Understanding PF and ESI Contributions: How Do You Calculate Them Correctly?

Welcome to the HR field! I can help you with your query on how to calculate PF and ESI. The contributions for both PF and ESI come from both the employee and the employer.

Provident Fund (PF) Contribution

For PF (Provident Fund), the typical contribution is 12% of the employee's basic salary from both the employee and the employer.

Employee State Insurance (ESI) Contribution

For ESI (Employee State Insurance), the contribution is usually 0.75% of the employee's salary from the employee and 3.25% from the employer.

These contributions are generally calculated on a monthly basis. It's important to ensure timely and accurate calculations to comply with regulations.

If you have any more questions or need further clarification, feel free to ask.

Best regards

Provident Fund (PF) Overview

PF has two contributions:

- **Employee Contribution:** 12% of Basic Salary. (12% goes to the Employee Provident Fund (EPF) account)

- **Employer Contribution:** 12% of Basic Salary. (Here, the employer contribution is divided as follows: 8.33% of 12% goes to the pension fund, and 3.67% of 12% to the Employee Provident Fund (EPF)).

PF will be calculated on Basic Salary (Basic + DA).

This is applicable for 20 or more persons working in an establishment (soon to become 10 members).

For a basic salary exceeding Rs. 6500, the employer has the option to contribute 12% of 6500 (Rs. 780) or the actual 12% on the basic salary.

Note: While remitting to the EPFO department, the employee contribution will be 12%, and the employer contribution is 13.61% (where employer contribution is 12%, Admin Charges is 1.1%, EDLI Charges is 0.5%, and EDLI admin charges is 0.01%).

Employee State Insurance (ESIC)

- **Employee Contribution:** 1.75% of Gross Salary.

- **Employer Contribution:** 4.75% of Gross Salary.

ESIC will be calculated on Gross Salary.

This is applicable for 10 or more employees in an establishment.

ESIC is applicable/contributed for employees receiving a salary up to Rs. 15000 (Gross salary) and Rs. 25000 in the case of employees with a disability.

Both PF & ESI should be calculated based on the actual earned basic and actual earned gross salary for the month, respectively.

There are also many posts by members in Cite HR on the same topic; you can find a detailed explanation there.

Regards

Firstly, let me congratulate you on being a part of the HR community. I wish you all the luck for your future. With regard to your query, PF and ESIC are monthly contributions. If you mention the state you reside in, it would help others guide you properly.

Provident Fund (PF) Contribution

- Employee's share is 12% on the actual basic salary.
- Employer's share is 12% on the actual basic with an upper limit of Rs. 6500.

An example will make it clear and understandable:

Actual Basic earned for a month = Rs. 9000

For PF calculation:

- Employee share = 9000 * 12% = Rs. 1080
- Employer share:
- EPS = 6500 * 8.33% = Rs. 541.45
- EPF = Employee Contribution - EPS = Rs. 1080 - Rs. 541.45 = Rs. 538.55
- EDLL Charges = 6500 * 0.50% = Rs. 32.5
- EDLL Admin charges = 6500 * 0.01% = Rs. 0.65
- PF Admin Charges = 9000 * 1.1% = Rs. 99

At times, companies also calculate PF on the actual basic only; you can check with your employer.

Employee State Insurance (ESIC) Contribution

Employees with a Gross salary ≤ Rs. 15000 are eligible for ESIC.

- Employee's contribution = 1.75% of Actual Gross Salary
- Employer's contribution = 4.75% of Actual Gross Salary

Hope this helps.

Regards,
Hiral