FAQ’s on ESI Deduction

The Statutory compliance requirement for ESI deduction is as follows:
pf esiESI fund, maintained by ESIC is applicable to employees earning Rs 15,000 or less per month to provide the cash and medical benefits to them and their families. This fund is a contributory fund in which both the employer and employee contribute 4.75% and 1.75% respectively to make it a total of 6.5%.

For ESI calculation, the salary comprises of all the monthly payable amounts such as basic pay, dearness allowance, city compensatory allowance, HRA, incentive allowance, attendance bonus, meal allowance and incentive bonus. The salary however, does not include annual bonus, retrenchment compensation, encashment of leave and gratuity.
ESI Calculation

Consider the salary of an employee is Rs 9000 pm then the ESI calculation for the employee would be calculated as:
ESI = 9000*(1.75/100) = 158
Note: Employees contribution is 1.75 percent
The ESI calculation for the employer’s contribution would be calculated as:
9000*(4.75/100) = 428
Note: Employer’s contribution is 4.75 percent
In case the salary goes above Rs 15,000 pm during the contribution period, the ESI would be calculated on the higher salary. For example, if the salary of an employee is raised to Rs 17,000 per month during the ESI contribution period then the ESI would be calculated on Rs 17,000 instead of Rs 15,000.

Statutory compliance requirement for PF deduction
The Statutory compliance requirement for PF deduction is as follows:
Just like ESI, the Employees Provident Fund (EPF) is also a contributory fund in which both the employee and employer contribute amount. EPF is a compulsory and contributory fund for the Indian organizations under “The Employees’ Provident Fund and Miscellaneous Provisions Act 1952″.
Employee and Employer Contributions for PF Deduction Statutory Compliance

For EFP, both the employee and the employer contributes equal amount, which is 12% of the salary of the employee. However, the employee contributions may differ. Employees can contribute more than 12% of their salary voluntarily. However, in such a case, the employer is not bound to match the extra contribution of the employee.

For PF contribution, the salary comprises of components such as: basic wages, DA, conveyance allowance and special allowance.

For the PF deduction, the maximum limit of salary of the employee is Rs 15,000/- per month. This means that even if the employee’s salary is above Rs 15,000/- the employer is liable to contribute only on Rs 15,000/-, that is Rs 1,800.
The Statutory compliance for PF contribution has some less known facts associated with it. The PF is divided into EPF and EPS (Employee pension Scheme) contributions. The employees’ contribution goes straight to EPF whereas from employer’s contribution, the 8.33% goes to EPS subject to Rs 1,250 a month and the rest goes to EPF. The payroll providers takes care about your ESI and PF deductions automatically.

How EmpXtrack handles ESI and PF statutory compliance
EmpXtrack is one of the best payroll providers that takes away the burden of calculating ESI and PF contributions from the company’s side as well as employee’s side. EmpXtrack allows you to set your and your employees’ ESI and PF preferences. It allows you to select the PF rules applicable to your company. You can select the PF contribution of the company as:
12% of Basic salary.
Minimum of 12% of Basic salary or Fixed Monthly PF deduction.
PF deduction of the company as a fixed amount < = 1,800.
Once the ESI and PF preferences are set in the EmpXtrack system, the Payroll Software automatically calculates the payroll for the employees accordingly and frees you from managing the ESI and PF statutory compliance for your company manually.

Leave a Comment