Hi Seniors,
I have a query regarding EPF deduction. One of our contractors is deducting and paying EPF as per minimum wages (it is 9090/- including DA). However, the security guard is receiving a gross amount of Rs.13,500/-. For example, the Basic and DA amount to 9090/-, and the remaining amount for HRA + other allowances is 4410/-.
Now, my doubt is whether it is right or wrong to deduct only on minimum wages. As per my knowledge, he has to deduct on the entire amount except HRA as per the new amendment.
Kindly reply.
From India, Hyderabad
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3I have a query regarding EPF deduction. One of our contractors is deducting and paying EPF as per minimum wages (it is 9090/- including DA). However, the security guard is receiving a gross amount of Rs.13,500/-. For example, the Basic and DA amount to 9090/-, and the remaining amount for HRA + other allowances is 4410/-.
Now, my doubt is whether it is right or wrong to deduct only on minimum wages. As per my knowledge, he has to deduct on the entire amount except HRA as per the new amendment.
Kindly reply.
From India, Hyderabad
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First of all, let me say that there have been no amendments made to the EPF & MP Act except for a clarification of section 2(b) of the Act which states that basic wages mean the total sum of the amounts that an employee earns.
According to the definition of wages provided above, the entire amount will qualify for PF contribution. While HRA is exempted from the basic salary, this exemption is applicable only to HRA amounts paid in addition to the salary. For example, if your security guards are provided accommodation near your factory by vendors and the rent for this accommodation is paid separately to the guards, this constitutes HRA. On the other hand, if the vendors directly pay the rent for the house to the landlord, the cash value of the rent paid is included in the salary as part of their CTC, and this component will not qualify for PF contribution.
Therefore, Rs 13,500 will qualify for PF deduction.
From India, Kannur
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According to the definition of wages provided above, the entire amount will qualify for PF contribution. While HRA is exempted from the basic salary, this exemption is applicable only to HRA amounts paid in addition to the salary. For example, if your security guards are provided accommodation near your factory by vendors and the rent for this accommodation is paid separately to the guards, this constitutes HRA. On the other hand, if the vendors directly pay the rent for the house to the landlord, the cash value of the rent paid is included in the salary as part of their CTC, and this component will not qualify for PF contribution.
Therefore, Rs 13,500 will qualify for PF deduction.
From India, Kannur
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Madhu Sir,
The contractor is directly paying HRA to security guards. Sir, I have one more doubt. If any employee's gross salary is 21,000/- and his basic + DA is 14,000/-, what is the calculation for EPF? Should the total amount be considered or only 15,000/- as per EPF wage?
Thank you.
From India, Hyderabad
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The contractor is directly paying HRA to security guards. Sir, I have one more doubt. If any employee's gross salary is 21,000/- and his basic + DA is 14,000/-, what is the calculation for EPF? Should the total amount be considered or only 15,000/- as per EPF wage?
Thank you.
From India, Hyderabad
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If the vendor is paying it separately, then it will not attract PF. But if it is paid as part of the salary, as a component of the salary, it will certainly be a part of the salary for PF contribution as well.
If the gross salary is above Rs 15,000, naturally, you can restrict PF contribution to 12% of Rs 15,000, i.e., Rs 1,800. You need not pay it on Rs 21,000. In such cases, you have to create a component in the payroll called PF Qualifying salary and make it restricted to Rs 15,000. Put the formula for PF on that cell.
From India, Kannur
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If the gross salary is above Rs 15,000, naturally, you can restrict PF contribution to 12% of Rs 15,000, i.e., Rs 1,800. You need not pay it on Rs 21,000. In such cases, you have to create a component in the payroll called PF Qualifying salary and make it restricted to Rs 15,000. Put the formula for PF on that cell.
From India, Kannur
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Thank you Madhu Sir for your prompt reply. Basic+ DA- 14,000/- HRA-4,000/- and Other allowance- 3,000/- Total gross salary-21,000/- Based on that the above, we have to deduct EPF only on 15,000/- .
