is the total salary that qualifies for PF contribution, there is no need to press for minimum wages. Employers are bound to pay contributions on the total wages paid or payable.
From India, Kannur
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SC Judgment-No obligation to excess contribution than Statutory Limit.docx
Sc-judgment-eps -1995_english.p df