Raj Kumar Hansdah
Shrm, Od, Hrd, Pms
Consultant & G.m.
Hr , Personnel & Admin
Bank Employee
+4 Others

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Dear Seniors,
I have joined a company very recently, the company is in money marketing and doing its business since last 4 years but have not done its registration under PF or ESIC Act.
Employees are getting its salary through cash, therefore neither any payslip is given to any employee nor any statutory deduction is made.
As an HR I have been asked to prepare the offer letters for all employees then have to start the PF & ESI deduction of the employees.
I would request my seniors to kindly guide me how should i start the PF & ESI deduction procedure so the company statutory compliance can be maintained.
Prachi Desai

From India, Kolkata
Hi ,
If your company / factory comprises more then 20 employees
then PF act becomes applicable .
For registration of PF and ESI its better you contact your local ESI
office and PF authority to get the complete details .
Offer letters are issued to candidates who are about to join the organisation.
instead you can go ahead with appointment letters for the employees who
have not received the same .
Rajeev Dixit

From India, Bangalore
Dear Sir,
Thanx for your reply, but could you pls tell me that till date the employees were getting salary in cash so any PF & ESI is not deducted. So if i registered the company with PF & ESI what should be my next step to regularize the statutory procedure.
Prachi Desai

From India, Kolkata
Dear Team,
If you dont have PF ESIC, PT no. then no issue. we will process your payroll and we will provide you All benefit of statutory compliance. you no need to invest you Rs. 70,000 or 80,000/- for registration.
just call on 23060101 - induslink services
Induslink Services

From India, Mumbai
You have to get it registered even if your strength is 10. It's good sign you started regularising some legal issues. Some where you have to start. When you file your regn.papers they may ask you some documents including Balance sheet/Acs, IT Return etc. These are all can be managed nicely. Best thing is to contact the Officer in charge of your office area/business for EPF/ESIC (are you in Kolkatta ? I am told in Kolkatta and Mumbai anything is possible am I correct ?) and ask them what to do, they will guide you with everything. You have to spend some money also. Are you prepared to spend? No option one day or other these are all have to be faced. Don't get panic, like you there are lakhs and lakhs of firms are in India. You will get it done.

From India, Bangalore
Hi Prachi
Its good that your company has started regularising its affairs.
As an HR you have a lot of activities to be undertaken. See that the Offer letter/Appointment letter you issue are apt so that registration and other activities under the EPF& MP Act 1952 gets complied with.
Accordingly you can start processing for Payroll also. So far you may have worked only on the Net Pay concept, as all payments are in cash. Henceforth you shall have to take care of other components too. In fact it would be ideal if you can arrive at Pay bands for all employees, working out with their designations/job role; qualification and experience, seniority in the company and the salary that they are actually getting.
Do feel free to seek further help, as you go about setting up a regular HR department and HR functions. It will help if you can also share your academic qualifications and experience, to enable members to give appropriate guidance to you.
Warm regards.

From India, Delhi
Dear Sir,
Thanks for your valuable suggestions. Pls note I am an MBA in HR from Symbiosis with an experience of 5 yrs in HR. Would like to ask you about the following points, if you could pls provide me with the reply:
1. Standard No of days for monthly salary calculation.
2. Currently company is providing only the offer letters not the appointment letters, in that case is company anyways bound under any statutory non compliance.
3. Company's main business is selling debentures in market and reinvesting the money in other sectors, so this case is the company is also liable for the PF & ESI for those employees working in other sectors.
Prachi Desai

From India, Kolkata
Prachi It is good at least your company started initiating steps to regularize the statutory obligations. B.Saikumar Mumbai
From India, Mumbai

Dear friend,

1. Avg.salary calculated for 30 days (including paid holidays). If you have to pay proportinately, say for 10, 15 days etc. take average salary per day (divided by 30 days) and pay. Some firms take actual no.of working days in a month (say 25, 26 days) and arrive at per day salary. Some use total calendar days, say 28, 29, 30 & 31 days. This goes according to the practice followed in the firm.

2. Yes, offer letter is not to be taken as Appointment letter for the simple reason that any offer doesn't contain the whole text of Terms & conditions. Secondly it will remain as "offer" this can be confirmed only by the Apptt.letter. Even statutorily Apptt. letter is a document form part of statutory records. An offer letter could be there or not, this takes as a binding document only when it is accepted by the offered, when it is not accepted it has no role to play.

3. Is your firm regd.under NBFC ? or remains only as an Investment co. ? Do you also lend or borrow money, collect deposits from public ? Much would depend on the status of your operations. In any case there is no Exemption from PF/ESI if you are not a banking Co. for which separate provisions will apply.


From India, Bangalore
Dear Prachi

I agree with the comments posted by kumar s., on your queries; and further I would like to add the following :

1 : Standard no. of days taken is either 30 or actual days in that month (from 28 to 31); depending on the legacy practices of the company. Now, for monthly salary this includes Sundays/Weekly Off, Closed Holidays.

For per day absence in case of Leave Without Pay, the monthly salary is divided by the NUMBER of days taken in "standard no. of days in a month" to arrive at a day's salary.

2.: It is safer to start with "Öffer Letter" as its not legally binding; and the next step is the Appointment Letter, which implies a commitment for employment. The formal Date of Joining is crucial; as it signals the application and Compliance of the Statutory provisions like PF, ESI etc. In other words, once Appointment Letter is issued and the employee has "joined" on roll, there is no escape from legal compliances.

3. : Your company would be covered under the Shops and Establishment Act; as evident from your description of its activities. Accordingly all the related/applicable labour legislations like PF, ESI etc shall apply.

Thanks for informing that you are an MBA with 5 years of HR experience - it will make communication easier and unambiguous.

Warm regards.

From India, Delhi

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