Dear All,
I have a lot of confusion on ESI and PF Matters:
1) If an Employee's salary is Rs. 14,000/- (assuming Basic + DA and no other component) and he took leaves for 5 days. In this case, his Gross Salary is Rs. 14,000, whereas after considering leaves his salary will be Rs. 11,667/-. Now, will ESI be deducted on 11,667 or Rs. 14,000/-? And Why? PF is also liable to be deducted on Basic + DA. In this case, will PF be deducted on 15,000 or 11,667 or 14,000/-? (Please reply ASAP)
2) If in the above case his salary is Rs. 16,000/-, then what will be the deduction amount for ESI and PF?
3) Our Management has decided to deduct the employee and employer share from the employee's salary only. What will be the consequences of this case?
4) Our accountant calculates every month's salary on the basis of 30 days even if the month belongs to 28 or 31. Is this correct?
I am waiting for your response.
Thanks in Advance,
Garima
From India, New Delhi
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3I have a lot of confusion on ESI and PF Matters:
1) If an Employee's salary is Rs. 14,000/- (assuming Basic + DA and no other component) and he took leaves for 5 days. In this case, his Gross Salary is Rs. 14,000, whereas after considering leaves his salary will be Rs. 11,667/-. Now, will ESI be deducted on 11,667 or Rs. 14,000/-? And Why? PF is also liable to be deducted on Basic + DA. In this case, will PF be deducted on 15,000 or 11,667 or 14,000/-? (Please reply ASAP)
2) If in the above case his salary is Rs. 16,000/-, then what will be the deduction amount for ESI and PF?
3) Our Management has decided to deduct the employee and employer share from the employee's salary only. What will be the consequences of this case?
4) Our accountant calculates every month's salary on the basis of 30 days even if the month belongs to 28 or 31. Is this correct?
I am waiting for your response.
Thanks in Advance,
Garima
From India, New Delhi
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Hi Garima, Good Question for all to gain basic knowledge. PF & ESI Always deduct on Earned Basic + DA. So In your case 11667 is Earned basic so deduct on it
From India, Delhi
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From India, Delhi
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Dear Sirs,
1. ESI Contribution on wages paid on leave sanctioned is payable. However, ESI contribution on encashment of leave, if permissible, after a selected year/period is not payable.
2. At present, ESI wage limit is Rs. 15,000/- Therefore, contribution on Rs. 16,000/- as wages is not payable provided this amount does not include Overtime amounts and also that the employee is getting Rs. 16,000/- since the beginning of the present contribution period. If the employee's salary is enhanced in any month during the contribution period, his contribution is required to be deducted till the close of the contribution period. (Section 2(9) & Rule 50).
3. Deducting employers' share of contribution from wages of employees is violative of provisions of ESI Act, 1948, and is also an offense punishable under the said Act. (Section 40 & 85(b). However, the term "CTC" as is generally called in HR circles is different than "wages".
4. The terms "wage period" (Section 2(24) and "average daily wages during a wage period" (Rule 2(1-B) have been defined under the said Act and Rules framed thereunder. Please refer to the same.
If you have any more doubts, I suggest you seek clarification in writing from the appropriate office of ESIC before making any decision so that there may not be any violation or levy of interest or penalty due to any wrong applications of provisions of the said Act and rules/regulations framed thereunder.
From India, Noida
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1. ESI Contribution on wages paid on leave sanctioned is payable. However, ESI contribution on encashment of leave, if permissible, after a selected year/period is not payable.
2. At present, ESI wage limit is Rs. 15,000/- Therefore, contribution on Rs. 16,000/- as wages is not payable provided this amount does not include Overtime amounts and also that the employee is getting Rs. 16,000/- since the beginning of the present contribution period. If the employee's salary is enhanced in any month during the contribution period, his contribution is required to be deducted till the close of the contribution period. (Section 2(9) & Rule 50).
3. Deducting employers' share of contribution from wages of employees is violative of provisions of ESI Act, 1948, and is also an offense punishable under the said Act. (Section 40 & 85(b). However, the term "CTC" as is generally called in HR circles is different than "wages".
4. The terms "wage period" (Section 2(24) and "average daily wages during a wage period" (Rule 2(1-B) have been defined under the said Act and Rules framed thereunder. Please refer to the same.
