Harsh Kumar Mehta
Consultant In Labour Laws/hr
Management Consultants Legal & Hr
Legal Advisor Compliance And Benefit
Korgaonkar K A
Asst Manager - Hr (jyoti Plastics Works Pvt
Asst Manager Hr
[email protected]
Part Time Any Data Entry Jobs
+8 Others

Dear All,
I have lot of confusion on ESI and PF Matters:-
1) If Employee salary is Rs. 14,000/- (assuming Basic + DA and no other component) and he took leaves for 5 days. In this case his Gross Salary is Rs. 14,000 whereas after considering leaves his salary will be Rs 11,667/-. Now ESI will be deducted on 11,667 or Rs. 14,000/-???? and Why?? PF also liable to deduct on Basic +DA. In this case PF will be deduct on 15,000 or 11,667 or 14,000/- (Plz reply ASAP)
2) If in the above case his salary will be 16,000/- then what will be the deduction amount for ESI and PF?
3) Our Management has decided to deduct employee nd employer share from employee salary only. What will be the consequences of this case?
4) Our accountant calculate every month salary on the basis of 30 days even such month belongs to 28 or 31?? Is it correct?
I am waiting for your response.
Thanks in Advance,

From India, New Delhi
Hi Garima, Good Question for all to gain basic knowledge. PF & ESI Always deduct on Earned Basic + DA. So In your case 11667 is Earned basic so deduct on it
From India, Delhi

1. ESI Contribution on wages paid on leave sanctioned is payable. However, ESI contribution on encashment of leave, if permissible, after a selected year/period is not payable.

2. At present, ESI wage limit is Rs. 15000/- Therefore, contribution on Rs. 16000/- as wages is not payable provided this amount does not include Overtime amounts and also that the employee is getting Rs. 16000/- since beginning of present contribution period. If the employees' salary is enhanced in any month during contribution period, his contribution is required to be deducted till close of contribution period. (Section 2(9) & Rule 50).

3. Deducting employers' share of contribution from wages of employees is violative of provisions of ESI Act, 1948 and is also an offence punishable under said Act. (Section 40 & 85(b). However. the term "CTC" as is generally called in HR circles is different than "wages".

4. The terms "wage period" (Section 2(24) and "average daily wages during a wage period" (Rule 2(1-B) have been defined under said Act and Rules framed thereunder. Please refer the same.

If you have any more doubt, I will suggest you to seek clarification in writing from the appropriate office of ESIC before making any decision so that there may not be any violation or levy of interest or penalty due to any wrong applications of provisions of said Act and rules/regulations framed thereunder.

From India, Noida
PF is calculated on Basic+DA ESI is calculated on Earned Gross
From United States, Ogden
Can u pls clarify ??
If a person's Gross Salary is 18k, but becos of loss of pay earns only 13000/- in a particular month say, Sep 2014, ...what will be the contbn amount for that month...15000*12% = 1800/- or 13000/- * 12% = 1560/-

From United Arab Emirates
Dear Bhuvana
Pf deduction will calculate upon Basic+DA of employee. Basic + DA percentage will depend upon company policy. if you company Basic+DA is 50% then pf deduction will be like 13000*50%=6500, then Basic+DA= 6500/-, now PF deduction will be 6500*12%= 780/-,
any clarification you can contact 9908410310. (Sudhakar)

From India, Madgaon
Dear Bhuvana,
There are many things as practically calculation of PF, its depend on earning during the month if Basic+DA is only 13000/-rs for the month of Sept-14 then calculation will be 13000/- * 12% = 1560/- rs from employee part contribution.
if you want discussion on this topic, i will surely help you this is very interesting topic regarding PF contribution. and you will be surely learn with discussion more new things for PF.

From India, Delhi
Dear Bhuvana, You should always calculate the PF deductions on earned salary of the respective month i.e you should calculate 13000*12%=1560/-. regards, Ankireddy
From India, Mumbai
Dear Garima,

I give below reply in response to your queries in simple way to understand:

1) ESI as well as PF contributions will deducted on Rs 11,667/ ,which is total salary earned by an employee during the month in question. Please note that ESI contribution is payable on gross salary and PF contribution is payable on Basic & DA.

2) Due to annual increment,the aforesaid employee's salary is revised to Rs 16,000/ per month (Basic & DA), PF contribution will be deducted @ 12% on Rs.15,000/ pm from employee and employer's contribution @ 12% plus 1.61% Admn etc charges (Total 13.61%).

As ESI ceiling limit is Rs 15,000/ pm, no ESI contribution is payable but If the employee's'salary is increased in any month during contribution period, his contribution is required to be deducted till end of contribution period i,e contribution period -April to September & October to March.Once the contribution period is over, you need not require to deduct and deposit ESI contribution of the said the employee since he is out of the ESI coverage.

3) Your Management has decided to deduct employee & employer from employee's salary, which is contrary to PF Act.It is highly illegal.So convene not to take wrong decision. In this regard, I may refer to recent decision of the Apex Court in the matter of PF Commissioner vs Group 4 Security.

4 )Please follow "wage period" and "average daily wages during a wage period as per Act & Rules. However, in accordance with Minimum Wages Act, average daily wages can be ascertained as under i,e, total monthly wages divided by 26 to get daily wages.

From India, Calcutta
Dear Garima ji,

In fact I read your post on the day you posted it. I got confused myself on that day, indeed and decided not to reply.

Learned members including Harsh Kumar ji and Sibabrata ji since they contributed in your post, I read your post again.

You are a new member on this knowledge sharing platform. I do not know how old you are in HR but it seems from your post that you are a fresher one.

What I feel, you should first try to understand what is salary or what constitute salary.

Your question is basically on Salary. I will advise you, you should first study some salary sheets and try to understand how the salary is calculated.

There are four basic parts in the salary sheet. First-one is attendance or days payable and rate of salary. Second-one is earnings with Gross Amount. Third-one is deductions. And forth-one is Net Payable i.e. Gross minus deductions.

It seems you have made mistake in writing I think, You mean to say- Gross Salary is Rs. 14,000 and if 5 days leave salary is deducted then Gross Salary would be Rs. 11,667.

Now your question is, whether ESI is to be deducted on Rs. 14,000 or on Rs. 11,667 and PF is to be deducted on Rs. 14,000 or on Rs. 11,667 or on Rs. 15,000?

Answer to your question is as under:

PF and ESI is deducted on earned salary. Earned salary is inclusive of leave salary. PF is deducted on earned Basic + DA and ESI is deducted on earned Gross. In your case Basic+DA and Gross is same. So PF as well as ESI will be deducted on Rs. 14,000.

Hope your confusion is removed.

From India, Mumbai

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