Hi, this is Swetha. I am presently associated with a construction company. Can anyone please let me know the calculation of PF and ESI? Some companies deduct PF from the basic salary of the gross salary, while others deduct PF from the basic salary of the net salary, i.e., after deducting LOPs (if any) from the gross. Which one is right, and also give me clarity with the calculation.
From India, Hyderabad
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1From India, Hyderabad
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Hi Ms. Swetha,
Both ESI and EPF are calculated on the earned gross/basic wages only. ESI is calculated on the earned gross salary for the particular month, while EPF is calculated on the earned wages and other retaining allowances for the particular month. ESI and EPF are not contributed for loss of pay due to absenteeism.
If you have any doubts, you can reach out to me.
From India, Bangalore
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Both ESI and EPF are calculated on the earned gross/basic wages only. ESI is calculated on the earned gross salary for the particular month, while EPF is calculated on the earned wages and other retaining allowances for the particular month. ESI and EPF are not contributed for loss of pay due to absenteeism.
If you have any doubts, you can reach out to me.
From India, Bangalore
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Dear Swetha,
Simple rule: PF is on Basic + DA earned in that particular month. ESIC is on Gross Salary earned in that particular month. Bonus is 8.33% on (Basic + DA) earned in that particular month. Gratuity is 4.17% on (Basic + DA) earned in that particular month (It will be paid at the time of F & F settlement for those who worked for more than 5 years).
Regards,
Karthik
From India, Hyderabad
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Simple rule: PF is on Basic + DA earned in that particular month. ESIC is on Gross Salary earned in that particular month. Bonus is 8.33% on (Basic + DA) earned in that particular month. Gratuity is 4.17% on (Basic + DA) earned in that particular month (It will be paid at the time of F & F settlement for those who worked for more than 5 years).
Regards,
Karthik
From India, Hyderabad
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If payable salary is Rs. 12,000 per month and he has a loss of pay for 5 days, then the salary he earned during the month will be Rs. 10,000. So, the deduction of EPF will be Rs. 1,200. Deduction for ESI will be 1.75% of wages earned on all components of wages after loss of pay deduction.
From India, Thiruvananthapuram
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From India, Thiruvananthapuram
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Correct Deduction of ESIC and PF
I would like to inform you that the correct deduction of ESIC and PF, along with salary components, should be covered as per the rule and Act, which is most important.
ESIC Deductions
ESIC will be deducted from the gross salary of employees who are earning less than ₹15,000 per month, and overtime will also be added to the monthly gross. The employee's share will be 1.75%, and the employer's share will be 4.75%. Both will be deducted from the same salary. Please also remember that if the contribution value after the decimal is 0.01, kindly consider it as 1 rupee.
PF Deductions
PF will be deducted on BASIC + DA as per the rule, which is 12% of the employee's contribution. The employee's contribution will be 13.36% as per the rule (including accounts no. 10, 2, 21 & 22). EPF should be 8.33% of ₹15,000 (limit) maximum. As per the new notification, ₹500 should be remitted in Account no. 2 and ₹200 in account no. 22.
For more clarification, please call us or write to us at [Email Removed For Privacy Reasons] or [Phone Number Removed For Privacy Reasons].
Regards,
Adroit Manpower & Compliance Service.
From India, Delhi
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I would like to inform you that the correct deduction of ESIC and PF, along with salary components, should be covered as per the rule and Act, which is most important.
ESIC Deductions
ESIC will be deducted from the gross salary of employees who are earning less than ₹15,000 per month, and overtime will also be added to the monthly gross. The employee's share will be 1.75%, and the employer's share will be 4.75%. Both will be deducted from the same salary. Please also remember that if the contribution value after the decimal is 0.01, kindly consider it as 1 rupee.
PF Deductions
PF will be deducted on BASIC + DA as per the rule, which is 12% of the employee's contribution. The employee's contribution will be 13.36% as per the rule (including accounts no. 10, 2, 21 & 22). EPF should be 8.33% of ₹15,000 (limit) maximum. As per the new notification, ₹500 should be remitted in Account no. 2 and ₹200 in account no. 22.
For more clarification, please call us or write to us at [Email Removed For Privacy Reasons] or [Phone Number Removed For Privacy Reasons].
