Hi all, I want to know about the basics of PF and ESIC. I am new to these terminologies in practice. Can anyone please explain this to me and also let me know how to calculate PF and ESIC?
Thanks in advance to all.
From India, Pune
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1Thanks in advance to all.
From India, Pune
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Understanding ESI & EPF Schemes
ESI & EPF are such schemes that cannot be explained in a few lines. It would be better if you could download the material, including Acts and rules/regulations framed thereunder, from the websites of either of the above departments or from the Ministry of Labour & Employment, Central Government.
You can, however, raise any specific issues on any labor laws after going through the basic instructions and provisions of the said Acts/rules/regulations if there remains any scope for doubt.
Regards
From India, Noida
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ESI & EPF are such schemes that cannot be explained in a few lines. It would be better if you could download the material, including Acts and rules/regulations framed thereunder, from the websites of either of the above departments or from the Ministry of Labour & Employment, Central Government.
You can, however, raise any specific issues on any labor laws after going through the basic instructions and provisions of the said Acts/rules/regulations if there remains any scope for doubt.
Regards
From India, Noida
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PF Calculation
Basic salary of Rs 3500
Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500.
Contribution Towards | Calculation | Amount
- EPF Employees share: 3500 x 12% = 420
- EPS Employer share: 3500 x 8.33% = 292
- EPF employer share: 3500 x 3.67% = 128
- EDLI charges: 3500 x 0.5% = 18
- EPF Admin charges: 3500 x 1.1% = 39
- EDLI Admin charges: 3500 x 0.01% = 0.35 (rounded up to Rs 1/-)
Basic Salary Above Rs 6500
In such cases, companies use different methods for calculation as per their payroll policy. Consider an employee getting a basic salary of 7500/-. We can calculate it in different ways, but EPS is calculated only up to 6500/-, meaning the maximum amount is fixed at Rs 541.00. The three methods mentioned below are based on the above example.
Method-1
If a company considers the total basic salary above the limit fixed at 6500.00 for PF calculation, the employer has decided to contribute on the total basic salary, which is 12% on 7500.00, equal to 900.00. The EPS Share is fixed at 541. The balance (900-541) goes to the EPF account, 359.00. You may be thinking, what about 3.67%? Here you don’t need to care about it.
Contribution Towards | Calculation | Amount
- EPF Employees share: 7500 x 12% = 900
- EPS Employer share: 6500 x 8.33% = 541
- EPF employer share: 7500 x 12% (-) 541 = 359
- EDLI charges: 7500 x 0.5% = 38
- EPF Admin charges: 7500 x 1.1% = 83
- EDLI Admin charges: 7500 x 0.01% = 0.75 (rounded up to Rs 1/-)
Method-2
Some companies follow the below method in which the employee share is calculated on 7500/- and the employer share is calculated on the upper limit of Rs 6500/-.
Contribution Towards | Calculation | Amount
- EPF Employees share: 7500 x 12% = 900
- EPS Employer share: 6500 x 8.33% = 541
- EPF employer share: 6500 x 3.67% = 239
- EDLI charges: 6500 x 0.5% = 33
- EPF Admin charges: 6500 x 1.1% = 72
- EDLI Admin charges: 6500 x 0.01% = 0.65 (rounded up to Rs 1/-)
Method-3
Some companies calculate both employer and employee shares on 6500/- despite a higher basic salary than 6500.00.
Contribution Towards | Calculation | Amount
- EPF Employees share: 6500 x 12% = 780
- EPS Employer share: 6500 x 8.33% = 541
- EPF employer share: 6500 x 3.67% = 239
- EDLI charges: 6500 x 0.5% = 33
- EPF Admin charges: 6500 x 1.1% = 72
- EDLI Admin charges: 6500 x 0.01% = 0.65 (rounded up to Rs 1/-)
ESI Calculation
Employee's State Insurance scheme is a self-financing social security and health insurance scheme for Indian workers. Any laborer who earns below Rs 15000 as his or her monthly salary will be covered under the ESI. Both the employer and employee contribute to ESI. The employer's contribution is around 4.75% and the employee's contribution is 1.75%.
