Understanding PF and ESI Deductions: Is There a Minimum Limit for PF and How is ESI Calculated?

I want to know, is there anything like a "Minimum Limit" on which PF is not deducted?

Also, is ESI deducted from the basic salary or the gross salary?

There is no minimum limit for ESI and PF. There is only a maximum ceiling limit for both. PF is deducted based on the basic salary, while ESI is calculated on the gross salary.

Thank you.

ESI Contribution Details

For ESI, there is a maximum limit of Gross Salary of Rs 15,000/-. If any employee's gross salary exceeds Rs 15,000, then he/she is not entitled to ESI contribution. If the gross salary is less than Rs 15,000, then the employee has to contribute 1.75% of the gross salary, and the employer (ER) has to contribute 4.75% of the gross salary.

EPF Contribution Details

For EPF, only Basic & DA are considered, not gross pay. If an employee's Basic + DA is above Rs 6,500, then he/she is exempted from PF based on certain criteria. If Basic + DA is less than Rs 6,500, then both the employee (EE) and employer (ER) have to contribute 12% on Basic + DA. Additionally, as an admin charge, the ER has to contribute 1.61% on Basic + DA.



Thank you so much for sharing the information. However, I couldn't fully comprehend the statement, "If an Employee's Basic+DA is Above 6500/-, then He/She is exempted from PF based on certain criteria." What I understand is that if someone's Basic+DA exceeds 6500/-, their PF is not deducted if the employee is willing. Is this correct? Could you please elaborate a bit more on this?

Thanks,
Axita

The criteria are:

1. If Basic + DA is below ₹6500/-, PF is mandatory.
2. If Basic + DA is above ₹6500/- due to an increment or promotion, PF is mandatory. In this case, the contribution shall be limited to ₹780/-, which is 12% of ₹6500/-, or shall be contributed at 12% of the full basic.
3. If Basic + DA is above ₹6500/- due to a change of job, and in the earlier company, he/she had PF benefits, PF is mandatory. In this case, the contribution shall be limited to ₹780/-, which is 12% of ₹6500/-, or shall be contributed at 12% of the full basic.

In the rest of the cases, PF is not mandatory. 

PF Contribution Requirements

Okay! So, in summary, PF must legally be deducted for all employees. Also, ₹780 is the maximum amount contributed by employers. However, for employees, the contribution can vary according to their willingness to contribute to the PF.

Thank you so much!!

One last query, please! Is ESI applicable to trainees as well? Also, does the maximum salary for which ESI is deducted vary from state to state, or is it $15,000 for all states? Who decides this limit? Is it mandatory for everyone, or can employees choose whether to have ESI deducted or not?

Applicability of ESI and PF for Trainees

Both ESI and PF are applicable even for trainees, except Apprentices. Both ESI and PF are central Acts and are common throughout India. The limits are decided by the Ministry of Labour and respective boards.

Understanding Excluded Employees Under the P.F. Scheme 1952

If P.F. is to be deducted for all employees, who is considered an excluded employee under Para 2(f) of the P.F. Scheme 1952? And when will this apply?

Clarification on ESI for Trainees and Apprentices

Regarding your other query on ESI, trainees or apprentices appointed under the Apprentices Act 1961 are outside the purview of the ESI Act. As far as the wage limit is concerned, kindly refer to Sec. 2(9) read with Rule 50 of the ESI Act and Rules, which is self-evident.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Clarification on PF Components

Please clarify regarding PF. Last year, we learned that for PF, not only Basic + DA but also the special allowance is included.

Regards,
Shenba

PF is not payable when the employee has joined the company on a salary above ₹6,500 and did not have an active PF account when they joined. More correctly, where they did not have PF in their previous company and have not closed it when they joined a new company.

Hi Swasthik! Are you saying that employees drawing more than Rs. 6,500/- (gross or basic, couldn't make out) are not liable for any PF deductions? Also, if any employee has a PF account earlier and changes the company, could you please tell me what needs to be done to use the same PF account? If somebody opens a new PF account, what would happen to the old account? I read somewhere that it remains active only.

Regards,

Clarification on PF and ESI Deductions

Hello Mr. Saiseven, please correct me if I am wrong. As per the ESI Act, the minimum wages are Rs. 50, under which employees do not need to contribute for ESI, and all the payment is done by the employer. Trainees and apprentices are not liable for any deductions for ESI and EPF.

"If P.F. is to be deducted for all employees, then who is an excluded employee under Para 2(f) of the P.F. Scheme 1952, and when will they figure?" Can you please shed some light on the same? There are employees who are not liable for deduction. What are the criteria for the same? I was unable to find when the employee/employer would figure.

Would be thankful for your time and efforts!

Thanks,
Axita

6500 Basic Salary and PF Deductions

An employee joining a company with a salary above 6500 does not need to subscribe to the PF scheme. He has to fill up Form A, and PF will not be deducted from his salary. Nor will PF contribution be applicable from the employer.

Form A includes a declaration that the employee does not have any existing PF account, which means it can only happen with someone who has not worked earlier in a company where PF was being deducted, or if he has withdrawn the PF from that account prior to joining the new company.

If you have an existing PF account from your old company, you are required to have the same transferred to your new PF account.

