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PF Contribution - Proration

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This is related to India Payroll PF Calculation.

Here PF Basis = Basic Pay & Eligible Pay = Rs 6500/-.

Eligible pay or PF basis, whichever is less, standard system

considers that as the PF contribution.

For Ex:

If Basic Pay <= Rs 6500, PF wud be 12% of actual Basic

If Basic Pay > Rs 6500, PF wud be 12% Rs 6500

This is working fine in the standard system.

Current Requirement is:

When there is a loss of pay for an emp, the Basic is prorated

accordingly. But the twist in the story is The Eligible Pay also

needs to be prorated. And then, the lesser of the prorated basic

& prorated eligible pay is to be considered for the PF

calculation.

For Ex:

An emp with basic pay of Rs8000, has 3 day's loss of pay in a

month. The prorated basic becomes Rs7200 for that month

deducting 8000*3/30 as loss of pay from basic pay, which is

still higher than the eligible pay. In such a scenario, the

system should not calulate PF based on the eligible pay of

Rs6500. Instead it has to prorate the eligible pay accordingly

and then consider the lesser of prorated basic and prorated

eligible pay for PF calc. i.e;

Prorated eligible pay = Rs5850 [deducting 6500*3/30 as loss of

pay from eligible pay]

How to prorate this Eligible Pay ?

Accepted Solutions (0)

Answers (2)

Answers (2)

Former Member
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Hi

The PF calculation when taken it is taken as what is told by you, but when LOP happens poration is done only on basic. As eligble pay is constant 6500.00 that cannot be rorated in any scenario.

R K

sikindar_a
Active Contributor
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Rajesh did u checked with the PF office

does the acts say same

please let us know generally it shd get Prorated

The proration as mentioned by you happens only when the employee joined/left in the middle of the month. However, in case of LOP, PF is calculated on the earned basic (reduced) and eligible pay, whichever is less. Please check with your legal counsel for getting legal opinion on the matter.

However, if you still need to prorate the eligible pay based on LOP days, then write a rule which will check the value of /111 and limit it to eligible pay (prorated in case of LOP) before function INEPF is called in the schema. This way the value passed on to INEPF in WT /111 will be the prorated value and your requirement will be met.

But, I would still ask you to get legal opinion on the same as it may lead to statutory default in case the standard calculation is correct. It is always better and legally safe to deduct and contribute more PF.

inputs given by VK (Vivek)

Edited by: Sikindar on Jun 18, 2009 4:42 PM

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Dear Sikindar,

Thanks for ur reply. I also thought the same. But I want to know if any other company in India is following this or is it just the first requirement. Rajesh and Dattaraj are also part of my Team.

Thx,

Surabhi Ranganath

sikindar_a
Active Contributor
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oh

convey my regards to Raj and other friends there

yes regarding the prorate issue yes this issue came one back

where there user identified

if we are opting for 6500 i mean 780 Rs PF than it is not Prorateing

but if he opts 12% it is prorateing

kidnly check