Dear HR Professionals,
I hope you are all doing great!
I am working as a Talent Acquisition Consultant in an emerging IT company headquartered in Singapore, and I am currently deputed at the Indian branch.
My company strives to adhere to all legal compliances in the regions where it operates. Therefore, we are currently navigating the issue of PF applicability and are facing a dilemma regarding PF contributions. According to an article I read, the maximum salary considered for PF is Rs. 15,000 per month, which includes basic salary and dearness allowance. If this information is accurate, the maximum PF deduction would amount to Rs. 1,800 (15,000 X 12%).
However, we have employees whose salaries exceed the upper limit mentioned. Being in the IT industry, working with cutting-edge technologies, our salaries tend to be on the higher side. To illustrate, I am sharing the salary breakdown we use in our organization:
CTC offered: Rs. 10,00,000 per annum
Particulars Monthly Annual
Basic Salary 40,917 4,91,000
House Rent Allowance 20,458 2,45,500
Special Allowance 15,548 1,86,580
Employer's Contribution to Provident Fund 4,910 58,920
Total A (Fixed) 81,833 9,82,000
Additional Annual Benefits
Group Insurance Premium (B) 18,000
Total B 18,000
Annual CTC (A+B) - 10,00,000
In the example above, the basic salary per month is Rs. 40,197, and we do not have dearness allowance as a salary component. Therefore, the PF contribution would be 12% of Rs. 40,197, totaling Rs. 4,824.
I kindly request your advice on whether the above calculation is correct or if the PF amount should be limited to Rs. 1,800 as per the maximum limit. Your assistance on this matter would be greatly appreciated.
Thanks in advance.
From India, Mumbai
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I hope you are all doing great!
I am working as a Talent Acquisition Consultant in an emerging IT company headquartered in Singapore, and I am currently deputed at the Indian branch.
My company strives to adhere to all legal compliances in the regions where it operates. Therefore, we are currently navigating the issue of PF applicability and are facing a dilemma regarding PF contributions. According to an article I read, the maximum salary considered for PF is Rs. 15,000 per month, which includes basic salary and dearness allowance. If this information is accurate, the maximum PF deduction would amount to Rs. 1,800 (15,000 X 12%).
However, we have employees whose salaries exceed the upper limit mentioned. Being in the IT industry, working with cutting-edge technologies, our salaries tend to be on the higher side. To illustrate, I am sharing the salary breakdown we use in our organization:
CTC offered: Rs. 10,00,000 per annum
Particulars Monthly Annual
Basic Salary 40,917 4,91,000
House Rent Allowance 20,458 2,45,500
Special Allowance 15,548 1,86,580
Employer's Contribution to Provident Fund 4,910 58,920
Total A (Fixed) 81,833 9,82,000
Additional Annual Benefits
Group Insurance Premium (B) 18,000
Total B 18,000
Annual CTC (A+B) - 10,00,000
In the example above, the basic salary per month is Rs. 40,197, and we do not have dearness allowance as a salary component. Therefore, the PF contribution would be 12% of Rs. 40,197, totaling Rs. 4,824.
I kindly request your advice on whether the above calculation is correct or if the PF amount should be limited to Rs. 1,800 as per the maximum limit. Your assistance on this matter would be greatly appreciated.
Thanks in advance.
From India, Mumbai
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You need to understand the basics of the EPF Act 1952. Please go through the sites available on the matter to gain clarity on the scope and applicability.
Notwithstanding that, the points are clarified as follows:
The EPF Act is applicable to employees drawing a salary up to Rs. 15,000. In case an employee starts their career with you and draws wages exceeding Rs. 15,000, then you need not cover such employees. However, if the employee was already covered before joining you, then you have to continue the coverage even if the employee's wages are more than Rs. 15,000.
Regarding the payment of contribution, Rs. 18,00 is the statutory limit, but employees can contribute more as a voluntary contribution. As a welfare measure, the employer can also make an equal contribution or limit it to Rs. 18,00.
From India, Mumbai
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1655Notwithstanding that, the points are clarified as follows:
The EPF Act is applicable to employees drawing a salary up to Rs. 15,000. In case an employee starts their career with you and draws wages exceeding Rs. 15,000, then you need not cover such employees. However, if the employee was already covered before joining you, then you have to continue the coverage even if the employee's wages are more than Rs. 15,000.
Regarding the payment of contribution, Rs. 18,00 is the statutory limit, but employees can contribute more as a voluntary contribution. As a welfare measure, the employer can also make an equal contribution or limit it to Rs. 18,00.
From India, Mumbai
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf