Navigating PF and ESI Compliances: Can Anyone Guide Me Through the Procedures?

Hi,

Can anyone help me with PF & ESI compliances and the procedures for the same?

Regards,
Ruchika

Hi Ruchika,

Here is the details that you asked over citehr.

The formalities for ESI are that you must have a minimum of 20 employees, regardless of whether they are receiving a salary of more than 10000/- or less. The maximum ceiling for ESI contribution is up to 10000/- Gross/Month only. Those earning 10001/- or more will be exempted from the ESI.

Yes, ESI and ESIC are the same. ESIC stands for Employee State Insurance Corporation.

The Employer should register the Factory or Establishment with the ESI Corporation within 15 days of the applicability of the ESI Act. The declaration of registration is to be filled in form 01, along with a separate sheet containing the name and address of the Establishment, number of employees, nature of duty, and the name, designation, and address of the manager controlling such persons, in respect of an office situated outside. Once satisfied with the application, the ESI regional office will allot a code number to the employer.

After that, you can register your employees with the ESI. They must fill out a declaration form FORM 1, clearly stating Male or Female. All declaration forms should be countersigned by the employer.

Then prepare a return of declaration in form 3 separately for Male & Female within 10 days of filling out the declaration form.

Then, every employee shall be allotted a temporary identification number.

For PF formalities, the company must be at least 3 years old before it can be registered with the PF department. Even for this Act, the minimum number of employees should be 20.

Every employer of an establishment to which the Employee Provident Fund Act applies should submit in Form 5A (in duplicate) to the commissioner, particulars of all the branches and departments, owners, directors, partners if any, or any other person who is controlling its affairs within 15 days of the scheme's applicability.

Upon receipt of Form 5A, the commissioner shall verify the particulars submitted and, once satisfied, shall allot an Establishment Code No.

I hope it is clear to you now.

Regards,

Amit Seth.

Hi Ruchika

A brief note on PF, Hope you find it informative

Provident Fund is regulated by Employees' Provident Funds & Miscellaneous Provisions Act, 1952. It applies factories or to such establishments as may be notified by the Central Government, which are employing 20 or more persons.

The expression “Employee” has been defined under Section 2(f) of the EPF Act to mean any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment and who gets his wages directly or indirectly from the employer and includes any person employed by or through a contractor in or in connection with the work of the establishment and an apprentice (except apprentice under the Apprentices Act, 1961 or under the Standing Orders of the establishment).

Wages - For the purposes of deduction of contribution, wages would include Basic Wages, Dearness Allowance, Cash Value of any Food Concession and Retaining Allowance, if any.

Contribution - Contribution is required to be paid in respect of employees, whose basic wages, dearness allowance, cash value of food concession and retaining allowance does not exceed Rs. 6,500/- per month. For employees, who are already covered under the Scheme and cross this limits, the contribution is payable limited to Rs. 6,500/- per month.

The amount of contribution is 12% by the employer and 12% by the employee. It is the duty of the employer to deduct the employees' contribution from his wages and deposit with the P.F. Authorities on or before 15th of the succeeding month. If the employer commits default, he is prohibited from recovering employees' contribution from his future wages and the liability has to be borne by the employer.

In addition to the said contributions, employer is also required to pay administrative charges @ 1.10 of the employees' wages subject to limit of Rs. 5/- every month, for the administration of Provident Fund, and @ 0.01% of the employees wages subject to a minimum of Rs. 2% every month for administration of Deposit Linked Insurance Fund.

Out of 12% contribution deducted from the employees' wages, 8.33% is to be deposited in the Provident Fund, 0.5% in the Deposit Linked Insurance Fund and the balance in the Provident Fund. Employers entire contribution of 12% is to be deposited in the Provident Fund.

If an employee wants to deposit more than the statutory limit in his P.F. Account, he can do so and he may authorize the employer in writing. The Additional contribution by an employee is restricted to 8% of his wages eligible for P. F. Contributions.

Penalties - Provisions for penalties is made in Sections 14, 14A and 14AA of the EPF Act. In nutshell the following are punishable :-

(a) making or causing to be made any false statement or false representation for the purposes of avoiding any payment under the Act, the penalty is imprisonment upto 1 year or fine of Rs. 5,000/- or both

(b) contravention of payment of contribution, inspection charges or administrative charges is punishable (i) with imprisonment upto 3 years but not less than 1 year and fine of Rs. 10,000/-, in case of default in payment of employees' contribution, which has been deducted by the employer from the employees' wages (ii) imprisonment shall not be less than six months and fine of Rs. 5,000/- in any other case.

However, Court has the discretion to impose lesser punishment for adequate and special reasons to be recorded in the judgement,

(c) If an offence is committed for the 2nd time, the punishment is imprisonment upto 5 years, but it shall not be less than 2 years and a fine of Rs. 25000/-.

Interest - Employer is liable to pay interest on delayed payment of contributions. The interest would be payable @ 12% p.a simple interest or at such higher rate as may be specified in the Scheme, which shall not exceed the lending rate of interest charged by any scheduled bank.

Damages - Where an employer makes default in the payment of any contribution the P. F. Authorities are empowered to recover the damages not exceeding the amount of the arrears.

Yagesh Sharma

Hi Everyone,

Thank you so much for the information and support. Could you please confirm the interest percentage and the rate of damages for the late submission of PF and ESI? I urgently need this information.

Regards,
Ruchika

Hi Amit,

This is related to your details about PF. I have a clarification: "For PF formalities, the company must be 3 years old. After that, only it can be registered with the PF department. Even for this Act, the minimum number of employees should be 20."

Referring to your above lines, what is the total employee strength above 20 from day one? According to me, it should be covered under PF from the start only. Correct me if I am wrong.

Regards,
Amith R.

Hi Amit,

After an amendment in the previous PF Act, now onwards, whenever the employee strength reaches 20, it should be registered with the PF Act. So now the entry criteria are almost the same with the ESI Act for the PF Act as well.

Regards,
Amit Seth.

Hi Ruchika,

As required, how much interest does the employer have to pay for delays in the challan? Employers have to pay 12% interest for delays in processing the challan.

I hope this information satisfies your query. If not, feel free to ask again.

Regards,
Rajput

Dear Ruchika,

Please provide your email address so that we can send you a presentation on EPF and ESIC. Additionally, you can refer to the following websites for more information:

For EPF: www.epfindia.nic.in
For ESI: www.esic.nic.in

I hope you will find all the information you need on these websites. If you have any questions regarding the same, please feel free to ask us on Cite HR.