Starting as an HR Exec at a New MNC: How Do I Handle PF and ESI Registrations?

Dear Friends,

I'm going to join a newly starting MNC as HR Exec. So, I'm a stranger to the registration process for PF, ESI, and other requirements for the new company. Could you guide me on what needs to be done?

Advance thanks

Hi Siva, Provident Commission is a part of the local labor authority. You need to fill in an application which is available at all court. Provident Fund Registration is optional if the employee strength is not more than 20. The process of registration will take a maximum of 2 days. For ESI, you need to get registered with the ESIC department (which is a part of the local labor authority). ESIC Registration is optional if the employee strength is less than 10. This process will take a maximum of 1 day.

Deepali

Hi Deepali,

Can you please help me out with the PF and ESIC procedures? I don't even know about them. Could you please let me know the step-by-step process of PF and ESIC practical workings in an organization? What are the responsibilities of an HR Executive in handling the same, especially if the person doesn't even know the basics of PF and ESIC?

I understand that explaining this may take some time, but I would be grateful if you could assist me.

Regards,
Manish

Hi Manish,

Is Shara providing the facility of ESI and PF to the employees? In which sector of Shara are you?

Deepali

Deepali, actually, there are different cells, and I am not in the PF & ESIC cell. They have their own trust, which is why we don't deal with the PF Office. Can you please help me with this? I know HR functions except for PF & ESIC functions. I only have theoretical knowledge of that, not practical.

Manish

Hi Manish,

For PF and ESI facility, a company needs to first get registered. The procedure I have already discussed.

The minimum number of employees within a company for PF is 20 and for ESI is 10. You need to calculate the PF amount, which is deducted from the employee's salary. PF is a form of saving. Once an employee is registered with the PF office, they receive a PF number that can be used in the next company, and the savings can be carried forward.

Some companies do not provide the PF facility to employees on probation or on a contractual/part-time basis. PF constitutes 12% of the employee's salary, and the employer's share is the same. For example, if an employee has a basic salary of 10,000, their monthly PF contribution would be 12% of 10,000, which amounts to 1,200 (deducted from their salary) plus an additional 1,200 from the employer's contribution, making the total PF saving per month 2,400.

In some cases, companies deduct the employer's contribution from the employee's salary instead of providing their share. In the previously mentioned example, this would result in 2,400 being deducted from the employee's salary.

PF is given to the employee upon retirement. A portion is transferred to the employee's account, while another part is allocated to a pension plan. The pension plan is not applicable in cases of voluntary retirement.

ESI:

For ESI, the company deducts a fixed amount from the employee's salary on a monthly basis, as determined by the ESI department. Once an employee is registered with the ESI department, they receive an ESI card that grants them access to free and discounted facilities in ESI and government hospitals. The ESI Department provides a list of such hospitals.

Similar to PF, the ESI card can also be transferred to the new company. PF is mandatory for companies with a minimum of 20 employees, and ESI is required for a minimum of 10 employees.

Deepali

Dear Friend,

Is it a construction company? If so:

1) You have to register with the local Assistant Commissioner of Labour Office through your Principal Employer.
2) Regarding PF, through the local PF Enforcement Office. Ensure that one authorized signatory should be the Principal Employer.
3) Regarding ESI, through the local ESI Office. Ensure that the local area is coverable or not.

If it is a corporate office:

1) You have to register with the local Labour Department as per the Shops & Estb. Act.
2 & 3 are common.

Regards,
PBS KUMAR

Hi, if you are in Chennai, kindly provide your contact number. I can help you as I have over 35 years of practical experience on payroll-related compliance.

GK

Hi Deepali,

Thank you for the information. It's really beneficial. I am even planning PF for my employees. However, the Google material is very theoretical. Thank you for the knowledge.

Stay in touch.

Regards,
Megha

Hi,

Now a ROCKET is going on by RPFC of various states. Each state is giving different findings and interpretation of the definition WAGES/BASIC. In my view, as long as the act is not amended to give definition of Basic, the commissioner cannot give their own interpretation, so long as THERE IS A CONTRACT OF EMPLOYMENT. Asking the employer to pay contribution on the minimum wages is contrary to the Supreme Court judgement on Minimum wages. The judgement clearly indicates that it is not the minimum rate, so long as the employer pays more than the minimum rate including all the allowances, there is no irregularity. The RPFC commissioner, out of anxiety, issues circulars which is bad in law.

GK

Dear Deepali,

Our organization is in the freight forwarding business. We have started PF for our employees, and management has decided that for those whose salary is above 10,000.00, their PF share (Employer's Contribution) will be deducted from their salary. Is this according to PF rules?

One more thing about the PF (Form No. 2), an employee who is a bachelor can mention his brother's name in the Nominee column. In Part-B of the same form, there are two paragraphs. Which paragraph should be filled out by the bachelor person?

Regards,
Nirmal

Hi Nirmal,

It is incorrect that the management contribution can be restricted to Rs. 6,500. The employer contribution cannot be deducted from the employee's salary. In most companies, the employer contribution is included as part of the Cost to the Company (CTC). If that is the case, it is acceptable.

Regards,
GK

Hi,

I am new in HR and want to confirm, aside from PF and ESI, what are the other benefits that are deducted and can be added in the employees' accounts? Also, what does TDS stand for and what percentage is applicable for this?

Kavita

Waiting for a reply. If someone is unmarried, in this case, to whom should he make the nominee? Either his brother, who is married, or his father, whose age is around 58, and his mother is already deceased.

Your earliest reply will be highly appreciated.

Regards,
Nirmal