Understanding PF, EPS, and ESI: Do We Calculate Using Only Basic Salary or More?

Could anybody please confirm what the amount to be calculated for PF, EPS, and ESI is? Whether we have to consider only the BASIC amount of the salary for calculation or any other salary head to be added to BASIC.

What is the minimum wage for calculating ESI?

Mr. Shankar Ganesh,

You need to learn more about PF & ESI. PF Wages mean Basic + DA + Food subsidy + leave encashment (if paid). On PF wages, the employee contributes 12%, and the employer also contributes 12%. The employer's contribution is split into PF 3.67% and Pension 8.33%. The PF wages ceiling is up to Rs. 6500/-.

ESIC wages mean basic + DA + allowances + overtime. However, Conveyance should not be considered. The ESI revised limit is Rs. 10,000/-. The employee contributes 1.75%, and the employer contributes 4.75% on the total ESI wages.

The minimum wages also attract ESI deduction.

Regards,
Bhushan Dahanukar

Dear Mr. Bhushan Dahanukar,

PF calculation is done on Basic + DA only. There is no need to include leave encashment and food subsidy. Under ESI, deduction is based on gross salary, which includes basic, DA, HRA, Convenience, and Special Allowance. All components falling under gross salary must be considered for deduction.

Regards,
Srinivas B

I am attaching a file containing the details of ESI wages. Just go through it.

Can anybody clarify my following queries:

Calculating Monthly Salary for Daily Rate Wages

1) How do I calculate the monthly salary of Rs. 15,000/- in the case of daily rate wages? What is the rule applicable for absenteeism? For example, if a person works 30/31 days in a month, they will exceed the monthly salary of Rs. 15,000/-. If he/she is absent for even one day, their salary will be below Rs. 15,000/-. In such a case, are they eligible for ESIC deduction or not?

ESIC Coverage and Salary Fluctuations

2) An employee was de-covered from ESIC Coverage from October-12 to January-13 as his salary was more than Rs. 15,000/-. However, in the month of Feb-13, he only receives 28 days' salary, which is less than Rs. 15,000/-. What are the rules applicable as per the ESIC Act, 1948? Will the employee be subject to ESIC deduction or not?

Regards,
Sudhakar M. Acharya

Daily Rated Wage System and ESIC Eligibility

My question is about the "daily rated wage system," specifically:

• How to treat absenteeism while calculating the ESIC salary of Rs. 15,000/-? For example, Workman A worked for 31 days in January 2013 and received a monthly salary of Rs. 15,500/-, while Workman B worked only 28 days and got a salary of Rs. 14,000/-. In this case, Workman B is eligible for ESIC deduction. In my view, he should be de-covered from ESIC since if he had worked for 31 days, his salary would have been Rs. 15,500/-.

• Similarly, in February 2013, for instance, Workman A will receive only 28 days' salary, i.e., Rs. 14,000/-, which is below Rs. 15,000/-. Is Workman A still eligible for ESIC deductions?

Nothing has been mentioned in the Act. The Act specifies the eligible salary per month for ESIC deduction is Rs. 15,000/-.

Please clarify.

Regards,
Sudhakar M. Acharya.

Thank you very much for the information. However, my query is different.

I know the eligibility salary for ESIC is Rs. 15,000/- and the contribution period is from April to September and October to March. Even if a worker is once covered in the months of April or October, irrespective of wages, whether they are more than Rs. 15,000 or less than that, the employer should deduct the ESIC. There are no issues for those workers who are paid monthly.

The issue arises for workers who are paid on a daily basis, where they receive wages for the number of days worked in a month. If a worker works for the full month, i.e., 26 days (excluding Sundays), they will earn wages exceeding Rs. 15,000 and will be out of ESIC coverage. However, if a worker is absent for 2 days and receives wages for only 24 days, their earnings will be below Rs. 15,000. My question is how should such a worker be treated? Is the employer obligated to deduct ESIC for this worker, or will they be considered out of ESI coverage since if they had worked for 26 days, their salary would have exceeded Rs. 15,000?

Moreover, from October 2012 to January 2013, most of our workers earned wages exceeding Rs. 15,000 as they worked for 26/27 days (excluding Sundays) and were out of ESIC coverage. However, in this month, February 2013, with only 28 days, the workers will receive wages for 24 days only, which will be less than Rs. 15,000. My question here is, should they be enrolled for ESIC or not?

Kindly advise me.

Regards,
Sudhakar M. Acharya