Who Should Handle Employee Financials Like PF and ESI: HR or Finance?

Responsibility for Employee Financial Aspects

In an organization, who should ideally take care of PF, ESI, Gratuity, and other financial aspects related to employees? Is this the responsibility of the HR department or the Finance department?

Thanks,
Avinash

It is the task of HR and the personnel department. The personnel department maintains the wage roll and deducts the statutory deductions such as PF, ESI, PT, IT, etc. It is the wage section that prepares the wage roll and maintains the attendance. Hence, they have all the records to account for PF, ESI, PT, IT, etc.

Based on the workings of the personnel department, the finance department's role is to make payments to the authorities on time.

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

In a medium to large organization, the following practices are normally observed:

1. Submission of returns by HR
2. Interpretation of definitions is always done by HR
3. Deductions and maintenance of accounts are handled by the Accounts department
4. Liaison with departments is the responsibility of HR
5. Maintenance of registers is carried out by HR
6. Representing the organization before judicial authorities is the duty of HR

HR will be accountable for all ESI and PF-related issues, while the Accounts department will play a supportive role and be responsible for payment-related matters.

When you say "Interpretation regarding the definition is always by HR," what do you mean by that, please? Could you please elaborate?

Thanks,
Avinash

There are many definitions like wages, employee, benefits, etc. HR is supposed to have knowledge of case laws pertaining to these definitions and implement correct definitions across. For example, discussions will arise as to whether conveyance allowance will be included as part of wages. HR should cite definitions, case laws, and advise the correct position.

Dear Mr. Avinash,

I am in sync with all the replies given by friends on your doubt. The right practice and convention are for the HR department to handle all matters concerning employees, such as welfare and statutory compliance, except TDS under Income Tax. The HR department sends requisitions for cheques after making all the calculations and preparing challans, etc. It is the HR department that should understand the correct meaning of various terms under labor laws, for which they should have the latest editions of books and be in touch with the concerned departments, attend workshops and seminars arranged by them or industry associations. Websites like this have some limitations, as often the replies given by some contributors may not be correct or latest. Hence, be careful and selective. No HR professional can avoid reading original laws and the latest editions of reputed books on the subject. Where needed, they should consult legal advisors well-versed in the subject. Not all those claiming to be consultants need to be knowledgeable on the latest laws, and many are merely liaison men who could even complicate matters.

Regards,
O. Abdul Hameed
Formerly Addl. Commissioner ESIC
[Email Removed For Privacy Reasons]

Dear Avinash ji and the entire HR fraternity, while endorsing Abdul Hameed ji to the fullest extent, I would say that if HR is not handling this job, it means HR is not strong and competent enough, in my view.