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F & ESI Compliance on Salary Adjusted Against Notice Pay Recovery and Determination of Date of Exit

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SARAN KUMAR

Accountant

108 Points Posted on 11 June 2026

An employee abandoned employment after 04.05.2026 without serving the notice period. The company has adjusted wages for 01.05.2026 to 04.05.2026 against notice pay recovery and no amount is payable to the employee.

In such a case:

Is PF/ESI contribution required on the wages adjusted against notice pay recovery?
Should the PF and ESI Date of Exit be 04.05.2026 or 30.04.2026?

Replies (2)

Quick Summary

When salary for the notice period is adjusted against notice pay recovery, the Date of Exit for PF and ESI should be the actual last working day, 04-05-2026. PF and ESI wages are generally based on salary earned up to the exit date, even if the net salary payable becomes Nil after notice pay recovery.

Aashok FC Advisory

Finance Compliance Consultant

1116 Points Posted on 11 June 2026

PF/ESI Contributions: Do not apply to notice pay recovery, as this is a compensatory deduction, not earned wages.

Date of Exit: Should be recorded as the actual last day of employment (04 - May - 2026), reflecting the period the employee was on the payroll.

SARAN KUMAR

Accountant

108 Points Posted on 12 June 2026

An employee resigned and his last working day was 04-05-2026. The company is recovering notice pay, and therefore no salary is payable to the employee for May 2026.

As notice pay recovery is considered a compensatory deduction and not earned wages, please clarify:

What should be reported as PF wages and ESI wages for May 2026?
Should PF and ESI contributions be calculated on the salary earned up to the date of exit (01-05-2026 to 04-05-2026), even though the net payable salary is Nil due to notice pay recovery?