Hello, Why ESI & EPF deduction amount is vary in every month salary ? how does it calculated? Regards, Seja Desai
From India, Surat
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From India, Surat
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Dear Seja,
It will not vary. PF will be deducted at 12% (or Rs.780/- in some organizations where basic pay is more than Rs.6,500) from employees. ESI will be deducted at 1.75% from employees (up to Gross salary Rs.15,000).
The following are the cases where the PF & ESI contribution varies:
PF will vary only in the month when an employee works on the National festival holiday or if he is absent. For example, if an employee is paid for 31 days in January and works on the 1st and 26th, then he has to be paid double wages for those 2 days, resulting in a variation in basic salary as he will be paid for 33 days. Similarly, if an employee is absent for 2 days, he will get the salary for 29 days, causing a variation in basic pay.
ESI will vary only if the employee is paid overtime, monthly incentive, attendance bonus, or National festival holiday. Even if the gross amount increases to more than Rs.15,000, the ESI amount will be deducted based on the actual gross earned.
Thank you.
From India, Mumbai
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193It will not vary. PF will be deducted at 12% (or Rs.780/- in some organizations where basic pay is more than Rs.6,500) from employees. ESI will be deducted at 1.75% from employees (up to Gross salary Rs.15,000).
The following are the cases where the PF & ESI contribution varies:
PF will vary only in the month when an employee works on the National festival holiday or if he is absent. For example, if an employee is paid for 31 days in January and works on the 1st and 26th, then he has to be paid double wages for those 2 days, resulting in a variation in basic salary as he will be paid for 33 days. Similarly, if an employee is absent for 2 days, he will get the salary for 29 days, causing a variation in basic pay.
ESI will vary only if the employee is paid overtime, monthly incentive, attendance bonus, or National festival holiday. Even if the gross amount increases to more than Rs.15,000, the ESI amount will be deducted based on the actual gross earned.
Thank you.
From India, Mumbai
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Hello Seja,
Do you mean to refer to the PF & ESI based on our contribution or the total contribution? For individual PF & ESI, there won't be a difference in every month's salary unless there is a variance in your salary. PF constitutes 12% of your basic salary, while ESI is calculated at 1.75% of your gross salary.
Regards
From India, Bangalore
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Do you mean to refer to the PF & ESI based on our contribution or the total contribution? For individual PF & ESI, there won't be a difference in every month's salary unless there is a variance in your salary. PF constitutes 12% of your basic salary, while ESI is calculated at 1.75% of your gross salary.
Regards
From India, Bangalore
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Dear Kris,
DA varies from company to company. Moreover, private companies only provide a basic salary. Mostly, DA is followed in central/state government offices. Currently, for central government employees, DA is 51% of the basic pay, increased from 45% to 51%. Additionally, it is applicable to employees where the minimum wages rule applies. Minimum wages comprise both basic and DA components.
Thank you.
From India, Mumbai
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DA varies from company to company. Moreover, private companies only provide a basic salary. Mostly, DA is followed in central/state government offices. Currently, for central government employees, DA is 51% of the basic pay, increased from 45% to 51%. Additionally, it is applicable to employees where the minimum wages rule applies. Minimum wages comprise both basic and DA components.
Thank you.
From India, Mumbai
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Dear Shenbagarajan K,
Thank you for the nice info. Could you please explain to me more about DA? Why do private companies not follow DA, and what is the main objective of DA? Additionally, could you provide me with a salary breakup including DA for better understanding?
Thanks in advance.
From India, Bangalore
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Thank you for the nice info. Could you please explain to me more about DA? Why do private companies not follow DA, and what is the main objective of DA? Additionally, could you provide me with a salary breakup including DA for better understanding?
Thanks in advance.
From India, Bangalore
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Dear Kris,
Sorry, the Dearness Allowance (DA) for the central government is presently 58% and has been proposed to increase to 65%. It is increased every six months.
RRReddy,
The concept of DA came into effect in 1972 only. Mainly, it was introduced for pensioners and has gradually been applied to all government sectors (both central and state).
Dearness allowance is granted to compensate for the price increase above that which the revised pay scales relate to. This allowance is sanctioned twice a year, payable from 1 January and 1 July.
Since private companies do not determine salaries using pay scales, DA is not provided in many companies.
