Can We Exempt Employees from PF and Handle ESI After a Salary Increase? Seeking Advice

I am Rajini, working as an HR Executive at PALACE TOYOTA, a dealership for Toyota Cars.

Query on PF Exemption

My query is whether we can exempt an employee from PF by fixing the basic salary at Rs. 6600. If an employee is eligible for PF in a previous company, can we exempt them from PF in their current company or not? Please suggest.

ESI Filing for Salary Increase

If an employee's salary increases from Rs. 10,000 to Rs. 15,200 as gross salary in the month of May, how should we treat them in ESI filing?

Thank you.

Regards,
Rajini

The national ceiling limit of Basic for PF exemption is Rs. 6,500/-. However, once an employee is covered under PF (when the basic is below Rs. 6,500/-), they cannot be exempted even if the Basic increases to or above Rs. 6,500/-.

Similarly, if the employee is a member of PF in their previous organization, they cannot be exempted in your company unless they show a 2-month gap in their employment. Form 11 mentions the same.

ESI Contribution

If the gross salary of an employee crosses Rs. 15,000/- in the month of May, ESI should be deducted until September. From October, you can stop the contribution towards ESI.

Thanks a lot. But we have exempted the employees from PF, and there is no gap of two months from the date of resignation and joining date. What can be done in this case? We need to file an ESI contribution on the entire 15,000 rupees, excluding washing allowances, right? Please let me know the Statutory Returns to be filed annually.

Statutory Compliance and ESI Contribution

In that case, you are flouting the law. But now that you've done so, you still need to have them fill out Form 11. The contribution of ESI will be on the actual gross salary earned, i.e., where the gross salary of the employee is 15,500/-, the ESI contribution will be on 15,000/-, assuming 100% presence. But if the employee happens to attend the office for less than 30/31 days, the actual gross shall be below 15,000/-, and hence the contribution will be on the gross salary earned in such cases.

In that case, you are flouting the law. But now that you've done so, you still need to make them fill Form 11.

The contribution of ESI will be on the actual gross salary earned. For example, where the gross salary of the employee is ₹15,500, the ESI contribution will be on ₹15,000, assuming 100% presence. However, if the employee attends the office for fewer than 30/31 days, the actual gross shall be below ₹15,000, and hence the contribution will be on the earned gross salary.

Thanks a lot for your valuable reply. I will get Form 11 filled by all PF-exempted employees. What are all the statutory returns to be filed by the company, which is registered under the Factories Act?