Currently, 12% of basic wages is deducted as employees’ contribution towards social security schemes run by the EPFO and an equal amount is contributed by employers

New Delhi : In a bid to deal with issue of splitting of wages by employers, retirement fund body EPFO has asked its over 120 field formations to inspect firms which are deducting PF on 50% or less of total wages, reports PTI.    The employers often split wages into different allowances to reduce their PF liability and also increase the take home pay of their workers. The provident fund is deducted as percentage of basic wages.

At present, 12% of basic wages is deducted as employees’ contribution towards social security schemes run by the Employees’ Provident Fund Organisation (EPFO) and an equal amount is contributed by employers. “All officers in-charge of field offices are directed to get such establishments inspected where PF contributions has been deducted on 50% or less of total wages,” an office order said.

According to the order, the exercise of inspecting the firms deducting PF on 50 per cent or less of total wages, must be completed by August 31. The EPFO headquarters have asked the field formations to submit a report in this regard by September 7.

EPFO pointed out, “instance have come to notice where total wages of employees’ are splitted by employers to the extent that PF liability is reduced up to 50 per cent of total wages.”

It observed in the order that “many employers split total wages payable to their employees into several allowances in such a way that the said allowances are covered under the category of exclusions provided under Section 2 (b) (EPF & MP Act 1952)….encouraging subterfuge of splitting of wages to exclude the PF liability.”

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