How Do You Calculate PF and ESI for Part-Time Employees Working 8 Days a Month?

Query on PF and ESI Calculation for Part-Time Employees

I have a query regarding PF and ESI calculation for a part-time employee. If a company hires a part-time employee to work 2 days a week or a total of 8 days in a month and pays Rs. 7000/- per month as salary, what will be the calculation of PF & ESI payments, and how will the company show it in its PF & ESI return? In the case of a regular employee, the days counted are 30 or 31 in the return form. However, in the case of the aforementioned part-time employee, what will be the correct treatment?

Thanks & regards,

I'm not an expert, but according to me, you may calculate his salary for 30 or 31 days. For example, 8 days = Rs. 7000/- means Rs. 875/- per day (in the case of 30 days), which equals Rs. 26,250/- per month. Now, as per government rules, PF contribution is applicable for a maximum of Rs. 15,000/- per month (Basic + DA).

So you have two choices: first, consider Rs. 26,250/- inclusive of Basic and DA, then you don't need to pay such contributions; second, consider the Basic + DA amount less than Rs. 15,000/- and the rest to be allocated to other allowances. We are following the second choice in our company.

For instance, if Gross Salary = Rs. 25,000/- per month, then Basic + DA = 60% * 25,000, HRA = 40% * Basic, and the rest counts as Other Allowances. Hope this information may be helpful to you.

Regards,
Azhar Ansari

Hello,

In this case, you should hire him on a contract basis and provide PF and ESIC returns based on the number of working days in a month with your organization.

1. Sir, how will you define and confirm that a person you employed as a part-time employee is really a part-time employee? If a person is working only for 2 days a week, then he can also be working as a casual, temporary, or a badli employee/worker. Can you prove that the said employee, on other days of the week/month, is also working in some other unit/factory?

2. If an employee is working in other units also, and you can prove that his total earnings or wages exceed Rs. 15,000 per month, then I think you can establish that the said employee is not covered under the ESI Act, 1948, and the rules/regulations framed thereunder.

3. As a regular feature or practice in the industry, you can see there are a number of persons working part-time, such as labor law consultants, accountants, etc., who actually work for several units. Every case, I think, will depend on the facts of each case separately.

The solution to the whole matter depends upon your approach. You have to take care of the laws applicable for each scenario.

Example: Covering Under Social Security System

For example, if you really want to cover the person under the Social Security System (PF-ESI, Bonus, etc.), you can treat him as an employee.

However, as Mr. Harsh suggested, "how will you define and confirm that a person you employed as a part-time employee is really a part-time employee? If a person is working only for 2 days in a week, then he could also be working as a casual, temporary, or a badli employee/worker. Can you prove that the said employee is also working in some other unit/factory on other days of the week/month?"

So, you should first ask him whether he is not covered in PF-ESI in any other organization.

You can ask him to submit a request letter from his side to cover himself under PF-ESI. In your legal support, you can take a declaration from his side on judicial stamp paper. In the declaration he submits, the information provided by him is true. If at any stage the declaration is proved false, his employment and statutory coverage will be deemed to be withdrawn, etc.

Please note that coverage under PF-ESI can also lead to entitlement under the Bonus Act, Gratuity Act, ID Act, Employee Compensation Act, etc. (depending on your relations and circumstances).

Alternative: Professional Engagement

In the second case, if you don't want to subject him to any statutory compliances, please have a written agreement with him in which you appoint him as a Professional. In the agreement, you can decide the price of work, basis of calculation (number of days, job done, extra work, etc.), payment terms, and period of the contract.

The agreement should specifically state that he is engaged as a Professional and will never be deemed an employee of the company.

However, while releasing his payment, you have to deduct TDS (depending on the total volume in a Financial Year). He can claim a refund of the TDS after submitting his Income Tax Return if his total remuneration in a Financial Year is less than the taxable income.

I hope this meets your requirements. Fellow experienced members can correct me if any gaps are found.

Regards,
PAN SINGH DANGWAL

From the statement, he is paid around Rs. 900/- per day (you had stated that for 8 days you paid him Rs. 7000/-). Therefore, his rate of wages exceeds Rs. 15000/- per month, and as a result, he is not a person covered under the ESI Scheme. You can write this to the ESI authorities and get the same confirmed.

I have a query regarding PF and ESI calculation for a part-time employee. In our company, one employee who was working as permanent office staff is now going to continue his studies (MBA) and is also willing to work part-time in the evening. Is it possible to continue his ESI & PF contributions, or should we consider other calculations to reflect his part-time status? He is a student attending regular classes.