If you have any more doubts, I suggest you seek clarification in writing from the appropriate office of ESIC before making any decision so that there may not be any violation or levy of interest or penalty due to any wrong applications of provisions of the said Act and rules/regulations framed thereunder.
From India, Noida
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PF is calculated on Basic+DA ESI is calculated on Earned Gross
From United States, Ogden
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From United States, Ogden
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Sirs,
Can you please clarify?
If a person's Gross Salary is 18k, but due to a loss of pay, they earn only 13000/- in a particular month, let's say, September 2014, what will be the contribution amount for that month? Will it be 15000 * 12% = 1800/- or 13000 * 12% = 1560/-?
Thanks,
Bhuvana.
From United Arab Emirates
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Can you please clarify?
If a person's Gross Salary is 18k, but due to a loss of pay, they earn only 13000/- in a particular month, let's say, September 2014, what will be the contribution amount for that month? Will it be 15000 * 12% = 1800/- or 13000 * 12% = 1560/-?
Thanks,
Bhuvana.
From United Arab Emirates
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Dear Bhuvana,
PF deduction will be calculated based on the Basic+DA of the employee. The percentage of Basic + DA will depend on the company policy. If your company's Basic+DA is 50%, then the PF deduction will be calculated as follows: 13000 * 50% = 6500. Therefore, Basic+DA = 6500/-. Subsequently, the PF deduction will be 6500 * 12% = 780/-.
For any clarification, you can contact 9908410310.
(Sudhakar)
From India, Madgaon
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PF deduction will be calculated based on the Basic+DA of the employee. The percentage of Basic + DA will depend on the company policy. If your company's Basic+DA is 50%, then the PF deduction will be calculated as follows: 13000 * 50% = 6500. Therefore, Basic+DA = 6500/-. Subsequently, the PF deduction will be 6500 * 12% = 780/-.
For any clarification, you can contact 9908410310.
(Sudhakar)
From India, Madgaon
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Dear Bhuvana,
There are many things such as the practical calculation of PF. It depends on earnings during the month. If Basic+DA is only Rs. 13,000 for the month of Sept-14, then the calculation will be Rs. 13,000 * 12% = Rs. 1,560 from the employee's part contribution.
If you want to discuss this topic, I will surely help you. This is a very interesting topic regarding PF contribution, and you will surely learn more new things about PF through our discussion.
Regards,
Sukhpal
9891307304
From India, Delhi
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There are many things such as the practical calculation of PF. It depends on earnings during the month. If Basic+DA is only Rs. 13,000 for the month of Sept-14, then the calculation will be Rs. 13,000 * 12% = Rs. 1,560 from the employee's part contribution.
If you want to discuss this topic, I will surely help you. This is a very interesting topic regarding PF contribution, and you will surely learn more new things about PF through our discussion.
Regards,
Sukhpal
9891307304
From India, Delhi
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Dear Bhuvana, You should always calculate the PF deductions on earned salary of the respective month i.e you should calculate 13000*12%=1560/-. regards, Ankireddy
From India, Mumbai
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From India, Mumbai
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Dear Garima,
I am providing the following reply in response to your queries in a simple way to understand:
1) ESI as well as PF contributions will be deducted on Rs. 11,667, which is the total salary earned by an employee during the month in question. Please note that ESI contribution is payable on the gross salary, and PF contribution is payable on Basic & DA.
2) Due to the annual increment, the aforementioned employee's salary is revised to Rs. 16,000 per month (Basic & DA). PF contribution will be deducted at 12% on Rs. 15,000 per month from the employee, and the employer's contribution will be at 12% plus 1.61% Admin charges (Total 13.61%).
As the ESI ceiling limit is Rs. 15,000 per month, no ESI contribution is payable. However, if the employee's salary is increased in any month during the contribution period, his contribution is required to be deducted until the end of the contribution period, i.e., April to September and October to March. Once the contribution period is over, you are not required to deduct and deposit ESI contribution for the said employee since he is out of the ESI coverage.
3) Your management has decided to deduct from the employee's salary, which is contrary to the PF Act. It is highly illegal. Therefore, I urge you not to make this decision. In this regard, I refer to a recent decision of the Apex Court in the matter of PF Commissioner vs. Group 4 Security.
