Hello HRians,
Can anyone help me to know if retain...
# compensation-and-benefitsn
Nirav Shah
07/13/2023, 9:14 AMHello HRians,
Can anyone help me to know if retaining (Fixed) allowances are now considered while calculating EPF, apart from Basic and DA. If yes, can you provide me any legal source of reference. Also, let me know when employee can opt out of PF?
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Albus
07/13/2023, 9:15 AMThanks for asking Albus
Albus
07/13/2023, 9:15 AMAccording to the information provided in the documents, there is no mention of retaining (Fixed) allowances being considered while calculating EPF. The EPF is typically calculated based on the Basic Salary and Dearness Allowance (DA). However, it's important to note that most private organizations do not have a DA component, so the calculation would be based solely on the Basic Salary. As for opting out of PF, an employee with a basic salary of over Rs. 15,000 and who has never been a member of EPF can opt out of the scheme. But once they become a member, they cannot opt out of the scheme. If you are an organisation with more than 20 employees and you are registered under EPF Act with the local PF, an employee will not have a choice to choose whether they have to contribute or not. It is mandatory unless they don't want to be a regular employee but a freelancer for the company. Unfortunately, the documents provided do not contain any legal source of reference for these details. It's always a good idea to consult your company's HR department or refer to your employment contract for specific details regarding EPF calculations and policies in your organization.
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Wristy
07/13/2023, 9:21 AMHi @Nirav Shah The Labour Codes are yet to be passed, hence, currently it is Basic + DA only.
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Pragya Jain
07/13/2023, 9:36 AMk
Karthik Ingarsal
07/14/2023, 4:00 AM@Nirav Shah if i get you right your are you referring to calculation of PF for employees whose basic is Less than Rs.15000 per month. IF it is then please read below.
The PF contribution will be on the total amount including all the allowances paid to an employee and not just on the basic salary.
The Supreme Court ruled that 'special allowance' must be included in basic pay for calculation of provident fund (PF) deduction from employees and the company.
A bench of Justices Arun Mishra and Naveen Sinha dismissed appeals filed by many companies questioning the Provident Fund Commissioner’s decision to club basic pay with special allowances / other allowances for the purpose of deduction of PF and matching contribution by employers.
Crux and key pointers here are as under -
1. PF ceiling of 15,000/-pm is same ,it has not been revised.
2. If minimum PF contribution as per ceiling is paid i.e 1800/- PM from Both Employee And Employer then there is no need to change.
3. IF contribution is less than 1800 and if Gross is more or up to 15,000/- Rs pm , where Basic is less than 15,000 and remaining amount is bifurcated among different heads then excluding HRA And Statutory Bonus, all other heads to be considered with Basic for framing PF wages up to 15,000/- or on total of all heads if total of all heads is less than 15,000/- then on that entire total amount as arrived to considered as wage for PF to be calculated on.
4. There is no new provision but it is interpretation to the existing section/ Term. Hence date of implication is not expected it is ongoing rule.
5. PF authority may have recourse to the verdict of SC while conducting the inspections and computation of liability up to wage ceiling as defined under the law
Hope this helps
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Nirav Shah
07/14/2023, 5:13 AMThank you so much @Wristy @Karthik Ingarsal @Pragya Jain
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