Comprehensive Guide to Salary Processing, ESIC Compliance, and Payroll Basics

Hi Friends,

Can anyone help me with the basics of salary, payroll, attendance, etc.?

Regards,
Yogesh

Hi Yogesh,

Normally, basic salary is a combination of basic wages, DA, HRA, special allowances, and conveyance, etc. Payroll consists of these components along with deductions such as PF, ESIC, PT, income tax, advances, fines, etc.

Regards,
Vijay

Hi Yogesh,

Payroll is the salary processing system.

Payroll can be seen from two aspects. One is from the HR side and the other from the commercial people's side. The HR personnel process the payroll by means of sending attendance details or, better to say, LWP (Leave Without Pay) details and other complete information that an employee is going to receive in a particular month.

Upon receiving those details, the commercial team begins entering them into the payroll software, initiating the salary processing.

While processing the salary for a particular month, we HR personnel provide complete LWP (Leave Without Pay) details to the commercial department.

When calculating LWP, we prepare the attendance sheet with the weekly offs. Besides the weekly offs, we verify how many days an employee is absent, and out of those, how many days he was on leave, which we crosscheck with the leave applications. If the employee has submitted an approved leave application and has sufficient leave balance, we mark him on leave.

However, if the individual has not submitted the leave application form or has no leave balance, then for that specific day, the employee will be considered absent, and we will deduct his salary for that day.

Likewise, if there is a provision to provide one day's extra salary for a specific day if the employee does come, we calculate one day's extra salary for those employees who were present on that day.

I hope it is now very clear to you.

Regards,

Amit Seth.

Welcome, Yogesh.

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 ESI.

ESIC stands for Employee State Insurance Corporation.

The employer should register the factory or establishment with the ESI Corporation within 15 days of the ESI Act's applicability. The declaration of registration should be filled out in form 01, accompanied by a separate sheet containing the establishment's name and address, number of employees, nature of duties, and the name, designation, and address of the manager overseeing such individuals, for offices located outside. Once satisfied with the application, the ESI regional office will assign a code number to the employer.

Only after this can you register your employees with the ESI. They need to complete a declaration form (FORM 1), clearly indicating Male or Female. All declaration forms must be countersigned by the employer.

Next, prepare a declaration return in form 3 separately for Male & Female within 10 days of submitting the declaration form.

Every employee will then be assigned a temporary identification number.

ESI contributions come from both the employee and the employer.

It is calculated based on the gross salary per month, with the maximum ceiling being 10000 Rs./Month.

The contributions from both sides are as follows:

Employee Side: 1.75% of gross/month

So, if an employee's gross salary is 8000/month, the ESI contribution would be 8000*1.75% = 140 Rupees

Employer Side: 4.75% of gross/month

The ESI contribution would be 8000*4.75% = 380 Rupees.

Amit Seth.