From India, Hyderabad
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From India, Hyderabad
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Dear Friends,
In the case of a supervisor (staff category) earning Rs. 21,000, no EPF was deducted by the company, and she did not have any benefit under PF. She gave a complaint to the PF Department, which rejected her claim. The PF Department argued that it was the prerogative of the company to include a supervisor/staff under PF. She contested that other supervisors and staff were availing PF deduction, so she challenged her exclusion. The PF Department stated that other staff also had deductions under a contract, which did not extend to her. How can we help her?
P. Selvi
From India, Chennai
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In the case of a supervisor (staff category) earning Rs. 21,000, no EPF was deducted by the company, and she did not have any benefit under PF. She gave a complaint to the PF Department, which rejected her claim. The PF Department argued that it was the prerogative of the company to include a supervisor/staff under PF. She contested that other supervisors and staff were availing PF deduction, so she challenged her exclusion. The PF Department stated that other staff also had deductions under a contract, which did not extend to her. How can we help her?
P. Selvi
From India, Chennai
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You have said that a supervisor was "earning" Rs 21,000. What do you mean by this? Is it the total amount inclusive of incentives? Confirm.
Now, there is nothing in the PF Act which says that PF is not available to 'supervisors' but is available to all employees. The only thing is that an employee whose wages "at the time of joining the organization" exceed Rs 15,000 may be excluded from the coverage of PF. Accordingly, if the woman supervisor cited above has a "PF qualifying" salary of more than Rs 15,000 (Rs 21,000 is anyway above Rs 15,000), then she cannot become a member of PF unless the employer gives her coverage.
An important thing to note is that if the employee once covered will continue to be covered even if the salary exceeds Rs 15,000. Similarly, if she was getting less than Rs 15,000 earlier but now her salary has become Rs 21,000, she could get coverage from retrospective effect.
Most of the companies pay PF on some of the components of salary, such as basic salary and dearness allowance. The total salary may consist of basic wage, DA, HRA, Conveyance allowance, food allowance, medical allowance, etc. The total salary may be Rs 21,000, but the PF qualifying salary (the salary on which the company contributes PF) may be less than Rs 15,000. If the company has been contributing PF for other employees based on their Basic salary and Dearness Allowance only, and the basic and DA of this employee are less than Rs 15,000, then she is still eligible to receive PF. A company cannot have separate rules for coverage (for employee coverage based on their gross salary) and payment of contribution (for contribution payment based only on Basic salary).
Please confirm
From India, Kannur
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Now, there is nothing in the PF Act which says that PF is not available to 'supervisors' but is available to all employees. The only thing is that an employee whose wages "at the time of joining the organization" exceed Rs 15,000 may be excluded from the coverage of PF. Accordingly, if the woman supervisor cited above has a "PF qualifying" salary of more than Rs 15,000 (Rs 21,000 is anyway above Rs 15,000), then she cannot become a member of PF unless the employer gives her coverage.
An important thing to note is that if the employee once covered will continue to be covered even if the salary exceeds Rs 15,000. Similarly, if she was getting less than Rs 15,000 earlier but now her salary has become Rs 21,000, she could get coverage from retrospective effect.
Most of the companies pay PF on some of the components of salary, such as basic salary and dearness allowance. The total salary may consist of basic wage, DA, HRA, Conveyance allowance, food allowance, medical allowance, etc. The total salary may be Rs 21,000, but the PF qualifying salary (the salary on which the company contributes PF) may be less than Rs 15,000. If the company has been contributing PF for other employees based on their Basic salary and Dearness Allowance only, and the basic and DA of this employee are less than Rs 15,000, then she is still eligible to receive PF. A company cannot have separate rules for coverage (for employee coverage based on their gross salary) and payment of contribution (for contribution payment based only on Basic salary).
Please confirm
From India, Kannur
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