Please help me to understand the PF & ESIC calculation w.e.f. April 1 2019 as per the Government's new rules and guidelines. Is ex-gratia will be inculded in Gross salary? Also please explain the meaning of Gross Salary for both EPF and ESIC calculation.
1
Hi Sonal saxena,
Pl. be aware there is no new rule introduced either by the govt. or by the court. The recent judgment of SC only gives an ultimate interpretations of the existing provisions in the act. If you read the judgment it will be very clear to you what should form as 'gross salary'. Ex-gratia ( I think you mean to say this is in lieu of 'bonus') if so you have to read the interpretations as in the SC judgment.
From India, Bangalore
Pl. be aware there is no new rule introduced either by the govt. or by the court. The recent judgment of SC only gives an ultimate interpretations of the existing provisions in the act. If you read the judgment it will be very clear to you what should form as 'gross salary'. Ex-gratia ( I think you mean to say this is in lieu of 'bonus') if so you have to read the interpretations as in the SC judgment.
From India, Bangalore
Gross salary means the salary which you have agreed to be paid to an employee. It is that salary which is considered for deduction when he takes a leave without pay or it is that salary which is paid if he takes leave with pay. Very simple, how is average salary per day calculated? It is by dividing the gross salary by the number of days in the month. Yes, that gross salary is the salary as per contract of employment.
Ex gratia is not a monthly payment but t is paid once in a year or in six months period. Therefore, this is not part of salary. At the same time, suppose you have offered a remuneration,like, Rs 30000 as salary and Rs 5000 every month as exgratia. Here the amount of ex gratia is fixed and is specific amount and is not variable depending upon any future happening like production, sales, performance etc. In such cases, the ex gratia will also become part of contract of employment and will be assessed as salary.
Under ESI, washing allowance paid to employees who are given uniform by the company is excluded from wages. At the same time, for provident fund HRA is excluded. But that does not mean that you can pay any amount as HRA and escape from payment of PF. Only HRA which is paid addition to salary to those who live in rented houses can be excluded. A similar discussion was taken place in some other thread in this form itself. Please check that also.
In any case the employer's liability to contribute to PF can be restricted to 12% of Rs 15000. Rs 15000 is a very small amount and as such the employers who bifurcate this 15000 into small compartments with a view to reducing their PF contribution should be taking PF only as a statutory requirements and not employee friendly. It is very unfortunate that the HR people are still asking the same question which all are the components which can be excluded for PF contribution, just to make the employers happy!
From India, Kannur
Ex gratia is not a monthly payment but t is paid once in a year or in six months period. Therefore, this is not part of salary. At the same time, suppose you have offered a remuneration,like, Rs 30000 as salary and Rs 5000 every month as exgratia. Here the amount of ex gratia is fixed and is specific amount and is not variable depending upon any future happening like production, sales, performance etc. In such cases, the ex gratia will also become part of contract of employment and will be assessed as salary.
Under ESI, washing allowance paid to employees who are given uniform by the company is excluded from wages. At the same time, for provident fund HRA is excluded. But that does not mean that you can pay any amount as HRA and escape from payment of PF. Only HRA which is paid addition to salary to those who live in rented houses can be excluded. A similar discussion was taken place in some other thread in this form itself. Please check that also.
In any case the employer's liability to contribute to PF can be restricted to 12% of Rs 15000. Rs 15000 is a very small amount and as such the employers who bifurcate this 15000 into small compartments with a view to reducing their PF contribution should be taking PF only as a statutory requirements and not employee friendly. It is very unfortunate that the HR people are still asking the same question which all are the components which can be excluded for PF contribution, just to make the employers happy!
From India, Kannur
As per my consultant the PF notification of Sep 2014 is no more applicable and he said we need to deduct pension fund for all employees. Reference he is giving of recent judgement of Kerala High Court. But as per my understanding still there is no notification form EPFO. Please guide me if there any formal information to deduct pension for all employees.
From Korea
From Korea
Amendment of 2014 says that any employee who becomes a member of PF for the first time with an initial salary of not less than Rs 15000 shall be covered only under PF. It is not mandatory that such an employee should be covered by PF because is he is a new employee and his salary exceeds Rs 15000, he can be excluded. But if the company is willing to contribute PF, he can become a PF member. In such cases, the employer's contribution of 12% is to be deposited only in PF without contributing 8.33% to pension fund and the balance only to PF. As such you should have contributed your share of 12% to PF. Now in future, suppose there is a guideline that such a member should also be given Pension, hen the EPFO will make necessary accounting entries and transfer amount equal to 8.33% from PF to Pension Fund. There is no big deal in it. You can, therefore, continue to contribute the employer's share of 12% to Provident Fund alone until a communication to bifurcate Pension Fund and Provident Fund is given by the EPFO.
From India, Kannur
From India, Kannur
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