The Employee Provident Fund Organization (commonly referred to as the PF Department), has notified (dated 26-Sep-2016) a form called New Form No. 11. This replaces the earlier Form No. 11 (New).
Form No. 11 – what is that for?
While many payroll managers know that employees need to submit Form No. 11, not many seem to be aware of the importance of Form No. 11 particularly in the light of the PF Department’s notification dated 29-Aug-2014. In fact, in many organizations, new employees are not even asked to submit Form No. 11 and this leads to inadequate PF compliance.
Form No. 11 is the document through which a new employee submits their PF information to their employer. The key information contained in Form No. 11 are as follows.
a. Employee’s prior PF status – whether member or not.
If an employee was a member of PF during their previous employment, they cannot be left out of PF in the new organization as long as their earlier PF amount was not withdrawn. We find many payroll managers not being fully informed about the rules under which a new employee may be left out of Provident Fund. Some are under the impression that if an employee’s PF wage is more than Rs 15,000 per month, they can be automatically left out of PF. This is wrong. If an employee submits his PF information in Form No. 11, the employer has to include the employee for PF.
b. If PF member in his previous organization, then was the employee a member of EPS?
The notification dated 29-Aug-2014 notifies an important change related to Employee Pension Scheme (EPS). According to the notification,
As EPS will henceforth apply only to EPF members whose pay at the time of becoming a PF member is not more than Rs.15,000 per month on or after 01.09.2014, the entire employer and employee contribution shall remain in the provident fund and no diversion shall be made to EPS for all new PF members on or after 01.09.2014 having salary more than Rs.15,000 at the time of joining.
Effective 01-Sep-2014, any new employee who becomes PF member for the first time and whose salary is higher than Rs 15,000 cannot be a member of EPS. In other words, the entire 12% contribution should be placed under Employee Provident Fund and there shall be no contribution to Family Pension Fund.
But what if a new employee was under EPS in their earlier employment?
In such a case the employee should come under EPS in their new organization even if the employee’s salary is higher than Rs 15,000.
The Form No. 11 requires the employees to state whether or not they were a member of EPS in their earlier organization. On the basis of the employee’s declaration in Form No. 11, the employer should include/exclude him in/from EPS.
We find many payroll managers complaining that they are unable to get the correct information regarding EPS applicability from new employees. Some say that the new employees are just unable to clearly state whether they were under EPS in their previous organization. Many employees do not even seem to know how the 12% contribution is bifurcated and what EPS is. Consequently, in many organizations, all new employees are brought under EPS whether or not they are eligible for it, as an easy way out.
c. Other information
Form No. 11 also presents other information such as details of an international worker (if applicable) and KYC details.
The PF Department requires that the New Form No. 11 – Declaration Form be “retained by the employer for future reference.” You may be aware that the PF Department has enabled online transactions for PF transfer and withdrawal and hence it is extremely important that new employees provide accurate information regarding their PF status by submitting Form No. 11.
If you are responsible for PF compliance in your organization, please ensure that you get a signed copy of New Form No. 11 from new employees as soon as they join your organization. In addition, please get the employer declaration in the form duly signed, and store the New Form No. 11 for future reference.