Navigating PF and ESIC for Small Teams: Seeking Guidance on Compliance and Contributions

Dear Seniors,

Let me introduce myself as Deepthi Shetty. I am working as an HR Executive in a growing IT service providing company. I am primarily responsible for recruitment, payroll, and leave management. I am the only HR personnel in the organization, managing a team of only 28 employees.

Inquiry About ESIC and PF Requirements

I wanted to inquire whether it is mandatory to pay ESIC to employees with a salary below ₹15,000 per month. We have 8 employees earning below ₹15,000 per month and 4 office boys on a wages basis. Is PF and ESIC mandatory once we exceed a headcount of 20 employees? Could you please explain how ESIC functions? I have heard that the ESIC limit is ₹15,000 per month. What does this mean? Do employees below ₹15,000 not pay the 1.75%, but the employer has to pay 4.75%? For employees earning above ₹15,000, do both the employer and employee have to contribute?

Furthermore, is the payment monthly? What is the procedure for this? I apologize for any inconvenience, but I am in need of guidance from seniors.

Thanks & Regards,
Deepthi Shetty.

Before deducting the ESI amount, you should understand what the ESI Scheme is all about and whether it is applicable to your organization. Please review the attachment, which provides you with all the details regarding ESIS.

Regards,
Richard Rebello
[Phone Number Removed For Privacy Reasons]

PF and ESIC Applicability

PF and ESIC are applicable to your company as the employee strength exceeds 20. PF would be 12% - deducted on Basic + DA. ESIC would be deducted on Gross Salary up to ₹15,000/-. Above ₹15,000 gross salary, ESIC is exempted. ESIC would be deducted on all employees drawing less or up to ₹15,000/- irrespective of the employment status as daily wages or monthly salaried.

ESIC Contributions

ESIC contribution from employee salary is 1.75% and Employer contribution is 4.75% calculated on Gross Salary. Hence, the total contribution of employee and employer is 6.5%. Both PF and ESIC need to be paid monthly. Please visit the site where the necessary information is provided.

Hope this resolves your query. You can email me at [Email Removed For Privacy Reasons] for any further clarification.

Regards,
Manasi

ESI

Please verify if your area is covered under ESIC. If yes, ESIC is applicable for organizations with 20 or more employees. In your case, you have 28 employees, and 8 employees earn below ₹15,000 of gross salary, so you are required to deduct under the ESIC rule.

Once ESIC is applicable, even if you have less than 20 employees on any day, ESI will continue to be applicable. For salaries of ₹15,000 and above, the contribution rates are 1.75% from employees and 4.75% from employers, totaling 6.50% (excluding Washing Allowance).

Contribution Period and Benefit Period

- April to September: Benefit period is October to March
- October to March: Benefit period is April to September

Payment of Contribution: Before the 21st of every month

PF

- Minimum wages (Basic + DA): ₹6,500 per month
- Number of Employees: Minimum 20
- Employee Contribution: 12% on Basic
- Employer Contribution: 12% on Basic

Payment to PF Organization

- A/c No 1: 3.67% of Employer's Contribution (12%) + 12% of Employee's Contribution
- A/c No 2: 1.10% Admin Charge on Net Basic
- A/c No 10: 8.33% Employer's Contribution
- A/c No 21: 0.05% (On total Salary - Basic + DA) EDLIS
- A/c No 22: 0.01% (On total salary - Basic + DA)

The above payments should be made before the 15th of the month, and Challans, Form 5, 10, 12A, 2 should be submitted before the 25th of every month. Annual returns should be filed before the 31st of April, along with Form 3A and 6A.