EPS NEW SCHEME 2026-
Can an employer reduce PF contributions from Actual Basic Salary to the ?15,000 statutory wage ceiling?
Yes, under the new EPF Scheme, 2026, contributions above the statutory wage ceiling are no longer mandatory.
However, employers should not implement this change overnight, especially where employees have been receiving PF on actual basic wages for many years.
Such a reduction may amount to a change in service conditions, requiring careful legal and industrial relations (IR) handling.
Practical approach for employers
Review the existing practice.
Check whether PF has been contributed on actual basic wages or only up to ?15,000.
Verify appointment letters, HR policy, settlements, standing orders, and past practice.
1.Assess whether it is a change in service conditions
Reducing PF contributions may reduce the employee's retirement benefit.
If PF on higher wages has become an established employment benefit, changing it should be handled carefully under the Industrial Relations framework.
2 Consult employees or unions.
Discuss the proposed change openly.
Explain the new EPF Scheme and its impact.
Seek mutual agreement wherever possible..
3 Issue proper notice before implementation
If the change affects service conditions of eligible workmen, comply with the notice requirements under the Industrial Relations Code, 2020 before implementing the change.
4 Amend employment documents
Update HR policies, appointment terms, salary structure, and payroll processes wherever required.
5 Obtain employee options
Employees who wish to continue contributing on higher wages may opt for Voluntary Provident Fund (VPF), subject to the applicable rules.
6.Maintain proper records
Keep notices, employee communications, consultation records, acknowledgments, and management approvals for future compliance.
Recommended HR best practice
a.Do not reduce PF deductions abruptly.
b.Take legal advice before implementing the change.
c.Communicate the reasons transparently to employees.
Follow due process under the Industrial Relations Code, 2020 to minimize the risk of industrial disputes or legal challenges.
This approach balances compliance with the new EPF Scheme, 2026 while respecting employees' service conditions and maintaining good industrial relations.