Example 1:
Find out the ESI for the Gross salary of Rs 9000?
Step 1:
Enter the salary, e.g., 9000
Step 2:
The employee contributes 1.75% for ESI. Now compute as shown here, ESI = 9000*(1.75/100) = 158
Step 3:
The employer contributes 4.75% for ESI. Compute as shown here, ESI = 9000*(4.75/100) = 428
Regards.
From India, Mumbai
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Basic salary of Rs 3500
Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500.
Contribution Towards | Calculation | Amount
- EPF Employees share: 3500 x 12% = 420
- EPS Employer share: 3500 x 8.33% = 292
- EPF employer share: 3500 x 3.67% = 128
- EDLI charges: 3500 x 0.5% = 18
- EPF Admin charges: 3500 x 1.1% = 39
- EDLI Admin charges: 3500 x 0.01% = 0.35 (rounded up to Rs 1/-)
Basic Salary Above Rs 6500
In such cases, companies use different methods for calculation as per their payroll policy. Consider an employee getting a basic salary of 7500/-. We can calculate it in different ways, but EPS is calculated only up to 6500/-, meaning the maximum amount is fixed at Rs 541.00. The three methods mentioned below are based on the above example.
Method-1
If a company considers the total basic salary above the limit fixed at 6500.00 for PF calculation, the employer has decided to contribute on the total basic salary, which is 12% on 7500.00, equal to 900.00. The EPS Share is fixed at 541. The balance (900-541) goes to the EPF account, 359.00. You may be thinking, what about 3.67%? Here you don’t need to care about it.
Contribution Towards | Calculation | Amount
- EPF Employees share: 7500 x 12% = 900
- EPS Employer share: 6500 x 8.33% = 541
- EPF employer share: 7500 x 12% (-) 541 = 359
- EDLI charges: 7500 x 0.5% = 38
- EPF Admin charges: 7500 x 1.1% = 83
- EDLI Admin charges: 7500 x 0.01% = 0.75 (rounded up to Rs 1/-)
Method-2
Some companies follow the below method in which the employee share is calculated on 7500/- and the employer share is calculated on the upper limit of Rs 6500/-.
Contribution Towards | Calculation | Amount
- EPF Employees share: 7500 x 12% = 900
- EPS Employer share: 6500 x 8.33% = 541
- EPF employer share: 6500 x 3.67% = 239
- EDLI charges: 6500 x 0.5% = 33
- EPF Admin charges: 6500 x 1.1% = 72
- EDLI Admin charges: 6500 x 0.01% = 0.65 (rounded up to Rs 1/-)
Method-3
Some companies calculate both employer and employee shares on 6500/- despite a higher basic salary than 6500.00.
Contribution Towards | Calculation | Amount
- EPF Employees share: 6500 x 12% = 780
- EPS Employer share: 6500 x 8.33% = 541
- EPF employer share: 6500 x 3.67% = 239
- EDLI charges: 6500 x 0.5% = 33
- EPF Admin charges: 6500 x 1.1% = 72
- EDLI Admin charges: 6500 x 0.01% = 0.65 (rounded up to Rs 1/-)
ESI Calculation
Employee's State Insurance scheme is a self-financing social security and health insurance scheme for Indian workers. Any laborer who earns below Rs 15000 as his or her monthly salary will be covered under the ESI. Both the employer and employee contribute to ESI. The employer's contribution is around 4.75% and the employee's contribution is 1.75%.
Example 1:
Find out the ESI for the Gross salary of Rs 9000?
Step 1:
Enter the salary, e.g., 9000
Step 2:
The employee contributes 1.75% for ESI. Now compute as shown here, ESI = 9000*(1.75/100) = 158
Step 3:
The employer contributes 4.75% for ESI. Compute as shown here, ESI = 9000*(4.75/100) = 428
Regards.
From India, Mumbai
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PF CHALLAN & CALCULATION SHEET.xls
ESIC Calculation.zip