Hello, As a startup company we had more than 20 employees hence we registered for PF and paid PF to all employee.
Now we lost clients and we have very less workflow hence reduced to 8 employees, also we are closing company now and opening new company with new name with existing employees. Since its less than 10 employees we are not paying PF to anyone.
So my question is since we are not paying PF to anyone what would be the employees salary?
Example earlier if an employee was getting 18k as take home + 1k as employee PF and 1k as employer PF in total of gross was 20k per month, Now how much salary will that employee gets? Is it 18k or 19k?
From India, Bengaluru
3Now we lost clients and we have very less workflow hence reduced to 8 employees, also we are closing company now and opening new company with new name with existing employees. Since its less than 10 employees we are not paying PF to anyone.
So my question is since we are not paying PF to anyone what would be the employees salary?
Example earlier if an employee was getting 18k as take home + 1k as employee PF and 1k as employer PF in total of gross was 20k per month, Now how much salary will that employee gets? Is it 18k or 19k?
From India, Bengaluru
Hi Smitha,
You cannot withdraw Employer PF contributions from the existing company even though your company is running on loss. Moreover even if employer becomes insolvent or is in process of getting wound up, the PF contributions need to be paid in priority over the other debts.
Please refer the abstract of THE EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 for your understanding:
Act Abstract for Priority of payment of contributions over other debts:
5 [(1)] 6[Where any employer is adjudicated insolvent or, being a company, an order for winding up is made, the amount due- (a) From the employer in relation to 7 [an establishment] to which any 8 [Scheme or the Insurance Scheme] applies in respect of any contribution payable to
the Fund 9 [or, as the case may be, the Insurance Fund] damages recoverable under section 14B, accumulations required to be transferred under subsection (2) of section 15 or any charges payable by him under any other provision of this Act or of any provision of the 8 [Scheme or the insurance Scheme]; or
(b) From the employer in relation to an exempted 1 [establishment] in respect of any contribution to 2 [the provident fund or any insurance fund] (in so far as it relates to exempted employees), under the rules of 2 [the provident fund or any insurance fund], 3 [any contribution payable by him towards the 4 [Pension] Fund under sub—section (6) of section 17,] damages recoverable
under section 14B or any charges payable by him to the appropriate Government under any provision of this Act or under any of the conditions specified under section 17, Shall where the liability thereof has accrued before the order of adjudication or winding up is made, be deemed to be included] among the debts which under section 49 of the Presidency Towns Insolvency Act, 1909 (3 of 1909) or under section 61 of the Provincial Insolvency Act, 1920 (5 of 1920) or under 5
[section 530 of the Companies Act, 1956 (1 of 1956)], are to be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up, as the case may be.
[Explanation.- In this sub-section, and in section 17, “ insurance fund” means
any fund established by an employer under any scheme for providing benefits in the nature
of life insurance to employees, whether linked to their deposits in provident fund or not,
without payment by the employees of any separate contribution or premium in that behalf.]
================================================== ===============
Act section briefing count of employees: "3[(5) An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below
twenty.]"
Now coming to your query of new company... Incase your employee strength is not more than eight (and not ten) you can avoid PF contributions. In that case only applicable taxes may be deducted from salary. Eg for Karnataka Professional Tax). In the example quoted by you if your company in in Bangalore only professional tax of Rs 200 may be deducted from Rs. 18,000/- (Consolidated salary) and Rs. 17,800/- may stand payable to employee.
Hope this helps.
From India, Bangalore
You cannot withdraw Employer PF contributions from the existing company even though your company is running on loss. Moreover even if employer becomes insolvent or is in process of getting wound up, the PF contributions need to be paid in priority over the other debts.
Please refer the abstract of THE EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 for your understanding:
Act Abstract for Priority of payment of contributions over other debts:
5 [(1)] 6[Where any employer is adjudicated insolvent or, being a company, an order for winding up is made, the amount due- (a) From the employer in relation to 7 [an establishment] to which any 8 [Scheme or the Insurance Scheme] applies in respect of any contribution payable to
the Fund 9 [or, as the case may be, the Insurance Fund] damages recoverable under section 14B, accumulations required to be transferred under subsection (2) of section 15 or any charges payable by him under any other provision of this Act or of any provision of the 8 [Scheme or the insurance Scheme]; or
(b) From the employer in relation to an exempted 1 [establishment] in respect of any contribution to 2 [the provident fund or any insurance fund] (in so far as it relates to exempted employees), under the rules of 2 [the provident fund or any insurance fund], 3 [any contribution payable by him towards the 4 [Pension] Fund under sub—section (6) of section 17,] damages recoverable
under section 14B or any charges payable by him to the appropriate Government under any provision of this Act or under any of the conditions specified under section 17, Shall where the liability thereof has accrued before the order of adjudication or winding up is made, be deemed to be included] among the debts which under section 49 of the Presidency Towns Insolvency Act, 1909 (3 of 1909) or under section 61 of the Provincial Insolvency Act, 1920 (5 of 1920) or under 5
[section 530 of the Companies Act, 1956 (1 of 1956)], are to be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up, as the case may be.
[Explanation.- In this sub-section, and in section 17, “ insurance fund” means
any fund established by an employer under any scheme for providing benefits in the nature
of life insurance to employees, whether linked to their deposits in provident fund or not,
without payment by the employees of any separate contribution or premium in that behalf.]
================================================== ===============
Act section briefing count of employees: "3[(5) An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below
twenty.]"
Now coming to your query of new company... Incase your employee strength is not more than eight (and not ten) you can avoid PF contributions. In that case only applicable taxes may be deducted from salary. Eg for Karnataka Professional Tax). In the example quoted by you if your company in in Bangalore only professional tax of Rs 200 may be deducted from Rs. 18,000/- (Consolidated salary) and Rs. 17,800/- may stand payable to employee.
Hope this helps.
From India, Bangalore
Helo Gladwin, Thank you so much for your help and response This is so clear for me to understand
From India, Bengaluru
From India, Bengaluru
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HC All - Trainees not covered for PF -2010.pdf
PF Ledger.xls