4) Please follow the "wage period" and "average daily wages during a wage period as per the Act & Rules." However, in accordance with the Minimum Wages Act, average daily wages can be ascertained as follows: total monthly wages divided by 26 to get daily wages.
Thank you.
From India, Calcutta
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I am providing the following reply in response to your queries in a simple way to understand:
1) ESI as well as PF contributions will be deducted on Rs. 11,667, which is the total salary earned by an employee during the month in question. Please note that ESI contribution is payable on the gross salary, and PF contribution is payable on Basic & DA.
2) Due to the annual increment, the aforementioned employee's salary is revised to Rs. 16,000 per month (Basic & DA). PF contribution will be deducted at 12% on Rs. 15,000 per month from the employee, and the employer's contribution will be at 12% plus 1.61% Admin charges (Total 13.61%).
As the ESI ceiling limit is Rs. 15,000 per month, no ESI contribution is payable. However, if the employee's salary is increased in any month during the contribution period, his contribution is required to be deducted until the end of the contribution period, i.e., April to September and October to March. Once the contribution period is over, you are not required to deduct and deposit ESI contribution for the said employee since he is out of the ESI coverage.
3) Your management has decided to deduct from the employee's salary, which is contrary to the PF Act. It is highly illegal. Therefore, I urge you not to make this decision. In this regard, I refer to a recent decision of the Apex Court in the matter of PF Commissioner vs. Group 4 Security.
4) Please follow the "wage period" and "average daily wages during a wage period as per the Act & Rules." However, in accordance with the Minimum Wages Act, average daily wages can be ascertained as follows: total monthly wages divided by 26 to get daily wages.
Thank you.
From India, Calcutta
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Dear Garima ji,
In fact, I read your post on the day you posted it. I got confused myself on that day and decided not to reply.
Learned members, including Harsh Kumar ji and Sibabrata ji, since they contributed in your post, I read your post again.
You are a new member on this knowledge-sharing platform. I do not know how old you are in HR, but it seems from your post that you are a fresher.
What I feel is that you should first try to understand what salary is or what constitutes salary.
Your question is basically on Salary. I will advise you to first study some salary sheets and try to understand how the salary is calculated.
There are four basic parts in the salary sheet. The first one is attendance or days payable and rate of salary. The second one is earnings with Gross Amount. The third one is deductions. And the fourth one is Net Payable, i.e., Gross minus deductions.
It seems you have made a mistake in writing I think you mean to say - Gross Salary is Rs. 14,000 and if 5 days leave salary is deducted then Gross Salary would be Rs. 11,667.
Now your question is, whether ESI is to be deducted on Rs. 14,000 or on Rs. 11,667 and PF is to be deducted on Rs. 14,000 or on Rs. 11,667 or on Rs. 15,000?
The answer to your question is as follows:
PF and ESI are deducted on earned salary. Earned salary is inclusive of leave salary. PF is deducted on earned Basic + DA, and ESI is deducted on earned Gross. In your case, Basic + DA and Gross are the same. So PF as well as ESI will be deducted on Rs. 14,000.
Hope your confusion is removed.
From India, Mumbai
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In fact, I read your post on the day you posted it. I got confused myself on that day and decided not to reply.
Learned members, including Harsh Kumar ji and Sibabrata ji, since they contributed in your post, I read your post again.
You are a new member on this knowledge-sharing platform. I do not know how old you are in HR, but it seems from your post that you are a fresher.
What I feel is that you should first try to understand what salary is or what constitutes salary.
Your question is basically on Salary. I will advise you to first study some salary sheets and try to understand how the salary is calculated.
There are four basic parts in the salary sheet. The first one is attendance or days payable and rate of salary. The second one is earnings with Gross Amount. The third one is deductions. And the fourth one is Net Payable, i.e., Gross minus deductions.
It seems you have made a mistake in writing I think you mean to say - Gross Salary is Rs. 14,000 and if 5 days leave salary is deducted then Gross Salary would be Rs. 11,667.
Now your question is, whether ESI is to be deducted on Rs. 14,000 or on Rs. 11,667 and PF is to be deducted on Rs. 14,000 or on Rs. 11,667 or on Rs. 15,000?
The answer to your question is as follows:
PF and ESI are deducted on earned salary. Earned salary is inclusive of leave salary. PF is deducted on earned Basic + DA, and ESI is deducted on earned Gross. In your case, Basic + DA and Gross are the same. So PF as well as ESI will be deducted on Rs. 14,000.