As the Cost to Company (CTC) is fixed for the employee, they derive their salary breakdown as follows:
- Basic: 50 - 60% of gross salary
- House Rent Allowance (HRA): 40 - 50% of basic salary (50% in the case of metro cities)
- Transport Allowance: 800 (Maximum eligibility for tax exemption for TA)
- Medical Allowance: 1250 (Maximum eligibility for tax exemption for medical reimbursement)
- Remaining salary will fall under Special Allowance or ad hoc allowance salary heads.
For example, if an employee's monthly salary is 20000, their breakdown would be:
- Basic: 12000
- HRA: 6000
- TA: 800
- Special Allowance / Ad hoc Allowance: 1200
Total Salary: 20000
If an employee is paid the minimum wage, the respective state government will provide the minimum wage rate for different worker categories based on the city's classification. It is calculated as Basic + DA.
For instance, a salesperson working in Tamil Nadu (Chennai) receives the following wages:
- Basic salary: 78.88/day
- DA: 43.65/day
- Total: 122.53/day
So, if the person's salary is 7000, the salary structure will be:
- Basic + DA: 3799
- HRA: 1517
- TA: 800
- Special Allowance: 884
Total: 7000
I have corrected the spelling, grammar, and formatting errors in your input. Let me know if you need further assistance.
From India, Mumbai
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Sorry, the Dearness Allowance (DA) for the central government is presently 58% and has been proposed to increase to 65%. It is increased every six months.
RRReddy,
The concept of DA came into effect in 1972 only. Mainly, it was introduced for pensioners and has gradually been applied to all government sectors (both central and state).
Dearness allowance is granted to compensate for the price increase above that which the revised pay scales relate to. This allowance is sanctioned twice a year, payable from 1 January and 1 July.
Since private companies do not determine salaries using pay scales, DA is not provided in many companies.
As the Cost to Company (CTC) is fixed for the employee, they derive their salary breakdown as follows:
- Basic: 50 - 60% of gross salary
- House Rent Allowance (HRA): 40 - 50% of basic salary (50% in the case of metro cities)
- Transport Allowance: 800 (Maximum eligibility for tax exemption for TA)
- Medical Allowance: 1250 (Maximum eligibility for tax exemption for medical reimbursement)
- Remaining salary will fall under Special Allowance or ad hoc allowance salary heads.
For example, if an employee's monthly salary is 20000, their breakdown would be:
- Basic: 12000
- HRA: 6000
- TA: 800
- Special Allowance / Ad hoc Allowance: 1200
Total Salary: 20000
If an employee is paid the minimum wage, the respective state government will provide the minimum wage rate for different worker categories based on the city's classification. It is calculated as Basic + DA.
For instance, a salesperson working in Tamil Nadu (Chennai) receives the following wages:
- Basic salary: 78.88/day
- DA: 43.65/day
- Total: 122.53/day
So, if the person's salary is 7000, the salary structure will be:
- Basic + DA: 3799
- HRA: 1517
- TA: 800
- Special Allowance: 884
Total: 7000
I have corrected the spelling, grammar, and formatting errors in your input. Let me know if you need further assistance.
From India, Mumbai
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Hi everyone,
Suppose a person joins and his basic salary is 6000/- per month. His salary is eligible for PF deduction. After some months, his basic salary becomes 7000/- per month due to an increment. Now, the person is not willing to contribute to PF. Will he become excluded or not?
Regards,
Soumya Dutta
From India, Pune
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Suppose a person joins and his basic salary is 6000/- per month. His salary is eligible for PF deduction. After some months, his basic salary becomes 7000/- per month due to an increment. Now, the person is not willing to contribute to PF. Will he become excluded or not?
Regards,
Soumya Dutta
From India, Pune
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Dear Soumya, Yes, you can exempt him from EPF deduction based on wage ceiling more than Rs.6500/-. you can submit FORM 1(Exemption under Paragraph 27 of the Scheme) to the PF office.
From India, Mumbai
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From India, Mumbai
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Dear Soumya,
You can ask the employee to fill out the form, which should be attested by the authorized person of the organization, and then submit it to the PF office. If you have a group of people who want to seek exemption, you can apply through your company to the PF office. After obtaining the exemption, instruct them to withdraw their PF using Form 19 and Form 10C.
