Updated upto 01/07/2018
|
BASIS |
EMPLOYEES’ PROVIDENT FUND |
EMPLOYEES’ STATE INSURANCE |
|
Objective |
To accumulate savings among the workforce for their retirement |
Insurance scheme for the employees which covers sickness, maternity, death, disablement etc. |
|
Establishments covered |
Every establishment having twenty or more employees |
Every establishment having ten or more employees |
|
Wages ceiling |
Basic + DA <= Rs 15000 |
Basic + DA + HRA <= Rs 21000 |
CALCULATION OF EPF
Employee is required to contribute 12% of “PF salary” while the employer is required to contribute 13% of “PF salary” towards Employees’ Provident Fund
where “PF salary” consists of Basic + DA (including the cash value of any food concession) and retaining allowance
Employer’s contribution of 13% is distributed in four different accounts i.e. EPF, Pension Scheme, Employee Deposit Linked Insurance and EPF Administration charges in following manner:
CALCULATION OF ESI
Currently, 6.5% is the rate of contribution notified for ESI out of which 1.75% is deducted from employee’s salary while 4.75% is contributed by the employer.
ILLUSTRATION
Suppose an employee earns salary of Rs 16000 comprising of:
Basic Salary – Rs 10000
Dearness Allowance – Rs 2000
HRA – Rs 4000
Since his Total of Basic salary and DA is less than Rs 15000, he is covered within the ceiling limit. Calculate EPF contributions and write journal entries.
SOLUTION
Employer’s contribution:-
|
EPF @ 3.67% |
Rs 440 |
|
EPS @ 8.33% |
Rs 1000 |
|
EDLI @ 0.50% |
Rs 60 |
|
EPF Admin charges @ 0.50% |
Rs 60 |
|
TOTAL |
Rs 1560 |
Employee’s contribution to EPF @ 12% = Rs 1440
So total contribution made is Rs 1440 + Rs 1560 = Rs 3000
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