Hope your confusion is removed.
From India, Mumbai
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Dear Garima,
I have read all comments and I think you have a lot of confusion. So, I want to clear your doubts in a few words. Just follow and you'll see if it's correct or wrong. If needed, you can search on Google. Please find the details below:
ESIC
Suppose Ram, an employee, has a gross salary of 15000/- (including Basic+DA+Other) for 30 days. If they work the whole month, earning 15000/-, then as per the ESIC act, if any employee earns a gross salary or wage of 15000, they are exempted from ESIC. If they earn less than 15000, they are liable for ESIC.
PF
Suppose Ram's gross salary is 15000, and your company splits his salary like (PF+DA = 6500 + other + 8500), then your company deducts PF from Basic+DA*12%.
Regarding your most important query about leave encashment,
Suppose Ram worked 25 days in a month, then 5 days are his leave. When you calculate his salary, he has earned 25 days' salary + 5 days leave encashment, making his salary 15000/-.
If you have any queries or problems, feel free to contact me via my email: ashishshow@gmail.com
For any compliance-related issues, you can also reach out to me through my email.
Thanks & Regards,
Ashish Shaw
From India, Kolkata
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I have read all comments and I think you have a lot of confusion. So, I want to clear your doubts in a few words. Just follow and you'll see if it's correct or wrong. If needed, you can search on Google. Please find the details below:
ESIC
Suppose Ram, an employee, has a gross salary of 15000/- (including Basic+DA+Other) for 30 days. If they work the whole month, earning 15000/-, then as per the ESIC act, if any employee earns a gross salary or wage of 15000, they are exempted from ESIC. If they earn less than 15000, they are liable for ESIC.
PF
Suppose Ram's gross salary is 15000, and your company splits his salary like (PF+DA = 6500 + other + 8500), then your company deducts PF from Basic+DA*12%.
Regarding your most important query about leave encashment,
Suppose Ram worked 25 days in a month, then 5 days are his leave. When you calculate his salary, he has earned 25 days' salary + 5 days leave encashment, making his salary 15000/-.
If you have any queries or problems, feel free to contact me via my email: ashishshow@gmail.com
For any compliance-related issues, you can also reach out to me through my email.
Thanks & Regards,
Ashish Shaw
From India, Kolkata
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Hi all,
Please help me understand my query. My salary is Rs. 15,000/-, with a basic of Rs. 6,000/-. They usually deduct Rs. 780 + Rs. 780/- for PF contribution, but this month they deducted Rs. 1,800 + Rs. 1,800/-. Is this correct?
As far as I know, an employee receives the PF amount when they separate from the company. Will an employee receive it even if they resign after 5 or 6 months?
Looking forward to your kind support.
Thanks,
Sabaq
From India, Bangalore
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Please help me understand my query. My salary is Rs. 15,000/-, with a basic of Rs. 6,000/-. They usually deduct Rs. 780 + Rs. 780/- for PF contribution, but this month they deducted Rs. 1,800 + Rs. 1,800/-. Is this correct?
As far as I know, an employee receives the PF amount when they separate from the company. Will an employee receive it even if they resign after 5 or 6 months?
Looking forward to your kind support.
Thanks,
Sabaq
From India, Bangalore
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Dear Seniors,
If an employee's gross salary is 17k but due to a loss of pay, earns only 14k gross in that particular month, is it compulsory to pay ESIC even for that month? Please confirm.
Thanks,
Shalaka
From India, Mumbai
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If an employee's gross salary is 17k but due to a loss of pay, earns only 14k gross in that particular month, is it compulsory to pay ESIC even for that month? Please confirm.
Thanks,
Shalaka
From India, Mumbai
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Thank you all for clarifying my doubt. In my query, I had mentioned gross salary instead of BASIC+DA by mistake. So, my understanding is that the PF contribution (both employer and employee) will vary if there is a loss of pay, and it's not a constant figure.
Thank you.
From United Arab Emirates
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Thank you.
From United Arab Emirates
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Hi all, could you please help me find out my queries? My salary is 15,000/-, out of which the basic is 6,000/-. So, the PF deduction was 780+780/-. However, this month the PF deduction was 1,800+1,800/-. Is this correct? If an employee leaves an organization after 5 months, will they still receive the PF money?
