Understanding "Gross Salary" in the New ECR Format: Can You Help Clarify?

What does "gross salary" mean in the new ECR format? Please clarify.

Gross wages mean the total earnings of the person from that employer.

Please let me know if you need further clarification or assistance.

Dear Friend,

There are two important terms in New ECR:

Gross Wages - Gross Salary of the Employee

EPF Wages - Basic + DA amount on which we are going to calculate PF amount

Note: The calculation is based on EPF wages in the new ECR.

Thanks & Regards,
Juber Ahmad

EPFO and PF Contributions

With this EPFO, people will get an idea of the amounts the establishment is paying towards PF. Since many companies pay PF based on basic salary alone, and this practice is not correct as per the law, the new challan would be a hurdle for them. There will be a difference between gross salary and the PF contributing salary, and there is a high chance that they will require us to clarify the reasons for the big gap. Minor differences are okay because, in any case, HRA, which is part of the gross salary, is not a part of the PF qualifying salary.

Regards, Madhu.T.K

Hi punitsatna,

"Gross salary" means whatever he/she has earned (Basic + DA + HRA + Other, etc.).

Thanks & Regards,
Ashish Shaw

I would appreciate a clarification regarding gross wages as per ECR 2.0. Does that include bonus and overtime wage as well, which is not constant or is not part of the monthly emolument?

Thanks and regards, P Vijayan

Gross wages as per EPF ECR 2 equals the amount on which basis you calculate the slab of professional tax, or the amount which is to be submitted in Form 16 (both are the same).

Hi,

Can anyone explain how to calculate gross wages in the attached file?

Regards, Nandini

Understanding Gross Wages in TDS and Professional Tax Calculations

If we calculate bonuses and overtime for TDS (Tax Deducted at Source) purposes, specifically for professional tax, these amounts would also be included under gross wages. Remember, they are not demanding contributions based on gross wages, but the gross wages summed up over 12 months should match the wages plus salary expenses of the establishment.

They are also asking for "excluded employee details," which means the number of persons and the amount paid to them. This includes individuals aged 58 and above who are not on the EPF (Employees' Provident Fund) list, or those who have not been included in EPF or ESIC (Employees' State Insurance Corporation) from the start due to high salaries. This measure is taken to identify employers who report expenses under wages but evade labor welfare benefits.

Regards

@NandiniB,

Please find your file marked for gross wages required for ECR generation.

Hi Sharma,

Thank you for the reply.

Please find attached the file as my senior person did. The gross wage is different from your calculation to her calculation. Could you please explain it to me?

Regards,
Nandini

Understanding Gross Wages and PF Qualifying Wages

There can be different interpretations for gross wages and PF qualifying/contributing wages when it concerns an employee whose monthly salary exceeds Rs 15,000. An employer is under no compulsion to pay PF on an amount exceeding Rs 15,000, though many employers contribute on the entire salary or at least the entire Basic (plus DA) without restricting it to Rs 15,000. This is common in large companies, whereas medium-sized and small companies often restrict it to 12% of Rs 15,000.

In the former case, the PF qualifying Gross Salary is Rs 180,000 per annum (15,000 x 12). Therefore, the first interpretation of gross salary is that it is a salary subject to a maximum of Rs 15,000 per month or Rs 180,000 per annum. At the same time, if your establishment pays PF without any salary ceiling, then it can be the amount on which PF is deducted. This is the second interpretation, and as per this interpretation, and continuing the example given by Nandini, the gross salary is Rs 92,788 per month or Rs 1,113,451 per annum.

Now, had the employee been in receipt of a salary less than Rs 15,000, certainly, his other allowances would also attract PF. That means in the case of an employee whose salary is not more than Rs 15,000, the PF qualifying salary is not just Basic salary and DA, but it is the gross salary less HRA. That means PF qualifying salary should include all such allowances which are paid while an employee is on duty or on leave except HRA. There has been a misconception among us that PF is payable only on Basic salary and dearness allowance. Certainly, it is true that PF is payable only on Basic wages and DA, but what is basic salary has been defined very clearly in section 2(b) of the EPF & MP Act as the whole emoluments payable as per the contract of employment except HRA. Therefore, basic wages shall include allowances also. With regard to the treatment of special allowance, we have quite a number of court verdicts which say that a special allowance paid to all the employees should be taken as part of the salary, whereas if it is paid to a particular employee considering his special skill or some kinds of hardship to which he is exposed during the course of employment, then such an allowance shall be excluded from salary.

Hope this will clear the doubts of Nandini.

Regards, Madhu.T.K

In any term, the EPF amount does not differ. Under the basic concept of EPF, they require data from the employer. As per their Profit and Loss account, some amount is debited under the head "wages/Salary." If the amount is reconciled with 12 challans of the year, with gross wages, then they will not be concerned much.

Please note that after ECR submission, they ask for the "excluded employee" salary, the number of persons, and the amount as well. In gross, it's a way to reconcile with the accounts and labor department returns, and to determine if the establishment has avoided paying the EPFO dues, which are payable to the department.

Thank you.

Hi Madhu and Sharma,

I understand the explanation but still I can't make out how gross wage came to be Rs. 378917/-.

Regards,
Nandini

Hi,

I have one doubt: when we talk about Gross Salary or Wages in ECR, does it mean the gross salary of the particular month? For example, in case of absence, salary will be deducted, and therefore the gross amount can change according to the attendance.