The Provident Fund Office has allowed companies to cap their per-month PF contribution to employees at Rs. 6,500. At present, companies contribute an amount equal to at least 12 per cent of an employee’s basic salary towards his/her PF. Now if a company chooses it need not provide more than Rs. 6,500, the overall benefits of some salaried employees could be hit by the new circular. The final call rests with employees.
“An employer paying Provident Fund on full basic salary may limit contribution to Rs. 6,500 per month at any time,” said Sonu Iyer, consultancy firm EY’s partner and National Leader – Human Capital Global Mobility. He was reacting to the circular issued by the PF Office.
“The circular will especially help IT companies that are forced to pay up in addition to PF social security obligations of their employees stationed offshore in accordance with the rules of the countries they are placed in.”
The circular specifies that the Provident Fund Office will not challenge the 2011 Supreme Court ruling that allowed the capping of PF contributions. It directs the regional PF offices not to “force employers to contribute over and above the statutory wage ceiling in respect of their employees.”
“Option is available for the employees to contribute beyond the statutory wage ceiling if they so desire, subject to approval from the Provident Fund office under Para 26(6) of the Employees’ Provident Funds Scheme, 1952,” the circular says.
Mr. Iyer, however, said such an option might not be available where there was an agreement with the employees to contribute on full basic salary.
