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Epf esi computation

Jyothis (Article) (1127 Points)

16 September 2015

Do a company&employee need contibute towards ESI/EPF from 1st month of joining.

What if company account their salary as stipend to trainees & pays/deducts EPF/ESI.

Is there any specific condition to be fulfilled if account new joiners salary as stipend & not deducting/paying EPF/ESI

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8 Replies

Ki$hor B (Training & Advisory) (3015 Points)
Replied 17 September 2015

Where the employee or trainee is on the payroll of the company then PF&ESIC is to be deducted provided the criteria mentioned in the resp. acts is met.

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karan jit singh (Consultant) (1299 Points)
Replied 20 September 2015

no need to deduct as employee employer relation does not persist

Ki$hor B (Training & Advisory) (3015 Points)
Replied 23 September 2015

The words - 'Company', 'Employee' and 'Salary' used in the question means employer - employee relationship persists and salary is paid to the trainee. Obvious that 'trainee' is the designation and the person in on the payroll of the company. Hence, according to me EPFMP & ESIC Act are applicable.

Should there be any amendment or a court verdict please quote the same to resolve this issue.

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Jyothis (Article) (1127 Points)
Replied 24 September 2015

Now about rate at which a company has to deduct EPF & ESI.

Basic+DA for EPF - @ 12% from employee's salary & 12.36% emplyers contribution.

Can an employer adjust basic & da so as to avoid emplyees from epf limit.

Say a %,eg: 60% of salary as basic.

Do an employer need to deposit epf to various account say 8% to pension fund,2% to other fund.

Or entie contibution to EPF system & will they apportionate it to various funds.

Ki$hor B (Training & Advisory) (3015 Points)
Replied 25 September 2015

Yes, the rates for deduction are correct. Am sure you are maintaining Salary Register.

Basic is a major component in salary. Tax planning to circumvent PF is not suggested.

However, employees drawing salary in mid range can make such request while accepting the offer letter. Revising the salary components later on is not advisable.

A single deposit of statutory dues meets the requirement, ensure the amounts for each a/c are bifurcated to avoid confusion. Each a/c, I suppose, has a purpose and that is the reason the PF authorities seek break up.

PF contribution is a part of the retirement plans, investing monthly ensures good liquidity post retirement. Unless the employee has immediate cash crunch it is not a good idea to cut short on the PF deductions. I hope the reader understood what I meant.

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Jyothis (Article) (1127 Points)
Replied 26 September 2015

Pls consider the example.

As per ESI inspection conducted on jan-2015,inspectors ordered applicability of ESI from Jan-2014.i.e from retrsopective effect.

Altd was unable deduct employee contribution of previous months.

Company was only remmitting state labour fund still Jan-2015..

1. Company then opened PF &ESI account from March-2015,&contributed for the period Jan-2014 to Feb-2015.(Entire contibution made by company).Both employee & company contributed same for the month March 2015.&settled jan-2014 to March EPF ESI liability on 21-April-2015.

2. As a part of statutory-

Will disallowance attract on Employee contribution suffered by company & also same is not settled within due date expect March 2015.

Applicability of 43B on Employer & Employee contribution settled before 30/09/15 & its allowance,

Plz reply thanks in advance,

Vinayak (Manager) (184 Points)
Replied 26 September 2015

better to have opinion from prcatitioner in PF/ESIC

1 Like

Jyothis (Article) (1127 Points)
Replied 28 September 2015

How ever under Tax Audit/Statutory Audit.

A company cannot claim Employee's share of EPF contribution,as it is to be deducted from employee's salary.

In the above case company has contributed/agreed to bear employee share for past period in which deduction was not made/account was opened .i.e Jan-2014-Feb-2015.

Again EPF share of employee's should deposited on/before due date.20th of subsequent month.if 1 day is delayed entire ammount will be disallowed as 43B is not appplicable for employee's share.