Confused About ESI and PF Rules? Clarification Needed for Employee Wage Limits

Applicability of ESI and PF

I have a few doubts regarding the applicability of ESI and PF. I have more than 20 employees in our office. A few of them are drawing less than ₹6,500 per month, and a few are drawing up to ₹30,000 per month. My doubt is whether PF and ESI are applicable to all the employees. Is there any wage limit for the applicability of ESI and PF? I heard that the wage limit is ₹6,500 for PF and ₹15,000 for ESI. Are these correct? Please clarify...

Regards

There is a limit for PF and ESIC. The PF limit is ₹6,500, and the ESIC limit is ₹15,000. If an employee's basic salary is more than ₹6,500, they are not eligible for PF. However, if they wish to have their PF amount deducted, you can deduct either ₹6,500 or the full amount. Alternatively, if the employee does not want their PF amount deducted, they can fill out Form 11.

For ESIC, the limit is ₹15,000. If an employee's gross salary exceeds ₹15,000, they are not eligible for ESIC. All employees with a gross salary below ₹15,000 are required to be covered by ESIC. Starting from April 2013, the limit will increase to ₹25,000.

Thank you.

An employee who has newly joined a firm has a starting salary of ₹30,000. Is he covered under the PF and ESI acts?

Concept of an Exempted Employee

What is the concept of an exempted employee? Are employees drawing more than ₹6,500 per month completely excluded from the applicability of the act? Please clarify.

If the employee's basic salary is more than ₹6,500, it depends on your company whether they deduct a fixed amount of ₹6,500 or 12% of the full basic salary. In ESIC, he is not applicable, so you can only deduct PF & PT from his salary.

Applicability of ESI and EPF

Both ESI and EPF are applicable to you.

1. All employees with a salary up to ₹6,500 are to be covered under EPF.

2. New employees with a salary above ₹6,500 need not be covered under PF if they were not a PF member earlier. They shall be covered if they were a member of PF earlier. Obtain Form 11 from them.

3. In all the above cases, the employer's liability is limited to 12% of ₹6,500.

4. If you are willing, you can contribute for employees with a salary above ₹6,500.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

Firstly, thank you very much for your reply. You mentioned that employees drawing up to ₹6,500 are covered under the act, and I agree with that. However, what about the employees who are earning more than ₹6,500 per month? In my company, there are many individuals who earn more than ₹25,000 per month. What should be done in their case? Please reply. Awaiting your response.

Thank you.

Employees with a salary above ₹6,500 per month are to be covered in EPF if they were earlier members of EPF. If not, they need not be covered in EPF statutorily.

Regards,
Varghese Mathew

PF and ESI Coverage Guidelines

For up to ₹6,500, cover under PF and ESI for ₹6,500. For more than ₹6,500, even if it is ₹6,600, do not cover PF (if not requested by the employee or if you decide not to deduct) but deduct ESI. For more than ₹15,000, there is no need to deduct PF or ESI (if not requested by the employee or if you decide not to deduct). If you attempt to get exempt from deducting PF for more than ₹6,500, then maintain FORM 11.

Provident Fund and ESIC Applicability

As per your query regarding the Provident Fund: First of all, as you mentioned, your establishment has more than 20 employees, so the EPF Act 1952 is applicable to your establishment. Employees with a basic salary less than ₹6,500: it is compulsory to deduct PF. For employees with a basic salary more than ₹6,500: it is not compulsory to deduct, but you may deduct on ₹6,500, i.e., ₹780 per month, or you may deduct 12 percent of the basic salary.

ESIC Act Applicability

The ESIC Act is applicable if you employ 20 or more employees with a salary less than ₹15,000.

Regards,
Vikram Trivedi
PF ESIC Consultant
Cell No.: [Phone Number Removed For Privacy Reasons]

Dear friend,

In the case of ESI, if an employee's gross wages are less than ₹15,000, then you can deduct their ESI; otherwise, you cannot deduct it. It is mandatory. However, in the case of PF, some industries deduct PF if an employee's PF wages are more than ₹6,500.

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