New HR Executive Seeking Guidance on PF, ESI Calculations, and Gross Salary Basics

Dear seniors, please help me. I am a fresher who recently joined a company as an HR executive. I want to know how PF and ESI calculations should be done and about gross salary. Please help me out.

Thanks,
Dolly Singh

PF should be calculated on the actual Basic + DA salary. ESI should be calculated based on the actual Gross Salary. For PF, it is deducted at 12% for both the employee and employer share. For ESI, it is deducted at 1.75% from the employee and 4.75% from the employer's side. PF will be applicable for all employees, but if any person is earning more than Rs. 6500/-, then you can pay Rs. 780/- for both employer and employee (12% of 6500 is 780). Some companies pay 12% of the basic salary. ESI is applicable only for employees having a gross salary less than 15000.

Understanding PF Contributions

As you have mentioned, Rs. 780 contribution is from the employee only; the employer contribution should be added. When guiding juniors, we should help them understand that the contribution is 12% from the employee and 13.61% from the employer on (Basic + DA).

The breakdown is as follows:
- 12% from the employee
- 12% from the employer
- 0.50% for EDLI (Employee Deposit Linked Insurance)
- 1.10% for Admin Charges
- 0.01% for Admin Charges on EDLI

Regards,
Karthik

PF and ESI Calculation Overview

PF is calculated on the Basic amount, whereas the ESI is calculated on the Gross Salary.

ESI Contributions
- ESI Employee Contribution: 1.75%
- ESI Employer Contribution: 4.75%
- Total ESI Contribution: 6.5%

PF Contributions
- PF Employee Contribution: 12%
- PF Employer Contribution: 13.61%
- Total Contribution: 25.61%

With Regards,
M.V. Krishna Reddy

Here we are educating the employee on the basics to understand how the deductions are made. Even in the payslip, you show the 12% contribution by the employer. Moreover, if you are educating the junior that 13.67% is the employer's share, then the same will be communicated to the employee. The employee will add his 12%, and 13.61% has been added to his PF contribution. When PF and ESI are discussed, it is wise to communicate the actual amount being deducted from both sides. EDLI and Admin charges will be taken into account while remitting the challan through the bank or online, which will be known by the juniors when they have hands-on experience.

Thank you all, but I still have some problems. Can anybody guide me on how to create a salary slip on an Excel sheet and how deductions should be done?

Thank you,

Dolly Singh

The salary slip format will vary across different companies. Generally, it includes components like earnings, deductions, pay and disbursement details, ESI/PF number, number of working days, and employee/employer address. You can prepare it by including different components according to your requirements.