Employee Leaves in 5 Days: Are PF, ESI, and Professional Tax Still Required?

Hi,

One of our employees had a monthly gross salary of Rs 30,000/- and therefore was not eligible for PF enrollment (as salary above Rs 15,000) and not eligible for ESI enrollment (as salary above Rs 21,000). However, the employee leaves the company in just 5 days. Now, my queries are:

i) Since he has to be paid for 5 days and his salary amounts to Rs 5,000, does PF & ESI enrollment become mandatory for him as he is paid only Rs 5,000?

ii) Also, is Professional Tax to be paid for him or not? If he had continued for the full month, then definitely Professional Tax deduction would have been mandatory. However, since he has to be paid only Rs 5,000 and in our state, Professional Tax deduction is not required if the salary is below Rs 10,000.

Thank you.

PF and ESI are payable on notional wages. Since it is above Rs 15,000/21,000, you need not pay PF or ESI.

Profession Tax is payable on earned income. The relevant Act (it is a state Act and will vary from state to state) will provide the limit over which the tax becomes payable. Similarly, there will be a provision that in order to be taxable, one should have spent at least two months in the half year in the place coming under the jurisdiction of the local administration. Please check that and decide whether to pay it or not. Under Kerala rules, there is a minimum amount of revenue, i.e., Rs 12,000 per half-year below which the income is not subjected to the levy of profession tax. Similarly, one should have worked for at least 2 months.

Dear ANONYMOUS,

If any employee is covered for PF and ESIC, then his/her salary must be deducted for PF & ESIC even if you are paying him 1 day's salary.

In your case, if he is covered under PF, then deduct 12% of the basic component of his 5-day salary. If he is covered under ESIC, then deduct 0.75% of his gross salary as PF & ESIC deductions.

Regards

Let me confirm that an employee becomes covered under ESI or PF only if his notional salary is below Rs 21,000 or Rs 15,000, as the case may be. Registration should have been made on the day of his joining itself. If you have agreed to pay Rs 30,000, you should not have registered him under ESI or PF. Now, instead of 5 days, suppose he had worked for 11 days. Is it possible for you to register him under ESI? No.

In short period engagement, the notional wages, the salary that would have been paid had the employee worked for 30 days should be taken as salary. Please find a circular from ESIC in this regard. A similar circular is also there on EPF as well. However, I don't have it at my fingertips right now.

Should we pay PF/ESI to daily wage workers?

Should we pay PF/ESI to daily wage workers who come randomly when required? The daily wage ranges from 700 to 1000.

Please let me know if you have any further questions.