While the focus of the ESI or the Employees’ State Insurance is on the healthcare funds, the focus of the EPF or the Employee Provident Fund is on the retirement benefits and funds that the employees are supposed to get, when they are eligible for the appropriate funds. This is a compulsory fund under the Employees’ Provident Fund and Miscellaneous Provisions Act (1952). However, here too, both, the employer and employee need to make a contribution towards the EPF. It is usually a 12% contribution in most industries. While you should be contacting a PF consultant (For more Check here: https://www.workforce.org.in/) to understand the exact percentage of your contribution towards this scheme, 12% is the general percentage that it followed.
The general rules that are followed in EPF have fewer categories to the salary:
- Basic wage
- Conveyance Allowance
- Dearness Allowances
- Special Allowance(s) (if any)
However, even if an employee’s salary is Rs 15,000 or exceeds it. They are not obligated to pay more than Rs 1,800 a month. This is 12% of Rs 15,000. This EPF contribution will count towards your EPF only. Your EPS (Employee Pension Scheme) is looked after by the employer alone at 8.33% of your salary.
Should you consult a PF consultant for EPF and ESI?
If you try to follow the offline method for these schemes, you will have to follow a lot of challans, forms and paperwork to be sent to the bank. This is not only a time- consuming process but you can make a lot of mistakes in this. Therefore, it is best if you consult with a PF consultant, who has a good knowledge of the payroll process of India (Read Here: https://www.workforce.org.in/payroll_outsourcing.php). While you can go through this process online, which is what is encouraged by the government as well, it is still better to speak with a PF consultant before you start this process. This is only to understand your exact role and contributions, the kind of benefits you will receive as an employer, etc. It is best to be properly informed on these topics than to randomly enter a scheme you have partial knowledge on.
Why should you, as an employer, know so much about the EPF and ESI?
While this is for the benefits and social security of your employees, it is beneficial that you know everything related to it is so that you can have a proper understanding of the roles you need to maintain, as an employer, that is mandated by the government. At the same time, it will give you a lot more transparency as to what to expect even from the PF consultant you are taking help from in this process. Therefore, you will increase transparency in the payroll process. If you clarify everything from the very beginning to your employees, you are giving them a greater benefit to be a part of your organisation for a longer period of time. This is why you need to know everything about it as your organisation is going to be a part of it.