Changing PF contribution to 12% on full basic from statutory minimum of INR 1,800

[ParasChheda]

Hi All,

We have come across a situation. Currently, we are contributing PF on the minimum scale, i.e. INR 1,800 (each for employer & employee) since the inception of the company. Now, a certain number of employees (approx. 15%) are demanding to contribute 12% PF on full basic by the employee and employer, as that was the practice in their old organisation. By doing this, they could save more for retirement corpus.

Advice required from the community:

1. Can we have a mix of both, those who want to contribute full 12% can opt and rest others can restrict their PF contribution to INR 1,800? - This is a preferred option as many of them want more in-hand salary.
2. Can we change company policy to 12% on full basic for all employees from the next financial year? Do we need to inform the PF department for a policy change?

Note: We have already provided them with the option of VPF; however, they are demanding to increase employer contribution as well to enjoy more income tax benefit.

Looking forward to your insight.

I really appreciate any help you can provide.

[Bharath]

Hi

This can be scenario in your case

Employer & Employee @wage limit 15000 - 1800/-
Employer @ 15000 & Employee at actual basic, DA, SA - At actuals
Employer @ 15000 & Employee at VPF (20^)
Employer & Employee at actual basic, DA & SA
For fourth point, management will not agree as the law itself is self explanatory as there is a wage limit ceiling for PF contribution @ 15000/- This will increase the cost of management

It is upto your management whether to provide extra social benefit or not. It is not required to inform the PF authorities.

[ParasChheda]

@Bharath - Thanks for your reply.

For the fourth point, PF contribution both employee & employer is deducted from the CTC offered. So additional PF contribution would in return reduce in-hand salary for employee and no impact on the employer’s pocket.

We are still figuring whether part of employees can opt a full 12% contribution and rest others restrict to INR 1800. If you can throw some light on this would be really helpful.

[amiths]

@ParasChheda It should not be a problem. You can give employees an option to choose to contribute on Full wages or Restricted wages.

[Bharath]

Hi
In this case, not many employees opt for VPF when there is an impact on their take home. Only few peoples will ask for the same. HOwever yes, if the employee is ok with lesser take home, then you can go for Employee VPF or Actual basic and employer can stick to wage limit of Rs 15000/–