No comments if you wish to get out of ESI and EPF. Yes, you can get out of these social security schemes if you do not engage in any business. If you do conduct business, especially with the assistance of employees, you must provide them with all the benefits that are available to them. It is important to understand that these benefits represent the minimum and withholding them is unethical and goes against moral principles. Additionally, if you offer a competitive salary, it may not be necessary to provide ESI or PF contributions. Employees can then manage their own medical insurance and retirement planning. Therefore, consider setting their salary at Rs 21,001 to begin with, which would allow you to avoid paying 0.75% towards ESI and around Rs 1,800 for PF.
From India, Kannur
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4479From India, Kannur
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Good Morning Madhu garu,
Your comments are perfect! If the salary is more than 21000, automatically the employees are exempted under the ESI Act, and they will manage their medical issues. OK.
In view of changes in PF & ESI matters, the applicable wages to the employees/workers ranging from 15000 to 21000, which wage structure is the best one? Currently, we are having more than 5 wage components, and we wish to rationalize and restrict them to three components as mentioned in my previous query. The components such as HRA and Washing Allowances are already existing in our current wage structure. Also, a sudden increase in salary/wage is not in the hands of the HR Department.
Even though if we implement the proposed salary structure, the TAKE HOME SALARY of the employee/worker will also be reduced to that extent. It is a major concern for the industry in the case of low-salaried employees/contract workers, whose salaries are being protected in terms of the Minimum Wages Act.
Further, we wish to know how to calculate Gratuity and Leave Encashment of an employee? Whether it is only on Basic Wage or PF Gross (Basic + Children Edn. + Washing Allow.) as directed by SC.
In view of the above, your expert advice is helpful to the HR community to avoid any show-cause notices from the respective departments.
Regards, Krishna Kumar
From India, Hyderabad
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Your comments are perfect! If the salary is more than 21000, automatically the employees are exempted under the ESI Act, and they will manage their medical issues. OK.
In view of changes in PF & ESI matters, the applicable wages to the employees/workers ranging from 15000 to 21000, which wage structure is the best one? Currently, we are having more than 5 wage components, and we wish to rationalize and restrict them to three components as mentioned in my previous query. The components such as HRA and Washing Allowances are already existing in our current wage structure. Also, a sudden increase in salary/wage is not in the hands of the HR Department.
Even though if we implement the proposed salary structure, the TAKE HOME SALARY of the employee/worker will also be reduced to that extent. It is a major concern for the industry in the case of low-salaried employees/contract workers, whose salaries are being protected in terms of the Minimum Wages Act.
Further, we wish to know how to calculate Gratuity and Leave Encashment of an employee? Whether it is only on Basic Wage or PF Gross (Basic + Children Edn. + Washing Allow.) as directed by SC.
In view of the above, your expert advice is helpful to the HR community to avoid any show-cause notices from the respective departments.
Regards, Krishna Kumar
From India, Hyderabad
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I have already given so many comments on the applicable wages for PF, Gratuity, leave encashment, Bonus, etc. To repeat in a single sentence, the wage taken for deducting the salary of an employee if they have taken LOP is the wage for deciding PF, Gratuity, or retrenchment allowance or anything. For example, if your salary is Rs 15,000, of which you have fixed Rs 6,000 as Basic salary and you have been deducting PF on this amount only. Similarly, you take this amount for computing Bonus, leave encashment, and obviously, gratuity. But if the employee takes leave without pay, you will deduct Rs 500 from their salary. This is one 30th of 15,000. If their salary is Rs 6,000 and all the other components are just allowances, why can't you deduct only Rs 200, being one 30th of Rs 6,000?
Basic Salary means the salary as per the contract of employment. Anything paid in addition to this is an allowance, and only such allowances can be excluded from PF, Gratuity, etc. Obviously, for PF, the employer even has the privilege of restricting it to Rs 15,000. Even HRA is part of the salary if paid to all employees without considering whether they live in a rented house or not. Washing allowance paid to employees to whom you have not provided a uniform is also a part of the salary even for calculating ESI.
Restructuring the salary, keeping the cost-to-company unchanged based on changes in the law is unfair. If permitted, then poor employees will become victims even when there is a hike in salary by means of a notification from the government. The employer will not hesitate to add the electricity charges of a ceiling fan put for an employee or the tea and snacks the employer provides for the employee to make it equal to the statutory salary. Therefore, I will never give advice on how you can restructure your salary to protect your employer. I will only advise that PF is an investment and whatever deduction the employee may have in their take-home salary is only temporary. Being an HR person, convince the employees that a higher contribution would result in higher PF and higher pension.
From India, Kannur
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Basic Salary means the salary as per the contract of employment. Anything paid in addition to this is an allowance, and only such allowances can be excluded from PF, Gratuity, etc. Obviously, for PF, the employer even has the privilege of restricting it to Rs 15,000. Even HRA is part of the salary if paid to all employees without considering whether they live in a rented house or not. Washing allowance paid to employees to whom you have not provided a uniform is also a part of the salary even for calculating ESI.
Restructuring the salary, keeping the cost-to-company unchanged based on changes in the law is unfair. If permitted, then poor employees will become victims even when there is a hike in salary by means of a notification from the government. The employer will not hesitate to add the electricity charges of a ceiling fan put for an employee or the tea and snacks the employer provides for the employee to make it equal to the statutory salary. Therefore, I will never give advice on how you can restructure your salary to protect your employer. I will only advise that PF is an investment and whatever deduction the employee may have in their take-home salary is only temporary. Being an HR person, convince the employees that a higher contribution would result in higher PF and higher pension.
From India, Kannur
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