Understanding PF and ESI: Is Your Company Required to Register with These Schemes?

Hi,

Can anybody please explain how PF and ESI are handled by HR and whether it is necessary for a registered company to be registered with PF schemes?

hi,

well any organisation where 2 or more employees are

working covered under PF act....as per the rule both

employer n employee contribute to it total contribution is

24% in which 12% contributed by employer n 12% by employee.

ESI ACT

It is applicable to non-seasonal power using factories employing 10 or more persons and non-power using factories employing 20 or more persons.The Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatre, road motor transport undertakings and newspaper establishment employing 20 or more persons.The existing wage-limit for coverage under the Act, is Rs.7500/- per month (with effect from 1.4.2004). Now it is 10000/-

CONTRIBUTION

The employee's contribution rate (w.e.f. 1.1.97) is 1.75% of the wages and that of employer's is 4.75% of the wages paid/payable in respect of the employees in every wage period.

CONTRIBUTION PERIOD AND BENEFIT PERIOD

There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under.

Contribution period

1st April to 30th Sept.

1st Oct. to 31st March

Hi Premlatha and Divya Choubey,

The concept of PF and ESI, and the leave policy, have already been discussed in the past. If you can search in the quick search menu for more details.

Divya, I agree with your ESI concept but not with the PF breakdown:
- Employee Contribution: 12% (on basic salary)
- Employer Contribution: 13.61%
- 8.33% Pension fund + 3.67% provident fund
- 1.1% Account No. 2 (PF Salary i.c Basic Salary)
- 0.5% Account No. 21 (PF Salary i.c Basic Salary)
- 0.01% Account No. 22 (PF Salary i.c Basic Salary)

The total amount to be remitted to the PF office is 25.61% on or before the 15th of the next month.

Regards,
Kugan Paramasivam
09840485689

Divya Choubey

Hi Kungan,

Thank you for your reply. However, I still do not understand the following:

From Employer 13.61%:
- 8.33% Pension fund + 3.67% provident fund
- 1.1% Account No 2 (PF Salary inclusive of Basic Salary)
- 0.5% Account No 21 (PF Salary inclusive of Basic Salary)
- 0.01% Account No 22 (PF Salary inclusive of Basic Salary)

WHAT DOES IT MEAN?????

DIVYA...

Hi, Satya.

What about 0.5%? I know that goes to link schemes. What about other things? 1.1% - what does that mean according to accounts 2, 21, 22? What are those?

I have a question:

Under the EPF Act, the company is supposed to contribute 8.33% of the wages towards the Pension Scheme (out of the total 12% total employers' contribution). Now, this 8.33% is deducted up to the salary of Rs. 6500/- only, even if the salary is more than Rs. 6500/-.

For example:
Employer's salary is Rs. 10000/-; now, on that, 8.33% would be Rs. 833/-; however, the maximum contribution towards the pension scheme would be Rs. 542/- (8.33% of Rs. 6500/-) only.

Why is it so? Is there any provision for this in the act?

Please help me satisfy this query.

Jayesh Naik
Ahmedabad

Dear Mr. Naik,

As per your query, the PF is payable on Basic+DA and the encashment of EL only, not on the whole salary first.

Now if the Basic + DA of an employee is Rs. 10,000.00, then the deduction shall be as follows:

1. Employee Share @ 12% = Rs. 1,200.00 (Deposit in A/c No.-1)
2. Employer Share @ 8.33% (Maximum up to Rs. 6,500.00) = Rs. 541.00 (Deposit in A/c No.-10)

This is the maximum limit of the amount which goes to the EPF (as the Basic is more than Rs. 6,500.00 in the case as mentioned above).

3. Employer Share @ 3.67% (Difference between 12% - 8.33%) = Rs. 659.00 (Deposit in A/c No.1)
4. Admn Charge payable by the employee on the Total amount i.e. Rs. 10,000.00 @ 1.1% = Rs. 110.00 (Deposit in A/c No.-2)
5. EDLI charges payable by the Employer up to Rs. 6,500.00 @ 0.5% = Rs. 33.00 (Deposit in A/c No-21).
6. Admn. Charges to EDLI @ 0.01% = Rs. 2.00 Minimum.

If you adopted a policy in lieu of EDLI from LIC or anywhere else and got the exemption from the competent authority, then in that case, you do not have to pay the EDLI charges to the PF Department. You have to pay the Admn. Charges to EDLI @ 0.005%.

Thanks and Regards,

Abhishek Sharma

Dear Abhishek,

Thank you for your detailed explanation, but you have not answered my query. What I am asking is, where is the provision in the EPF Act that we have to deduct pension contributions at 8.33% on ₹6500 only and not on any salary in excess of ₹6500? Additionally, why is the maximum amount in the pension fund ₹641?

I hope you now understand my question.

Regards,
Jayesh Naik

Dear Mr. Naik,

Thank you for the discussion. You can find the information in the book "WHAT EVERYBODY SHOULD KNOW ABOUT LABOUR LAWS" written by H.L. Kumar.

Thanks and Regards,
Abhishek Sharma

Dear Mr. Naik,

Please see the attachment regarding your query. I believe it will provide you with the complete answer.

Regards,
Abhishek