Eligiblity

If you are a company with more than 20 employees that have a salary over 10,000 per month (Total Gross) and registered under the Shops and Commercial Establishments Act, then you are also applicable for registration under the ESI Act. If however your company draws power then you are applicable for ESI if you the total number of employee drawing wages of 10,000 (Total Gross) is equal to or more than 10.

Once the wages of an employee goes above the 10000 mark they can be suspended from ESI. However, ESI must continue to be deducted at the new wages (which might be greater than 10000) until the financial half is completed. (ESI submission are made bi-annually, once for each Financial Half in April and October).

Contribution

As per ESI act, Employee and Employer must both contribute towards ESI. As per current law, Employee contributes 1.75% of their wages, while the Employer contributes at 4.75% of the employee’s wages.
Rounding rules indicate that Employee contribution must be ceiled to the next Rupee in case the deduction amount has a Paisa component. The same applies to the employer as well.

Note: Employer’s contribution is calculated by multiplying the sum of wages of all ESI applicable employees with the employer contribution percentage [ (Σ(wages of ESI applicable employee) * 4.75%).ceil ].

In Salaree.com, you have a bit more control over how you manage your ESI employees but not too much! Salaree.com allows you to mark each employee that you wish to put in ESI manually. The calculations etc however are not configurable and maintained by our team for your ease.

You must supply the relevant company details in the “Settings” tab to activate ESI calculations.

All relevant reports and challans pertaining to ESI can be downloaded from the application itself.

Eligibility

If you are a company that has more than 20 employees then your company must be registered with the ‘Employee Provident Fund Organization, India. If your company strength ever reduces below 20, you must continue to be registered with the Provident Fund.

Contribution

Under the EPF Act, the employee and employer must contribute towards a pension fund for the benefit of the employee at retirement. The Govt also contributes a smaller amount towards the employee.

Employee’s Contribution

As per current laws, employee must contribute 12% of their basic salary (include Dearness Allowance) towards PF. The employer must also contribute a similar amount towards PF per employee.

The salary applicable for PF is capped at 6500. So, if your basic is 10000, your applicable PF deduction will be 12% of 6500 only (Rs. 780). If your salary is under 6500, then of course it’s 12% of whatever the basic is. For e.g. on a basic salary of 6000, the PF deduction is Rs. 720.

If you join a company at a salary higher than 6500, then you are not compelled to register for PF. However, if your salary grows from below 6500 to about it, you do not get unregistered from PF. You need to continue to have your PF deducted.

Employee are welcome to deposit over and above the minimum mandatory amount specified by PF. This is called Voluntary PF. The employer is however not obliged to match this amount.

Note: Employee’s contribution depends on the wages paid calculated after any loss of pay days during the month. If 50% of your salary is deducted due to absence or leaves, then effectively all relevant contributions are halved as well.

Employee’s PF contribution is tax deductable and as such does not contribute towards Gross earnings. There may be limits to the contribution which is tax deductable.

Employer’s Contribution

Employer also has to pay 0.5% EDLI, 1.1% Admin Charge and 0.01% Inspection Charge.

Employer’s contribution of 12% is split into 2 schemes Employee’s Pension Fund and Provident Fund. 8.33% out of 12% is paid to Employee’s Pension Fund and the remaining to the Provident Fund.

The above rules generally apply to most companies. There might be local exceptions in certain industries, states and sectors.

Submissions

Each month, every company needs to make certain submission to their nearest EPF office. A summary of those submissions are -

Monthly

• Form 12A Consolidated Statement of dues and remittance By 25th of the following month to which the dues relate.
• Form 5 Return of Employees qualifying for membership to the Employees’ Provident Fund for the first time during every month. Within 15 Days of the following month.
• Form 10 Return of members leaving service during the month.
• Payment Challan

Annual

• Form 3A Member’s annual Contribution card : Form showing month wise recoveries towards E.P.F and Pension Fund in respect of a member for one financial year. To be furnished by the employer before 30th April of the following year.
• Form 6A Consolidated annual contribution statement : This form provides annual contributions of each member of the establishment . A vital form for compiling the annual Provident Fund statement of a subscriber. To be submitted by 30th April.