Exemption from ESI and PF Contributions

An employee is exempted from paying the employee's share of ESI contribution if their daily average wage is up to Rs. 70 (to be verified to confirm if this limit has been increased). This should not be considered as a minimum wage limit for coverage. Only trainees and apprentices appointed under the Apprentices Act are outside the purview of the ESI Act, but not all. Regarding the PF Act, trainees and apprentices appointed under the Apprentices Act or under Standing Orders are exempt from the Act.

Regarding your PF inquiry, I believe the response provided by Swastika Banerjee should clarify your doubts.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Minimum Limit of EPF

Nobody is focusing on the question, which is: what is the minimum limit of EPF?

As per my knowledge, EPF should be deducted at the minimum level on minimum wages. For this, we can take Basic + DA.

Regards

PF Deduction Clarification Needed

Please clarify if a person who was having PF deducted in their previous organization, with a basic + VDA of Rs. 6752 at the time of leaving, joins a new organization where their basic salary is Rs. 7942. The current employer states that since the basic is above Rs. 6500, they will not deduct PF, or the employee should contribute both the employer's and employee's shares.

Kindly suggest what to do if someone has been having their PF deducted continuously for the last 2.5 years and suddenly faces this issue after a change in employment. Also, is it mandatory for the current employer to deduct PF because the previous employer was deducting it continuously?

Regards,
Jeetu Singh Bisht

One question from my side... PF deduction is 12% of Basic from the employee's side or can be more for VPF. But what is the maximum limit from the employer's side from the Basic Salary? Can it be more than 12%?

I want to add one more point to the views of Mr. Jeevarathinam. If the PF contribution for wages is more than ₹6,500, the benefits extended cannot be reverted in the future.

Thanks & Regards,

Ramesh C

Can you please help me understand the PF sheet in Payroll Processing? It contains Capwages, MC, CC, EPS, VPS. Please guide me through the process and formulas to calculate all these in the PF sheet.

Regards,
Sofiya Setia
Human Resources

Dear Seniors, according to the PF Act, the maximum contribution is INR 780 per month. My question is, if an individual earns more than that (for example, around INR 100,000 per month gross salary), is the contribution still limited to INR 780?

I am looking forward to your reply.

Thanks & Regards, Meghana

PF is mandatory for employees receiving wages (basic + DA) below or equal to Rs. 6500 per month. ESI is deducted from the gross salary, not exceeding Rs. 15000 per month. If an employee receives a salary of Rs. 6600 per month, there is no need to cut his/her PF.

There are various criteria for PF contribution if wages are above ₹6500. Those are:

- If due to an increment or promotion, an employee's wages exceed ₹6500, then it is mandatory.
- If any employee joins newly and their wages are above ₹6500 while joining, and if they had PF contributions in the previous company, then it is compulsory for contributions.
- If both the employee and the employer agree mutually, then they can contribute.

I hope you are clear now.

Dear Meghana,

Greetings for the day. Firstly, you must be aware that EPF should be deducted on Basic + DA + Food Allowance (if any). Secondly, the deduction of EPF should be compulsory for those whose salary is less than or up to Rs. 6,500. Thirdly, in EPF, there is no rule that above Rs. 6,500, EPF deduction should not be done or restricted as a ceiling. Rs. 6,500 is the ceiling only for EPS & EDLI, not for EPF.

Thanks & Regards,

Sumit Kumar Saxena
[Phone Number Removed For Privacy Reasons]

From the posts I have read, it seems that individuals with a basic salary plus DA below 6500 must contribute to PF. However, what happens to those earning more than 6500 as Basic+DA after a salary increment or upon joining the company? Are there any scenarios where PF contributions are not mandatory?

Please provide guidance.

There is a minimum limit of PF (12% of Basic Salary) that could be increased up to 20% (which is from the employee's basic). ESI is fixed at 1.75%, which is calculated based on the employee's gross salary.

Once you start deducting PF contributions from an employee, if the employee's salary exceeds Rs. 6500.00, the employer does not have the right to stop the PF deduction until the employee resigns or separates from the company. You should adhere to the PF eligibility criteria based on the basic salary + DA amount, not exceeding Rs. 6500.00.

Regards,
Y. Gowree Parameswara Rao

Can anyone tell me which clause mentions that above 6500 of basic PF is voluntary? I want to refer to that Act. Tell me the Act or send me the link for the same.

Regarding PF, the employee can opt not to be part of PF if their Basic + DA (including food subsidy) is more than ₹6,501/-. The employer's maximum liability is to contribute 8.33% of ₹6,500 or 8.33% of the actual Basic + DA, whichever is lower. The same rule applies to the employee's contribution as well. These are as per Section 6 of the PF & Miscellaneous Provisions Act, 1952.

I have not encountered any provision stating that if the employee has a previous PF account, it must be continued. Professionals who have read about this concept, please update all of us on which section states this.

Regards,
Janakiram PIPPALLA

Respected all Seniors, please guide me regarding this. I am working in an FMCG manufacturing company, and most of the production is exported. In our factory, more than 350 workers are employed, all of whom are from the local area, and their daily wages do not exceed 250. Consequently, most workers are not willing to have their Provident Fund (PF) deductions made from their salaries.

Question on Provident Fund Rules

My question is, "Are there any rules or laws concerning the above problem?" Please guide me.

Thank you.

Dear all,

What is the maximum range for EPF contribution?