Transitioning to HR Generalist: Can Anyone Explain ESI and PF Calculations?

Hi all,

Currently, I am working as an HR Recruiter in an MNC company, and I have decided to transition to an HR Generalist profile. Therefore, I am in need of clear information about ESI and PF.

Hi Sathish,

ESI is contributed from both sides by the employee as well as the employer. It is calculated based on the gross salary per month, with a maximum ceiling of Rs. 10,000 per month. The contributions from both sides are as follows:

Employee Side - 1.75% of gross/month
So, if the gross salary of an employee is Rs. 8000 per month, the ESI contribution would be 8000 * 1.75% = Rs. 140.

Employer Side - 4.75% of gross/month
The ESI contribution would be 8000 * 4.75% = Rs. 380.

Additionally, PF is also paid from both sides. Both the employer and the employee are required to pay 12% of the basic salary. Out of this 12%, the employer's contribution includes 8.33% for the Pension fund, while the remaining 3.67% goes to the PF Fund itself.

Regards,
Amit Seth.

Thank you for the nice explanation. However, I have a doubt. I believe the employee contributes 8.33% and 3.67% to the Pension and PF respectively, not the employer. Please correct me if I am mistaken.

Regards,
Sharad

Dear Sharad,

ESI

Employees' Contribution - 1.75% on the total wages he/she earned in the month. This should be rounded to the nearest rupee. That is to say if the ESI amount comes as Rs. 8.01, then the contribution deducted is Rs. 9.00. And if the contribution is Rs. 8.99, then the deductible amount is Rs. 9.00. Similarly, the employer's contribution at 4.75% is to be calculated individually. The total recovery of 1.75% and company contribution 4.75% are to be paid in one challan on or before the 21st of the subsequent month.

P.F.

The deduction and contribution at 12% are explained by way of an example.

Salary for the month Rs. 6500.

Employee Contribution (to be deducted from salary):

6500 x 12% = 780.

Employer's Contribution (not to be deducted from salary):

Family Pension Scheme = 6500 x 8.33% = 541.

Employees' Provident Fund (balance of the 12% amount):

780 - 541 = 239.

Besides this, the administration charges on EPF at 1.1% (A/C NO.2), insurance fund at 0.5% (A/C NO.21), and administration charges on the insurance fund at 0.01% (A/C NO.22) on the total salary paid during the month are to be remitted on or before the 15th of the subsequent month.

Thanks,

P. Ramachandran

Hi All,

As per my knowledge, PF is calculated on Basic salary and not gross salary. It is compulsory for employees earning Basic salary below Rs. 6500 and optional for employees having Basic salary over Rs. 6,500. Though we should insist all the employees to opt for PF.

ESI is calculated on Gross salary. Employees earning below Rs. 10,000 per month are covered under it.

Please correct me if I am wrong.

Regards,
Reena

Dear Reena,

You are right. However, when the option is for those drawing more than 6500 for PF, we should request a letter from the employee not to deduct PF since they are earning more than Rs. 6500.

Thanks,
P. Ramachandran

Dear Reena,

I have already explained the same. ESI is contributed from both sides: the Employee as well as the Employer. It is calculated based on the Gross salary per month, and the maximum ceiling is 10,000 Rs./Month. The contribution from both sides is as follows:

Employee Side - 1.75% of gross/month
So, if the gross of an employee is 8,000/month, then the ESI contribution would be 8,000 * 1.75% = 140 Rupees.

Employer Side - 4.75% of gross/month
ESI contribution would be 8,000 * 4.75% = 380 Rupees.

On the other hand, PF is also paid from both sides. Both the employer and the employee are required to pay 12% of the basic salary. Out of this 12% of the employer's contribution, 8.33% goes to the Pension fund, whereas the remaining 3.67% goes to the PF Fund itself.

Regards,

Amit Seth.