Can We Hire Call Center Employees for 3 Months Without PF & ESI Deductions?

Dear All, I am working in a call center. There is a high attrition rate. We pay PF and ESI, and when an employee leaves the organization, I want to know if an employee can be taken for 3 months on a salary basis without PF & ESI deductions. Please help.

Regards

No, you can't take them on a salary basis without PF or ESIC. It is mandatory for the employer to pay PF & ESIC for each and every employee. Some employers do not show new employees on the muster and also do not deduct ESIC, PF, and P-Tax from their wages for two to three months. You can go for the same, but this is the wrong practice.

Regards

Trainee Stipend and Contributions

If you take them as trainees for three months on payment of a stipend, you need not pay PF contribution, but you need to pay ESI contribution.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

In fact, I want to modify my reply. Since the Standing Orders Act is not applicable to you as you are not an industrial establishment within the meaning of the Standing Orders Act, even if you appoint them as trainees, I am afraid you cannot escape liability even under the P.F. The better option is to appoint them as apprentices under the Apprentices Act 1961 (if the Act covers your establishment) since they are not covered under both the P.F. Act and the ESI Act.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

You can set their basic salary above $6,500 so that PF will not be applicable to them. Additionally, if you increase their gross salary to over $15,000 per month, you will not need to pay for PF and ESIC.

Hope this information is helpful.

Regards,
Derek Gomes

I totally agree with Ganesh Chavan regarding "Apprentice."

Good Suggestion

"You can make their basic salary above 6,500 so PF will not be eligible for them, and you can make their gross salary above 15,000 per month. Then you need not pay for PF and ESIC." However, you should pay the admin charges of both Social Security Acts. There is no other option available.

Thanks.

Can anyone guide me? Our company has not paid PF & ESI contributions for the last six months. If we pay now, what is the penalty we have to bear?

I do agree with Ganesh about the 'Apprentice ITI institutes'. Also, PF will not be applicable in case the Basic wage goes above Rs. 6,500/-. Additionally, if their Gross salary is raised to above Rs. 15,000/month, PF and ESIC are not applicable. However, I am not so sure if your existing salary matrix can adjust with any offshoot hike for such recruits. Anyways, wish you all the best!

Regards

Provident Fund (PF) and Employee State Insurance (ESI) Deductions

PF is deducted on the basic salary, i.e., Basic + DA (Dearness Allowance) is Rs. 6500/- or less. Above that, PF is not deducted.

1. Employee – 12% (of Basic + DA & Food concession allowance & retaining allowance, if any)
2. Employer – 13.61% (of Basic + DA & Food concession allowance & retaining allowance, if any)

[13.61% = 3.67% PF + 8.33% Pension Scheme + 1.10% Admin. Charges of PF + 0.5% EDLI + 0.01% Admin Charges of EDLI]

EDLI - Employee Deposit Linked Insurance

EPF Calculation

Here, this PF is normally deducted from the basic & DA (Dearness Allowance).

- Basic salary: 35%
- DA: 15% of gross salary.

For example, if the gross salary of a person is Rs. 9000/- per month:

- Basic: 35% of 9000 = 3150
- DA: 15% of 9000 = 1350

Total: 4500

Such that the total amount would be deducted at 12% (i.e., PF = 540/-).

The maximum ceiling limit of PF is Rs. 6500/-. If the basic + DA exceeds 6500/-, then the contributions are optional. Some companies may have their own policies.

Provident fund calculated towards the employer is 13.61%:

1. Employer's Contribution
2. EPF A/c No.1 - 3.67%
3. EPF - Admin Charges - 1.1%
4. Pension Fund A/c No.10 - 8.33%
5. EDLI A/c No.21 - 0.5%
6. EDLI - Admin Charges - 0.01%

ESIC Calculation

In this ESIC, it includes the medical benefit for both the employee and employer. It is calculated on the basis of gross pay per month, with a maximum limit of up to Rs. 10000/- per month.

- Employee side: 1.75%
- Employer side: 4.75%

So, if the gross of an employee is 8000/- per month, his contribution would be 8000 * 1.75% = 140/-.
Employer: 8000 * 4.75% = 380/-.

Therefore, Net pay = Gross pay - Total deductions.

1. Those who are getting 10000/- gross per month will not be applicable under the ESIC act.
2. 20 eligible employees are required to get registered in ESIC.
3. Eligible employees are those who are getting gross pay up to 10000/- or less per month.

Apart from that, there is a tax deduction, including the Income & Professional Tax.

Cost to Company (CTC)

CTC means the cost to the company, i.e., all the expenses incurred by the company for any of its employees for a particular period (monthly/yearly).

Gross pay + Employer's PF + Employer's ESI + Bonus = CTC

i.e., the salary payable and other statutory benefits payable by the company.

I think this calculation will be helpful to you.

Regards,
Uma