Regards,
Adroit Manpower & Compliance Service.
From India, Delhi
Acknowledge(0)Amend(0)
Correct Deduction of ESIC and PF
I would like to inform you that the correct deduction of ESIC and PF and salary components should be covered as per the rule and Act, which is most important.
ESIC Deductions
ESIC will be deducted from the gross salary of employees who are earning less than ₹15,000 per month. Overtime will also be added to the monthly gross. The employee's share will be 1.75%, and the employer's share will be 4.75%, both to be deducted from the same salary. Please also remember that if the contribution value after the decimal is 0.01, it should be considered as 1 rupee.
PF Deductions
PF will be deducted on BASIC + DA as per the rule, with a 12% employee contribution. The employer's contribution will be 13.36% as per the rule (including account numbers 10, 2, 21, and 22). EPF should be 8.33% of ₹15,000 (the maximum limit). According to the new notification, ₹500 should be remitted in Account no. 2 and ₹200 in Account no. 22.
For more clarification, please call us or write to us at [Email Removed For Privacy Reasons] or contact us at [Phone Number Removed For Privacy Reasons].
Regards,
Adroit Manpower & Compliance Service.
From India, Delhi
Acknowledge(0)Amend(0)
I would like to inform you that the correct deduction of ESIC and PF and salary components should be covered as per the rule and Act, which is most important.
ESIC Deductions
ESIC will be deducted from the gross salary of employees who are earning less than ₹15,000 per month. Overtime will also be added to the monthly gross. The employee's share will be 1.75%, and the employer's share will be 4.75%, both to be deducted from the same salary. Please also remember that if the contribution value after the decimal is 0.01, it should be considered as 1 rupee.
PF Deductions
PF will be deducted on BASIC + DA as per the rule, with a 12% employee contribution. The employer's contribution will be 13.36% as per the rule (including account numbers 10, 2, 21, and 22). EPF should be 8.33% of ₹15,000 (the maximum limit). According to the new notification, ₹500 should be remitted in Account no. 2 and ₹200 in Account no. 22.
For more clarification, please call us or write to us at [Email Removed For Privacy Reasons] or contact us at [Phone Number Removed For Privacy Reasons].
Regards,
Adroit Manpower & Compliance Service.
From India, Delhi
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As per latest EPFO circular dated 18/03/14, EPF wage on which EPF contribution needs to be deducted is Basic(excluding HRA, overtime,bonus, commission etc) + DA+ Food concession+retaining allowance.
From India, Thane
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From India, Thane
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Dear Shweta, just to add to the above, do not follow the general definition of wages for PF given above. Please use the two tests below as given by the Supreme Court:
Tests for Determining 'Basic Wages'
The Supreme Court has laid down two tests to determine whether a component is included in the definition of ‘basic wages’ or not. These are the ‘test of universality’ and the ‘test of contingency’.
Applying the test of universality, if a component is paid universally, necessarily, and ordinarily to all employees of a company, the same is included in the definition of basic wages. Applying the test of contingency, if a component is paid subject to uncertain events like overtime payment, the same is excluded from the definition of basic wages.
So, if you are paying any cash component universally, necessarily, and ordinarily to all, like any allowance being paid to all employees, that needs to be construed as wages. So, overtime, bonuses, etc., are not part of PF wages, but any other component needs to be run through the test of "universally, necessarily, and ordinarily paid."
From India, Mumbai
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Tests for Determining 'Basic Wages'
The Supreme Court has laid down two tests to determine whether a component is included in the definition of ‘basic wages’ or not. These are the ‘test of universality’ and the ‘test of contingency’.
Applying the test of universality, if a component is paid universally, necessarily, and ordinarily to all employees of a company, the same is included in the definition of basic wages. Applying the test of contingency, if a component is paid subject to uncertain events like overtime payment, the same is excluded from the definition of basic wages.
So, if you are paying any cash component universally, necessarily, and ordinarily to all, like any allowance being paid to all employees, that needs to be construed as wages. So, overtime, bonuses, etc., are not part of PF wages, but any other component needs to be run through the test of "universally, necessarily, and ordinarily paid."
From India, Mumbai
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Salary Sheet & PF PT Calculation & Challan.xls