Struggling with PF, Gratuity, and ESI Calculations? Need Help Understanding the Basics

Hi all, please, someone help me. How do I calculate the PF, Gratuity, and ESI contributions? What basis is used in these calculations? I would appreciate assistance with these calculations. Thank you.

Dear Prasad, huge discussions are there regarding this topic. You can use the research tab. Even then, if you can't clarify your query, then we can have a discussion.

Salary Breakup

- Basic: 1000
- DA: 500
- HRA: 400
- Others: 1000

Gross Salary: 2900

For PF Calculation

(Basic + DA) * 12% means: (1000 + 500) / 100 * 12 (same from the company) and other administrative charges 1.61%. Max up to 6500/-.

For ESI Calculation

Gross salary * 1.75%
From employee salary deduction means: 2900 / 100 * 1.75
From Employer: 2900 / 100 * 4.25
Max up to 15000/-. For more details, see the............

Regards

Subject: How to Calculate PF, Gratuity, and ESI

Please refer to the formula in the attached sheet for further details. Should you require additional explanation, feel free to discuss.

Regards,
Vinod Chauhan
Consultant
New Delhi

What are the contribution periods and what are the benefit periods in the ESI Act? In the Provident Fund, how do we calculate PF, pension fund, and DIL? If you have any materials on ESI, PF, Gratuity, and Superannuation acts, please share them.

Thank you.

What is the difference between a gratuity fund and a superannuation fund? Please, can someone provide information?

Can someone provide information on the contribution period and benefit period in the ESI Act?

Thank you.

ESI Contribution Periods

The ESI contribution periods are:
1. 1st April to 30th September
2. 1st October to 31st March

If any employee falls within the ESI limit (i.e., Rs. 15,000/- gross) during the contribution period, ESI will be deducted until the end of the contribution period, even if his/her salary is increased to above Rs. 15,000/-. The benefit period is the next contribution period.

Regards,
VGKVKM

Dear Prasadu, Thank you, VGKVKM, for providing good information. Please give a little more explanation on this topic, i.e., contribution period and benefit period in the ESI Act.

Contribution Periods Under ESI

1. Contribution periods under ESI are:
- 1st April to 30th September, and the benefit period for this contribution starts on 1st January to 30th June.

2. Contribution period:
- 1st October to 31st March, and the benefit period for this contribution starts on 1st July to 31st December.

Regards,
Kiran Kale.

I am sending some calculations. I hope you find the ESI & PF calculation useful.

Regards

I am sorry, Mr. Kiran is correct regarding the benefit period. When I replied quickly, I made a mistake.

Gratuity Calculation

Gratuity is payable if an employee completes 5 years of continuous service. Continuous service includes eligible leaves. For each year of service, the employee will receive 15 days of BASIC+DA. The payment is calculated based on 26 working days, i.e., (BASIC+DA)/26*15.

PF Calculation

PF is calculated based on BASIC + DA. It is deducted from the employee's monthly salary (Basic+DA) at a minimum of 10% (some private PF funds offer more than 10%). This amount will be deducted from the employee's salary, and they will receive the net of PF as their salary. The employer will also contribute the same percentage towards the employee's PF contribution. Upon retirement, the employee will receive both the employee and employer contributions with interest up to the date. Early withdrawal is also possible. For more details, refer to the PF Act.

Out of the employer's contribution, 8.33% will be allocated to the EPF pension.

Regards

[QUOTE=VGKNAIRVKM;1683626]

I am sorry, Mr. Kiran is correct regarding the benefit period. When I replied quickly, I made a mistake.

Gratuity is payable when an employee completes 5 years of continuous service. Continuous service includes their eligible leaves as well. For each year of service, they will receive 15 days of BASIC+DA. The payment is calculated based on 26 working days, i.e., (BASIC+DA)/26*15.

PF is calculated based on BASIC + DA. It is deducted from the employee's monthly salary (Basic+DA) at a minimum of 10% (some private PF funds offer more than 10%). This deduction will be taken from the employee's salary, and they will receive the net of PF only as salary. The employer will contribute the same percentage towards the employee's PF. Upon retirement, the employee will receive both the employee and employer contributions with interest accrued to date (early withdrawal is also possible).

For more details, refer to the PF ACT.

Out of the employer's contribution, 8.33% will go towards the EPF pension.

Explanation of Employee's Provident Fund

I wish to explain a few points regarding the Employee's Provident Fund. The coverage of EPF is statutorily applicable when the firm has 20 employees receiving salaries. The contribution percentage is 12% of the salary/wages, not 10%.

For units with less than 20 employees who choose to voluntarily cover under the EPF & MP Act Section 1(4), the contribution percentage is 10%.

Regarding withdrawals, employees who leave before completing 10 years of PF service can withdraw the full amount in A/C.1 and A/C.10, receiving interest only on PF accumulation (15.67%).

Employees with 10 years of service in PF/EPS can withdraw the EPF amount and are eligible for a pension after turning 58, or can opt for reduced pension at age 50 with a 4% reduction per year.

I hope this information is helpful for you and others seeking clarity.

Regards,
Kiran Kale

For ESIC, it is applicable until your gross salary does not exceed INR 15,000, and the monthly deductions would be 1.75% (employee contribution) and 4.75% (employer contribution).

For example, if my salary is INR 15,000 gross, I am entitled to ESIC. Even if you receive a salary hike in May, your ESIC deductions will continue until September, as ESIC returns are processed half-yearly.

Thank you.

Regards

Dear Mr. Kiran, Thank you for providing more details regarding PF. I would like to clarify that the EPF contribution has been increased from 8.33% to 10%, and for those who were contributing 10%, it has been raised to 12%. I mentioned this briefly in my previous reply. Upon reviewing your response, I visited the EPF website where they clearly outline the details as follows (ref epfindia.nic.in IN POINT NO 24):

24) What is the voluntary rate of Provident Fund contribution by the member? According to the Act, the member must contribute at the rate of 10% or 12% of their basic pay, D.A., and retaining allowance if any. If the member wishes to contribute more voluntarily, they can do so at any rate up to 100% of basic and D.A. However, the employer is not obligated to match the enhanced rate.

Regards, VGKVKM

Dear VGKVKM, Yes, it is true that for those covered under u/s.1(4), the rate of contribution is 10%, as mentioned in the aforementioned point no. 24. I have also provided information on this in my previous response. Regards, KIRAN KALE.

If one person completes 58 but is still working, how do we calculate for challan payment? Additionally, how do we determine the difference in the basic amount? Please provide some guidance on this.

Pension Scheme Contribution After 58 Years

After completion of 58 years of age, the contribution of 8.33% towards the pension scheme stops, and that same contribution should be diverted to the employer's contribution. This means the employer's contribution should be at 12% where 3.67% is shown.

Regards,
KIRAN KALE

Hi Sir,

I am a fresher with no experience in PF and ESI. I have joined as an HR executive in a private firm where more than 20 employees are working. My manager is asking me to work on PF and ESI. There are no previous records for PF and ESI as we are going to start deducting PF for our employees for the upcoming year. I don't know how and where to start working on this.

Regards,
Rameela