Navigating PF Deductions: How to Calculate Salaries with New Minimum Wage Rules in Gujarat?

Dear Seniors,

We have recently raised the salaries of our employees. However, as per the new PF rules, PF deductions should be done on at least the minimum wages. The current minimum wage in Gujarat is Rs. 4550/-.

Calculating Salary with New PF Rules

As per the new PF rules, if I have to calculate the salary of an employee with a CTC of Rs. 5000/- or Rs. 4750/-, how should I proceed? The various salary components in our company are: Basic (60% of CTC), HRA (40% of Basic), and the rest is treated as other allowances, which together form the gross salary of the employee.

Out of this, 12% of the basic is deducted as PF, ESI (1.75% of gross), and PT as applicable. If the CTC of an employee is Rs. 4750 or Rs. 5000/-, how should I consider all the components of employee earnings (Basic will now become Rs. 4550/- as per the minimum wage under PF rules) and how should I work out the salary structure?

Please guide.

If the gross salary is ₹5000/-, define the basic salary as equal to the minimum wages, and the remaining amount can be paid as other allowances. You can also divide the minimum wages into Basic and DA, but make sure that you calculate PF on both heads (Basic + DA). Otherwise, let the minimum wages be under one head only, i.e., basic. You can surely allocate some amount under other heads if your company wishes to pay as an increment; otherwise, let other heads remain zero.

Regards,
Saunee

Dear Saunee,

Thank you for your reply. My dilemma is as follows:

CTC - Rs 5000/-
Basic - Rs 4550/-
HRA - 0
Other Allow - 0
Gross - Rs. 4550/-
PF (Employee Contribution) = 12% of 4550 = Rs. 546
ESI (Employee Contribution) = Rs. 80/-
PT = Rs. 20/-
Take home = 4550 (Gross) - 646 (Employee Deductions) = Rs. 3904/-
Company Contribution (PF) = 12% of 4550 = Rs. 546
ESI (Company Contribution) = 4.75% of 4550 = Rs. 217

Now, the calculation should be:
CTC = Take home + Employer Contributions = 3904 + 546 + 217, which totals Rs. 5313/-
However, my CTC has been fixed at 5000/-

I hope you now understand my real problem of adjusting the CTC without reducing the Basic salary below the minimum wages. This issue also arises for any CTC less than 5300/-

Kindly revert.

Understanding CTC Calculation

The total CTC will be:

- Gross: 5000
- ESTB Share EPF: 619 (13.61%)
- Estb Share ESI: 238 (4.75%)
- PT: 20
- Total: 5877

Note: In some companies, leave and bonus are also part of CTC.

Regards,
Harkishan Tanwer
[Phone Number Removed For Privacy Reasons]

The quantum of minimum wages and the employer's contribution are constants over which you have no control. On the other hand, you want to keep the CTC constant and are trying to fit in the minimum wage and the employer's contribution within the CTC. This is not always possible. You should have decided on the CTC based on the existing or future minimum wage.

With regards,

I agree with Mr. V. Harikrishnan's opinion. In certain emoluments, we have no control, since minimum wages are in a package.

Thanks & Regards,
Jana V

Agreed with Harikrishnan, your CTC is too low to cover all the statutory deductions, including the basic salary, which now has to be equivalent to the Basic salary. You need to increase the CTC of employees to make minimal adjustments in salary.

Regards,
Saunee

Thank you all for your valuable responses. However, I have not understood one thing: government organizations employ people on a contract basis, pay them below minimum wages at times, and do not deduct PF. How do government organizations ensure compliance when they mandate that private organizations must follow all rules, pay minimum wages, and deduct PF/ESIC as applicable? I understand that they do not directly hire people but employ them on contracts. However, PF rules specify that even for contract employees, PF deductions should start from day one. So, how is it possible for the government to disregard these rules?

Kindly advise. Thank you.

Regards,
Tittli

Hi all,

I am a contractor, and suppose one of my employees' salaries is $2000. How can I find the details below, or what calculation should I use to create ECR? Please tell me what percentage I should consider for the calculations. It would be a great help if you could provide me with this information:

1. Gross Wages: $2000
2. EPF Wages
3. EPS Wages
4. EDLI Wages
5. EPF Contribution
6. EPS Contribution
7. EPF_EPS_Diff_Remitted
8. NCP Days
9. Refund of Advances