From India, Bangalore
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From India, Bangalore
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I have a confusion regarding PF calculation. If an employee joined on the 24th of September 2014, what would be his PF contribution for the September month? His CTC is 17000, with basic + DA amounting to 10200. As per our policy, his September salary will be calculated along with the October month salary. So, what would be his PF deduction for September?
From India, New Delhi
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From India, New Delhi
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Dear RamyaRN,
You are aware that the PF ceiling has been raised from Rs 6500/PM to Rs 15000/PM with effect from September-14. An employee has joined your company on 24th September-14 at a CTC of Rs 17000/PM, which includes Basic & DA Rs. 10200/PM. The employee will receive 8 days' salary for September-14 and a full month's salary for Oct-14. According to the company policy, you will disburse his salary for Sept-14 & Oct-14 together.
If my assumption is correct, you are to deduct PF contribution at 12% on 8 days of Basic & DA for September-14 and for the salary of October-14, you are to deduct 12% on Rs 10200/ (Basic & DA) from the employee's salary. The employer will be required to contribute at 13.61% on Basic & DA.
When depositing the PF contribution for October-14, you are also required to show and deposit the arrear contribution for September-14 since his date of birth is 24th Sept-14.
From India, Calcutta
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You are aware that the PF ceiling has been raised from Rs 6500/PM to Rs 15000/PM with effect from September-14. An employee has joined your company on 24th September-14 at a CTC of Rs 17000/PM, which includes Basic & DA Rs. 10200/PM. The employee will receive 8 days' salary for September-14 and a full month's salary for Oct-14. According to the company policy, you will disburse his salary for Sept-14 & Oct-14 together.
If my assumption is correct, you are to deduct PF contribution at 12% on 8 days of Basic & DA for September-14 and for the salary of October-14, you are to deduct 12% on Rs 10200/ (Basic & DA) from the employee's salary. The employer will be required to contribute at 13.61% on Basic & DA.
When depositing the PF contribution for October-14, you are also required to show and deposit the arrear contribution for September-14 since his date of birth is 24th Sept-14.
From India, Calcutta
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For Example
PAY BILL
Staff Name: R. SENTHILKUMAR
EPF No: "CB/TRY/00027066/051"
Serial No: 1
Staff ID: 3815001
ESI No: 100065
"Salary Month": Oct-14
Basic Salary: 15000.00
HRA: 2500
T.A/D.A: 0
Over Time: 550
Attendance Bonus: 500
Conveyance: 750
Total: 19300.00
Less Advance: 1500
Sub-Total: 17800.00
Basic Net Payroll: 13500.00
Deduct
EPF 12% (13500/-): 1620
ESI 1.75% (13500/-): 236.25
"Loss of Pay No 3 Days of Days": 1500
Less Advance: 1500
Nett. Salary Payable: 8643.75
Employee's Signature: Manager.
From India, New Delhi
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PAY BILL
Staff Name: R. SENTHILKUMAR
EPF No: "CB/TRY/00027066/051"
Serial No: 1
Staff ID: 3815001
ESI No: 100065
"Salary Month": Oct-14
Basic Salary: 15000.00
HRA: 2500
T.A/D.A: 0
Over Time: 550
Attendance Bonus: 500
Conveyance: 750
Total: 19300.00
Less Advance: 1500
Sub-Total: 17800.00
Basic Net Payroll: 13500.00
Deduct
EPF 12% (13500/-): 1620
ESI 1.75% (13500/-): 236.25
"Loss of Pay No 3 Days of Days": 1500
Less Advance: 1500
Nett. Salary Payable: 8643.75
Employee's Signature: Manager.
From India, New Delhi
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Hi,
As per the new amendment, the limit has been increased to 15,000. Now, if an employee has a gross salary of 30,000 (basic + HRA + MA + other allowances) but his basic is 12,000, what amount should be considered for EPF contribution? Please help.
From India, Bangalore
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As per the new amendment, the limit has been increased to 15,000. Now, if an employee has a gross salary of 30,000 (basic + HRA + MA + other allowances) but his basic is 12,000, what amount should be considered for EPF contribution? Please help.
From India, Bangalore
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Ravi ji, EPF is to be calculated on BASIC + DA. In yr case, only Basic is available. Hence EPF shud be 12000 * 12% = 1440/- each e.er and e.ee.
