I need help with understanding if unpaid leaves affect basic salary of a employee or Gross Salary (Basic+HRA, in our case) of an employee and thus how are PF and ESI compliance are affected.
For example. a person is hired on 15000 Basic and 750 HRA (5% of basic) and they take unpaid leave of 5 days in a month. so will their basic change for that month of to Rs.12460 or will the basic remain the same and will their net change and the unpaid leave is deducted from their net.
Attaching calculations in 2 scenarios. Please guide.
From India, Mumbai
For example. a person is hired on 15000 Basic and 750 HRA (5% of basic) and they take unpaid leave of 5 days in a month. so will their basic change for that month of to Rs.12460 or will the basic remain the same and will their net change and the unpaid leave is deducted from their net.
Attaching calculations in 2 scenarios. Please guide.
From India, Mumbai
There are two approaches, some take the actual wages (gross wage) after deduction of LOP as the base and if it is still above Rs 15000, then for PF calculation Rs 15000 is taken and the second approach is that if there is any LOP, for deciding the PF amount, the same is deducted from Rs 15000 also as if the salary is Rs 15000. The second approach is right because if an employee takes LOP, he should lose the PF for that days. In the first approach, the PF contribution of an employee who has taken a few days LOP will be the same amount as an employee who has not taken any LOP because his gross salary is higher than the latter's gross salary. At the same time, if you proportionately deduct the PF also from the PF qualifying salary of Rs 15000, it is equitable and has sense. Moreover, for EPF, what is salary if the employer is restricting the contribution on Rs 15000? Rs 15000 only. If some one has a few days' LOP, naturally, it should be evidenced by non contributory days.
From India, Kannur
4240From India, Kannur
Scenario A is correct, when the basic salary has reduced to the level below the threshold, (Rs. 15,000 PM) PF deduction has to be on the actual salary. The same is the case with ESI too. As regards PT it would depend on the slab corresponding to the salary drawn.
From India, Mumbai
From India, Mumbai
Dear Friend,
To ensure accurate calculations, it is important to understand the wage computation process. By doing so, we can prevent confusion from arising.
The process involves the following steps [follow one after another in the below sequence]:
1. Begin with a fixed wage
2. Calculate the earned wage for the month based on the employee's attendance
3. Arrive at Gross wage
4. Deduct the proportionate amount from the earned wage for statutory contributions
5. Get Net wage
To help you better understand this process, here is an example computation based on the figures you provided:
I. Fixed wage:
(a) Per Month :
(i) Basic : 15000
(ii) HRA : 750
(b) Per Day [ (a) / 30]:
(i) Basic : 500
(ii) HRA : 25
II. Earned Wages for the month in question:
(i) Basic : 25 [Present days ] * 500 [ Per day wage ] = 12500
(ii) HRA : 25 [Present days ] * 25 [ Per day wage ] = 625
III. Gross Wage : 13125
IV. Statutory deductions [ Employee Contributions ]: 1798.43
(a) EPF [ 12.00 % on Basic Wage ] : 1500
[If Basic goes beyond 15K, you can put a cap of 1800 or go for actual]
(b) ESI [ 0.75 %] : 98.43
(c) PT [ > 10000 ] : If Feb 300, for others 200
V. Net Wage [ III – IV ] : 11326.56
Hope above will help you...
From India, Bangalore
To ensure accurate calculations, it is important to understand the wage computation process. By doing so, we can prevent confusion from arising.
The process involves the following steps [follow one after another in the below sequence]:
1. Begin with a fixed wage
2. Calculate the earned wage for the month based on the employee's attendance
3. Arrive at Gross wage
4. Deduct the proportionate amount from the earned wage for statutory contributions
5. Get Net wage
To help you better understand this process, here is an example computation based on the figures you provided:
I. Fixed wage:
(a) Per Month :
(i) Basic : 15000
(ii) HRA : 750
(b) Per Day [ (a) / 30]:
(i) Basic : 500
(ii) HRA : 25
II. Earned Wages for the month in question:
(i) Basic : 25 [Present days ] * 500 [ Per day wage ] = 12500
(ii) HRA : 25 [Present days ] * 25 [ Per day wage ] = 625
III. Gross Wage : 13125
IV. Statutory deductions [ Employee Contributions ]: 1798.43
(a) EPF [ 12.00 % on Basic Wage ] : 1500
[If Basic goes beyond 15K, you can put a cap of 1800 or go for actual]
(b) ESI [ 0.75 %] : 98.43
(c) PT [ > 10000 ] : If Feb 300, for others 200
V. Net Wage [ III – IV ] : 11326.56
Hope above will help you...
From India, Bangalore
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