Saswatabanerjee
Partner - Risk Management
Apex Management
Labour Laws Consultants
Pramodthakar
Taxation And Hr
Vmhr@rediffmail.com
Sr. Manager (p&a)
+1 Other

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Dear Professionals,
I have a confusion, since ESIC ceiling limit has be raised to 21000:
We have an employee of gross salary 15200/PM . this is his basic salary as well.
Now after deducting his part in esic contribution of 1.75%, his net salary becomes 14934 PM.
So now, does his basic salary become 14934 PM and falls under EPF .?
Kindly make my doubts clear.
Thank you
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Dear Sushma,
You have mentioned that his Gross Salary is Rs.15200/-. Yes he falls under ESI w.e.f. 1st January 2017 since the ESI threashold limit is increased. ESI dues calculation is applicable on Gross Salary.
ESI is deduction, it affects on In Hand pay and does not on Gross Payment.
You have not mentioned the Pay Structure, only gross salary is mentioned.
It appears that you do not have any salary structure as such. To avoid the ESI & EPF you have kept his
salary more than the threshold limit of Rs. 15,000/-
Now about EPF, - EPF dues calculation is based on Basic + DA+Food allowance. For the purpose of entitlement of membership, these three amounts [monthly rate] are considered.
Please take a note, EPF threshold limit is also expected to increase to 21000 or 25000 any time in near future.
So first, make the proper pay structure under proper guidance.
Thank you Mr. Pramod.
I want to clarify that, we did not bifurcated this salary. this is candidates' basic salary and gross earning as well.
So my Question is now will 14934 will be considered his basic salary or 15200 will remain.
Now with this does he comes under epf contribution as well.
Please guide.
pardon if I could not understand well.
Thank you.
Dear all,
Please note that the rate of salary / wage (not after deductions) is considered for coverage of ESI and EPF. In your case, if the rate of pay (Basic and DA) is beyond Rs.15000/-, he is at present exempted from the EPF preview subject to fulfillment of few condition.
P K Sharma
under the present conditions there is no need to recover EPF. V.Murali
Got My answer. Thank you very much Apex, VM HR and MR. Pramod for your help. Regards
Sushma,
You need to understand the concept of basic and gross
Basic salary (For PF) and gross salary (for ESIC) is the salary you have contracted / agreed to pay to an employee every month if he has worked on all days other than approved leave, holidays and weekly off.
It does not reduce for any deductions you are required to make, whether for PF, ESIC, income tax, leave without pay, profession tax, etc. So your gross / basic for the employee remains at ₹15200 and therefore out of scope of PF contributions.
Also please remember making a complicated salary structure is not a requirement and there is nothing in law that requires you to breakup the salary into various categories. If you have people who are under income tax, then only you would need to consider a structure that will make it tax efficient for the employee. again, some people use salary structures to reduce their PF contribution, but in the end, the amount is rarely significant.
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