Whether employee whose salary exceeds Rs 6500/- p.m. be exempted from contribution under Provident Fund Act? Can an establishment have two sets of employees, one drawing Rs. 6500 or more and covered under Provident Fund Act and another, drawing Rs. 6500/-or more and not covered under Provident Fund Act?

The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is applicable to every establishment wherein 20 or more employees are employed. Under Section 5 of the Act, the Central Government by Notification may frame a Scheme called the Employees Provident Fund Scheme for the establishment of Provident Fund under the above-mentioned Act.

According to Para 2(f) (i) of the Employees Provident Fund Scheme, an employee whose pay (Basic Wages with Dearness Allowance, retaining allowance and cash value of food concessions admissible thereon) at the time he is otherwise entitled to become a member of the fund exceeds Rs. 6,500/- per month is an “excluded employee” and is not required to be the member of the fund. Otherwise an employee who does not come within the meaning of “excluded employee” shall be entitled to and required to be member of the fund as per Para 26 (1) (a) of the Employees Provident Fund Scheme.

As per para 26 (6) – of the Employees’ Provident Funds Scheme, an Officer not below the rank of an Assistant Provident Fund Commissioner may on the joint request in writing of any employee of the factory or other establishment to which this Scheme applies and his employer enroll such employee as a member or allow him to contribute on more than Rs. 6,500/- of his pay per month if he is already a member with the Funds and thereupon such employee shall be entitled to the benefits and shall be subject to the conditions of the Fund, provided that the employer gives a undertaking in writing that he shall pay the administrative charges payable and comply with all statutory provisions in respect of such employee.

In the light of the above provisions, “excluded employees” under para 2(f)(i) of the Employees Provident Fund Scheme are not required to be members of the Fund and thereby pay PF contribution. Therefore, an establishment can have employees in respect of whom the Company pays Provident Fund Contribution and for those that the Company doesn’t. Finally, no separate declaration from an employee, whose salary is over and above Rs 6,500/-, needs to be taken from him for not paying contribution towards Provident Fund.