Is Your Payroll Cycle from 21st to 20th Legal? Seeking Advice on Compliance with EPF and ESIC

Hello everyone, I've joined an MNC company as an HR executive. In this company, the monthly cycle is from the 21st to the 20th. Is this the correct method as per the law? If yes, how can I ensure compliance with monthly requirements such as EPF and ESIC?

For example, if an employee resigns and their last working day is after the 20th, for instance, on the 25th of March. Currently, we deposit the employee's PF and ESIC contributions for the 5 days in the month of April. Is this the correct procedure? If not, please advise on how we can ensure compliance.

Please advise.

Dear Mr. ______,

Your company's monthly payment cycle from the 21st to the 20th is acceptable. However, you must pay monthly wages on or before the 7th/10th of every month, depending on the applicable employee strength.

Legal Compliance

According to the Payment of Wages Act, PF Act, and ESIC Act, the monthly cycle is from the 1st to the 30th/31st. This is the correct method as per the law. Additionally, you must pay EPF & ESIC contributions for monthly compliance before the 15th of every month.

Regards,
Sanjay Tiwari
Dy. GM (HRD & IR)
Air Control & Chemical Eng. Co. Ltd.
M: [Phone Number Removed For Privacy-Reasons]

Dear Mr. Sanjay,

Thank you for your quick response.

We pay wages approximately on the 27th, 28th, or 29th of every month and prepare the PF & ESIC challan around the 1st to 4th of every month.

As I previously asked for an example: If an employee resigns and their last working day is after the 20th, for instance, on the 25th of March. They leave in March, but we submit their 5 days' contributions of PF & ESIC in the month of April. Is this also correct or not? If we submit their 5 days' contributions in April, then their last month is April, not March. However, in reality, they left in March.

Salary Cut-off Date

The salary cut-off date is set for the convenience of payroll processing. In larger organizations where the employee count is higher, payroll cannot be processed after the end of the month to avoid salary delays. The cut-off date is from the 21st to the 20th, and the salary paid covers the period from the 1st to the 31st or 30th of every month only. In this scenario, any leaves or loss of pay availed by the employee will be reflected in the next month's cycle only. Otherwise, the full month's salary is paid.

Resigned Cases

For resigned cases, a separate FFS computation sheet will be prepared, and as per the process, 25 days of PF/ESI will be paid in the month of April.