How Do You Calculate Salary and PF with Varying Monthly Days? Seeking Insights!

Hi,

I would like to know about salary/PF calculations.

How do we need to calculate salary? Is it 26 days per month, 31 days per month, or should we consider an average of 30 days? What about February?

If an employee is on leave, the take-home pay will vary based on the number of days when calculating the salary.

I request you to share your knowledge.

I work for an IT company with a turnover of 60+.

Thanks in advance.

Regards,
Sritha.R

PF is calculated on the actual salary (basic + DA only) paid to the employees. If you have paid salary for 21 days only (the rest of the days the employee was on leave without pay), then that salary will qualify for PF deduction and contribution. If you have paid salary for 30 days, that will be the salary for PF. If you pay salary for 28/29 days in the month of February, then you need to take that reduced salary for PF as well.

Regards,
Madhu.T.K

Thank you, Madhu. It's nice to see that you are from ICFAI INC. Is there any hard and fast rule when calculating the salary? How many days do we need to consider?

Warm Regards, Sritha, R

Dear Sritha,

Salary may be calculated on a daily basis, weekly basis, fortnightly basis, or monthly basis, whereas PF returns are to be filed on a monthly basis only.

Regards,
Madhu.T.K

Hi Sritha,

There is no hard and fast rule for calculating salary based on the current month's days or 26. However, auditors object to calculating based on 26 as weekly rest days are paid.

Best,
Jav

PF towards salary has to be calculated in 30 days, i.e., 365 days / 12 months = 30.416 rounded to 30 days per month. However, in the case of Ms. Sritha, if she calculates in 26 days (avoiding weekly off days), there will be a violation of labor rule, which states that labor should attain a weekly off. So, all the calculations of EPF and the ESI have to be done in a 30-day month manner.

Regards,
Linnan

12% equal contribution towards PF from both employer and employee. PF & Superannuation contribution put together should not exceed 27% of the total contribution towards the pension. In PF, the employer has the flexibility to contribute at 12% of the employee's basic or Rs. 6500 per employee. Now, out of the employer's PF contribution, 8.33% of basic/Rs. 6500 max is segregated and credited to the pension fund. Due to this fact, depending upon the way the PF fund is managed, company-owned/third party, the encashment amount at the time of separation will vary.

Cheers,
Bala

By the way, there was news circulating earlier that it's going to be announced in the Gazette that the maximum ceiling for PF/pension contributions will be raised to Rs. 10,000. Has this change taken effect?