Confused About PF, ESI, and Gratuity Calculations? Let's Break It Down Together

In the past, I've found so many threads here, but I was caught by confusion. Some say PF doesn't apply for employees whose salary is over 6500/-. However, some attachments contain PF for any employee. So I decided to get clarity by asking for a report for these employees.

Employee Details

Employee A: Basic - 6000/- PM, has been working for 4 years.
Employee B: Basic - 8000/- PM, has been working for 4 years.
Employee C: Basic - 6000/- PM, has been working for 6 years.
Employee D: Basic - 8000/- PM, has been working for 6 years.

Clarification Needed on PF Calculation

Please explain with the employer's salary (Suppose his basic is 16000/-). Some said PF is calculated from both the employee and the employer. By the way, who is the employer? The employer's employer? Please explain the solution for these employees' Salary Structure (PF, ESI, Gratuity...) on a MONTHLY & YEARLY basis.

Usually, management restricts the PF contributions only to the ceiling of Rs. 6500, even if the basic wage (both basic + DA combined) exceeds Rs. 6500. Some managements pay PF contributions on the basic + DA without considering the ceiling.

This is for your kind information.

Regards,
G.K. Manjunath
Sr. Manager-HR

Thank you, sir. If you have time, please provide me with a report for the employees I have written about in the first post. I need information on both types of management regarding PF, ESI, and Gratuity.

PF is calculated on the Basic + DA + HRA. Both the employee and employer (the company/firm on whose payroll an employee is enrolled) contribute equally. The employee's contribution is 12%, and the employer's is 12% + 1.6%. This extra 1.6% is an administrative charge to be paid by the employer only. When the contribution of the employee exceeds Rs 6500, the employee is given an option to pay the extra amount or not, and accordingly, the employer contributes.

For example, if an employee's Basic + DA + HRA is Rs 60,000, then 12% would be Rs 7200. Out of this, the employee has to pay Rs 6500 compulsorily, and the remaining Rs 700 is optional/voluntary for them.

I hope this clears your doubt.

Regards,
Akansha Mahadule, Executive HR.

As per the ceiling of ₹6500, any person whose wages (Basic + DA) are more than ₹6500 will not attract PF deduction, provided they have not been a member of the EPF scheme in the past. Please note that if a person has been a member of the EPF (Employee Provident Fund) scheme once, they will remain a member even if their wages exceed the ceiling of ₹6500.

Hope this pacifies your curiosity.

Regards,
VS Chauhan
[Phone Number Removed For Privacy Reasons]

Only basic + DA, no HRA addition in that? Could you solve this for me?

Scenario 1: New Employee 'A'

1) 'A' is a new employee who gets a job with a salary (Basic + DA) more than 6500/- (for example, let's say 10000). As he is new to employment, there is no way he has had an EPF account in the past.

Scenario 2: Existing Employee 'B'

2) 'B', an old employee's first salary (Basic + DA) is less than 6500 (say 6000) and has an EPF account. However, after getting a promotion, his salary (Basic + DA) becomes more than 6500, for example, let's say 10000.

If you have time to solve this for me, I can ask about the remaining doubts on this topic.

Regards

I don't think your original question is clear to people, which is probably the reason you have not been getting a response. Using abusive language in posts is not going to get someone to respond.

In answer to your immediately previous post, if the person has an existing PF account, the company will have to continue PF for him. There is no exemption for such an employee. As has been mentioned above, the legal requirement is to pay PF on Basic + DA to a maximum of Rs. 6500. If your salary is above Rs. 6500, then the PF is required to be paid assuming the salary is Rs. 6500. Nothing in the act prevents an employer from voluntarily paying more.

I don't think I wrote any abusive text. If you think so, I can apologize. I didn't edit the post because if I did, readers might think I used inappropriate language. So, sorry for that.

After reading all of your answers, I got this idea. Please check and correct me if there are any errors.

1) PF is calculated at 12% on the summation of BASIC + DA + HRA.

2) If this 12% amount exceeds ₹6500 (not salary), it matters to limit it to ₹6500. The remaining amount is optional for the employee.
Request: Give me an example to better understand.

For example, as per 'Akshubm's reply:
"If an employee's basic + DA + HRA is ₹60,000, then its 12% would be ₹7200. Now, out of these, he has to pay ₹6500 compulsorily, and the remaining ₹700 is optional/voluntary for him."

In this case, what is the employer's contribution, ₹6500 or ₹7200?

3) Building on the above example: If an employee's first-ever job salary is ₹60,000, is there no PF account?

Regarding your questions:

1) A new employee whose wage is more than Rs. 10,000 - Management can pay PF only on the ceiling amount of Rs. 6,500. If Management wishes, they can pay on the entire amount of Rs. 10,000.

2) Even in the second case, the same principle applies. Till he crosses Rs. 6,500, Management has to pay contributions at the rate of 12%. Once he crosses the ceiling amount of Rs. 6,500, the Management can restrict its contribution to the ceiling amount of Rs. 6,500.

Hope this clarifies your doubt on PF contributions.

Regards,
G.K. Manjunath Sr. Manager.

Please provide me with details about the ceiling limit of PF Rs. 6500/-. How can I obtain this information from EPFO? Please do the needful.

Warm Regards,
Sandip

The limit of 6500 is the salary. The maximum employer contribution payable by law is Rs. 780. The employer and employee may pay more if they wish. Anyone with a salary exceeding 6500 can opt out of PF. To do so, their starting salary must be above 6500, and they must not have an active PF account from any previous job at that time.