Note: Even though there is an exemption in PF, if you can convince the employee, suggest that they continue contributing to the PF since it is a form of hidden saving for the employee, which will benefit them in the future.
From India, Mumbai
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You can ask the employee to fill out the form, which should be attested by the authorized person of the organization, and then submit it to the PF office. If you have a group of people who want to seek exemption, you can apply through your company to the PF office. After obtaining the exemption, instruct them to withdraw their PF using Form 19 and Form 10C.
Note: Even though there is an exemption in PF, if you can convince the employee, suggest that they continue contributing to the PF since it is a form of hidden saving for the employee, which will benefit them in the future.
From India, Mumbai
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Hi,
It will not vary month to month if employees' attendance is full every month. If leave without pay (LWP) is taken, then there will be a variation based on the LWP days. LWP is compensated in the following month. If employees work on national holidays (some state festival holidays also entitle double salary or one compensatory off) and choose to receive salary for those days, they will receive an extra day's salary, and PF/ESIC will be deducted from the processed salary for that month.
Overtime also affects the deduction on ESIC.
Regards,
Accord Services, Noida
From India, Delhi
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It will not vary month to month if employees' attendance is full every month. If leave without pay (LWP) is taken, then there will be a variation based on the LWP days. LWP is compensated in the following month. If employees work on national holidays (some state festival holidays also entitle double salary or one compensatory off) and choose to receive salary for those days, they will receive an extra day's salary, and PF/ESIC will be deducted from the processed salary for that month.
Overtime also affects the deduction on ESIC.
Regards,
Accord Services, Noida
From India, Delhi
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Dear Shenbarajan,
An employee will be granted exemption from the EPF scheme as per Section 27 of the Employees' Provident Funds Scheme, 1952, which is mentioned below:
27. Exemption of an Employee
(1) A Commissioner may, by order and subject to such conditions as may be specified in the order, exempt from the operation of all or any of the provisions of this Scheme an employee to whom the Scheme applies on receipt of an application in Form I from such an employee:
Provided that such an employee is entitled to benefits in the nature of Provident Fund, gratuity, or old-age pension according to the rules of the factory or other establishment, and such benefits, separately or jointly, are on the whole not less favorable than the benefits provided under the Act and the Scheme.
Please note that the second paragraph of Section 27 (1) mentions that the employee should be entitled to benefits by the employer that are equal to or better than the benefits provided under the EPF Act.
An exemption will not be granted just because the employee doesn't want to continue the same.
Regards,
Arun
From India, Kochi
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An employee will be granted exemption from the EPF scheme as per Section 27 of the Employees' Provident Funds Scheme, 1952, which is mentioned below:
27. Exemption of an Employee
(1) A Commissioner may, by order and subject to such conditions as may be specified in the order, exempt from the operation of all or any of the provisions of this Scheme an employee to whom the Scheme applies on receipt of an application in Form I from such an employee:
Provided that such an employee is entitled to benefits in the nature of Provident Fund, gratuity, or old-age pension according to the rules of the factory or other establishment, and such benefits, separately or jointly, are on the whole not less favorable than the benefits provided under the Act and the Scheme.
Please note that the second paragraph of Section 27 (1) mentions that the employee should be entitled to benefits by the employer that are equal to or better than the benefits provided under the EPF Act.
An exemption will not be granted just because the employee doesn't want to continue the same.
Regards,
Arun
From India, Kochi
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EPF is calculated on the Basic + DA, while ESI is calculated on the Gross.
Any component that totals for calculating EPF / ESI, if it varies from month to month, EPF and ESI will differ.
The All India Consumer Index for Industrial Workers (AICI-IW) varies each month and serves as the basis for calculating DA. For example, for Industrial Workers, it was 197 in December 2011, and the DA will correspond to this value. In January 2012, it will normally be higher - though sometimes it may be lower.
Since DA is one of the components in determining EPF (Basic+DA) and ESI (Gross), this will vary each month. Many industries opt for monthly DA variations.
Regarding the Government's approach, they calculate the average for 6 months (Jan-Jun and Jul-Dec) and announce the bi-annual DA.
Rajusiachen
From India, Coimbatore
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Any component that totals for calculating EPF / ESI, if it varies from month to month, EPF and ESI will differ.
