Understanding EDLI Calculations for New Employees with High Basic Salaries: Is This Approach Correct?

Dear Sir/Madam,
Please guide us for considering the EDLI basis amount for an employee whose Basic salary is more t han 6500.00 PM and has newly joined in our company during the month. His paid days for the first month is less than the actual monthly days. His PF basis amount is coming more than Rs. 6500.00.
Eg. Basic Amount = Rs. 10,000.00
DOJ – 10.07.2009
Paid days – 22.
PF basis amount = 10000 * 22/31 = 7097.00.
EDLI Basis Amount = 6500 *22/31 = 4613.00.
Is it correct

Dear Yogesh,

EDLI (0.50% of basic) will be calculated on drawn basic salary, up to a maximum of Rs. 6500. So, in your case, the employee has earned more than Rs. 6500, and you have to pay EDLI on Rs. 6500, not on a pro-rata basis.

For example, for the above-mentioned employee, you will pay the EPS amount as Rs. 541, not on a pro-rata basis. Similarly, you have to calculate on the earned basic salary.

Apart from that, you need to pay an EDLI admin fee of 0.01% of basic.

I hope I have cleared your doubt.

Regards,
Keshav Reddy.

Hi,

Let me make it clear. Always keep in mind while running the payroll.

For PF admin charges, calculate 1.1% on total (Basic + DA).

For EDLI, calculate 0.5% on basic or 6500, whichever is less.

For EDLI Inspection/Admin charges, calculate 0.01% on basic or 6500, whichever is less.

Round off all the values to the nearest rupee. To be frank, calculate these account heads for every employee, finally sum up the column, and round off the figure for each column. Now your EPF challan remittance A/c.1, 10, 2, 21, 22 are finished at one go for that month's payroll. This would avoid calculation errors in the finance department.

Often, confusion is arising in this forum because I have seen that many members just refer to 'basic wages' blindly and not specifically with actual basic or the ceiling limit for EDLI.

Now the trend in Employer contribution is followed as 780/- maximum. Here EPS is calculated as 8.33% on 6500 or basic, whichever is less, and EPF is (Employee PF contribution - EPS contribution) share. There are good companies that contribute 12% without a ceiling, but always ensure that the employee and employer contribute 12%. Hmmm... what to do!!

If the employer restricts his EPS to 6500 then,

(say) for Basic = 10000, then Ee PF = 1200, Er PF = (1200-541), EPS = 541.

But RPF has accepted this version also, i.e., EePF = 1200, ErPF = 239, EPS = 541. So you have altogether 4 models to follow as you wish.

Hope the doubt is clear now.

Regards,

Chandru

Consultant

Hi all, greetings for the day.

I have recently joined this forum and need guidance on whether we can deduct P.F. on a pro-rata basis in case an employee's actual basis for the month is more than ₹6500 after deducting leave without pay.

If anybody has any case law on this subject, please provide.

Thanks and regards,
Raj