From United Arab Emirates
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From United Arab Emirates
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Thanks very much for the response, could you please also clarify how the DA is defined. will other allowances qualify as DA? in our organisation we are following the above mentioned structure.
From India, Bangalore
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From India, Bangalore
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Ravi ji,
Other allowances cannot be considered as DA. DA is included in Govt. e.ees’ salary to compensate changes in cost of living. It is calculated as a percentage on avg of all india consumer price index which the Pay commission announces twice a year say 1st Jan and 1st July. Since the % is fluctuating and keeps increasing I think, Pvt sector e.ers don’t prefer including this in pay structure.
Request Seniors/Experts to correct me if am wrong. Thank You.
From United Arab Emirates
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Other allowances cannot be considered as DA. DA is included in Govt. e.ees’ salary to compensate changes in cost of living. It is calculated as a percentage on avg of all india consumer price index which the Pay commission announces twice a year say 1st Jan and 1st July. Since the % is fluctuating and keeps increasing I think, Pvt sector e.ers don’t prefer including this in pay structure.
Request Seniors/Experts to correct me if am wrong. Thank You.
From United Arab Emirates
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Dear all, Is pf withdrawal possible if only deducted for 3 months only ??? pls help
From India, Mumbai
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From India, Mumbai
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Hello All,
I want to know if an establishment started in 2012 with a workforce of 100 headcount, and that establishment had not registered itself with PF. Now in 2014, that establishment wants to complete the PF compliance, then what is the procedure? Please suggest me.
Regards,
Shubhlash
From India, Mumbai
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I want to know if an establishment started in 2012 with a workforce of 100 headcount, and that establishment had not registered itself with PF. Now in 2014, that establishment wants to complete the PF compliance, then what is the procedure? Please suggest me.
Regards,
Shubhlash
From India, Mumbai
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Sir,
1. The establishment is coverable with effect from the date it employed 20 or more persons for wages, and the principal employer will be required to ensure compliance from the said date of coverage.
2. For completing the formalities of coverage under EPF, you may please contact the nearest office of EPFO or ascertain the online procedure for such registration.
From India, Noida
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1. The establishment is coverable with effect from the date it employed 20 or more persons for wages, and the principal employer will be required to ensure compliance from the said date of coverage.
2. For completing the formalities of coverage under EPF, you may please contact the nearest office of EPFO or ascertain the online procedure for such registration.
From India, Noida
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Dear Garima,
Suppose “ Mr. X” was joined at your company on 1st March’2014 and his gross salary is 16,000/- per month for 30 days including 4 weekly off (Sunday), and he has took leave for 4 days (CL) on 15th October’ 2014 then you have to required approved, and salary will be calculate on present days 26 + leave days 4 = 30 days, that means 4 leave also paid by company because he has eligible for 4 days leave with salary under shops & establishment act he has earned 6.67 days CL and 9.33 days PL till date, and his PF deduction on Basic+DA maximum Rs. 15,000/- and he is not eligible for esic because his salary more than Rs. 15001/-, because as per esic rules you can deducted esic upto 15000/- maximum.
Your 3rd Ans: if you employed an employee with CTC then you can deduct both side share from Employee.
if you can not understand then you can communicate with me through my mail ID
Thanks & Regards
Ashish Shaw
, 
From India, Kolkata
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Suppose “ Mr. X” was joined at your company on 1st March’2014 and his gross salary is 16,000/- per month for 30 days including 4 weekly off (Sunday), and he has took leave for 4 days (CL) on 15th October’ 2014 then you have to required approved, and salary will be calculate on present days 26 + leave days 4 = 30 days, that means 4 leave also paid by company because he has eligible for 4 days leave with salary under shops & establishment act he has earned 6.67 days CL and 9.33 days PL till date, and his PF deduction on Basic+DA maximum Rs. 15,000/- and he is not eligible for esic because his salary more than Rs. 15001/-, because as per esic rules you can deducted esic upto 15000/- maximum.
Your 3rd Ans: if you employed an employee with CTC then you can deduct both side share from Employee.
if you can not understand then you can communicate with me through my mail ID
Thanks & Regards
Ashish Shaw
From India, Kolkata
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Salary Sheet & PF PT Calculation & Challan Nov 2010.xls