The All India Consumer Index for Industrial Workers (AICI-IW) varies each month and serves as the basis for calculating DA. For example, for Industrial Workers, it was 197 in December 2011, and the DA will correspond to this value. In January 2012, it will normally be higher - though sometimes it may be lower.
Since DA is one of the components in determining EPF (Basic+DA) and ESI (Gross), this will vary each month. Many industries opt for monthly DA variations.
Regarding the Government's approach, they calculate the average for 6 months (Jan-Jun and Jul-Dec) and announce the bi-annual DA.
Rajusiachen
From India, Coimbatore
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I think, yes, if he wants not to continue with the PF, he has to fill Form 11. Correct me if I am wrong, as most of the time it happens when an employee works for more than 3 or 4 years. Please confirm with seniors.
From India, Delhi
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From India, Delhi
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Hi Ruby,
Please be informed that if an employee was a member of the PF in the previous company, then, honestly, he will fill out Form 11, and his PF membership will continue with the present company. Whether his basic DA (PF salary, whatever) is more than Rs. 6,500/-, he will be covered under PF up to Rs. 6,500/- in the present company. If he joins as a fresher with the present company and also fills out Form 11, but his PF salary is Rs. 6,500/- or less, and PF applicability exists in the present company, then he will come under the ambit of PF applicability. If excluded from the scheme, then Form 11 will suffice.
Regards.
Accord Services (Labour Laws Consultancy), Noida
From India, Delhi
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Please be informed that if an employee was a member of the PF in the previous company, then, honestly, he will fill out Form 11, and his PF membership will continue with the present company. Whether his basic DA (PF salary, whatever) is more than Rs. 6,500/-, he will be covered under PF up to Rs. 6,500/- in the present company. If he joins as a fresher with the present company and also fills out Form 11, but his PF salary is Rs. 6,500/- or less, and PF applicability exists in the present company, then he will come under the ambit of PF applicability. If excluded from the scheme, then Form 11 will suffice.
Regards.
Accord Services (Labour Laws Consultancy), Noida
From India, Delhi
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Dear Ruby,
Form No. 11 (Eleven) under EPF scheme pertains to information provided by an employee when joining a new employer regarding their previous employments, including the names and addresses of employers, duration of service, and whether they were previously a member of the EPF scheme. This form is to be maintained by the employer.
Please note that an exemption from the EPF/Pension/EDLI scheme can only be granted to an employee if they receive equal or more favorable benefits from the current employer compared to those from the EPF authorities. Exemptions will not be granted solely because the employee does not wish to continue as a member.
Regards,
Arun
From India, Kochi
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Form No. 11 (Eleven) under EPF scheme pertains to information provided by an employee when joining a new employer regarding their previous employments, including the names and addresses of employers, duration of service, and whether they were previously a member of the EPF scheme. This form is to be maintained by the employer.
Please note that an exemption from the EPF/Pension/EDLI scheme can only be granted to an employee if they receive equal or more favorable benefits from the current employer compared to those from the EPF authorities. Exemptions will not be granted solely because the employee does not wish to continue as a member.
Regards,
Arun
From India, Kochi
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Dear Arun & Sharmard,
I am sorry, I am new to HR compliance, but I have noticed that many employees and employers do not want to engage with this matter. They simply fill out Form 11 without providing the past employment details of employees when they join the company.
I believe it is also possible for employees to opt-out or voluntarily withdraw from the Provident Fund (PF) scheme, especially since employees now have to bear the total PF contribution (both employee and employer) as part of their cost-to-company (CTC). Consequently, they may prefer not to lock up their money. Please guide me on how we can strike a balance where compliance and employee needs can both be effectively managed.
Thanks & Regards
From India, Delhi
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I am sorry, I am new to HR compliance, but I have noticed that many employees and employers do not want to engage with this matter. They simply fill out Form 11 without providing the past employment details of employees when they join the company.
I believe it is also possible for employees to opt-out or voluntarily withdraw from the Provident Fund (PF) scheme, especially since employees now have to bear the total PF contribution (both employee and employer) as part of their cost-to-company (CTC). Consequently, they may prefer not to lock up their money. Please guide me on how we can strike a balance where compliance and employee needs can both be effectively managed.
Thanks & Regards
From India, Delhi
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