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PF, ESI, professional tax, LWF and minimum wage

Every payslip works out PF with VPF, pension and EDLI, ESI, professional tax and the labour welfare fund from your Entity's settings. The ECR file, the ESIC sheet, the register of wages and the muster roll come out of the same payroll run.
PLANSFrom Growth
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The problem it solves

  • PF is worked out in a spreadsheet each month. A wrong ceiling or a missed pension split shows up only when EPFO rejects the ECR.
  • Someone crosses the ESI limit in August and ESI stops, though the law keeps them covered until September ends.
  • Professional tax is deducted at the old rate because nobody changed the February amount.
  • An inspector asks for the register of wages and the muster roll, and they have to be typed up from attendance.

How it works

  1. Set the rates once on the Entity's Payroll tab: PF, pension, EDLI and admin charges, and the PF wage ceiling. Also the ESIC rates and limit, the professional tax state and the LWF amounts.
  2. On each employee, tick what applies: PF Applies, PF on Actual Wages, Voluntary PF %, ESIC Applies, Professional Tax Applies, LWF Applies. Also set the skill for the minimum wage check.
  3. Run the payroll. Each payslip gets its PF, VPF, ESI, PT and LWF lines. The employer's PF, pension, EDLI, admin charges, ESI and LWF go in the employer cost.
  4. Open Tax and Statutory > Reporting > Statutory Compliance Check for the month. It lists what to fix before filing, such as PF deducted with no UAN, and what to remit.
  5. Go to Tax and Statutory > Statutory Forms and Returns and choose the payroll run. Prepare the ECR file, the ESIC sheet, the register of wages and the muster roll. Upload them on the EPFO and ESIC portals yourself.

Everything it does

Provident fund

  • Employee PF 12 % and employer PF 12 % of PF wages; both percentages are settings
  • PF wages are the components marked PF Wages: Basic and DA in the ready salary structure
  • PF on the wage ceiling (15,000) by default; per employee, PF on actual wages instead
  • Employer share split: pension (EPS) 8.33 % of wages up to the ceiling, the rest to EPF
  • EDLI 0.5 % on wages up to the ceiling; PF admin charges 0.5 %
  • Voluntary PF at the employee's own percentage, on the same wages
  • International workers: PF on the full wages from day one, no opt-out; none while a certificate of coverage is valid
  • Amounts rounded to the nearest rupee

ESI

  • Employee 0.75 % and employer 3.25 % of ESIC wages, rounded up to the next rupee
  • Applies while the month's full gross is not above 21,000 (a setting)
  • Someone who goes above the limit inside a contribution period (April to September, October to March) stays covered on full wages until it ends
  • ESIC wages are the components marked ESIC Wages: Basic, DA, HRA, conveyance, special allowance and overtime in the ready structure

Professional tax and LWF

  • One professional tax state per Entity; slabs by monthly gross earned
  • Slabs can be for women only or men only, with their own February amount
  • Slabs loaded as a starting point for Karnataka, Maharashtra, Telangana, Andhra Pradesh, West Bengal and Gujarat. Add other states under Tax and Statutory > Configuration > Professional Tax
  • LWF: a fixed employee and employer amount per Entity, taken only in the months you list (6 and 12 to start with)

Minimum wage check

  • Rates by state, zone and skill (unskilled, semi-skilled, skilled, highly skilled), per month or per day, Basic plus VDA, each with its effective date
  • No rates are loaded: you enter the rates your state notified
  • Compared with the components marked Counts for Minimum Wages (Basic and DA to start with), for the days paid
  • Warn on the payslip (the default), block approval of the run, or do not check
  • Payroll > Payslips > Below Minimum Wages lists every payslip that is short

Files and reports

  • PF ECR text file for the EPFO portal; people without a UAN are left out with a warning
  • ESIC monthly contribution sheet in Excel: IP number, days paid, wages, reason code and last working day
  • Register of wages in Excel with the minimum rate, earnings, each statutory deduction, net paid and how paid
  • Muster roll in Excel: each day's attendance code, days worked, paid days and loss of pay
  • PF sheet and ESI sheet in the layouts payroll teams use, per Entity or on one sheet
  • Reports: Statutory Cost Summary, PF Contribution Statement, PF Annual Statement, ESIC Contribution Statement, ESIC Half-Year Summary and Statutory Compliance Check

Who uses it

Payroll officerTicks what applies on each employee, runs the payroll, checks the compliance report and prepares the files.
Payroll ManagerSets the Entity's rates and keeps the professional tax slabs and minimum wage rates up to date.
Plant HR or admin managerHands the register of wages and the muster roll to an inspector.
EmployeeSees PF, ESI, PT and LWF on the payslip, with year-to-date PF and PT if the Entity shows them.

Where you use it

  • Web: HRMS > Tax and Statutory (Statutory Forms and Returns, Reporting, Configuration), the Entity's Payroll tab and the employee's Statutory Deductions
  • Web: the same files on each payroll run under Files and Register
  • Not filed for you: you upload the ECR and ESIC files on the EPFO and ESIC portals. There is no direct link to either portal
  • Not built: professional tax returns, LWF returns by state, and half-yearly professional tax

What you control

Settings

  • PF Employee % 12, PF Employer % 12, EPS (Pension) % 8.33, EDLI % 0.5, PF Admin Charges % 0.5
  • PF Wage Ceiling 15,000; PF on Ceiling Only on (each employee can choose actual wages)
  • ESIC Employee % 0.75, ESIC Employer % 3.25, ESIC Applies up to Gross 21,000
  • Professional Tax State: none until you choose one (no PT is taken without it)
  • LWF Employee and LWF Employer: empty; LWF Deducted in Months: 6,12
  • Minimum Wage Check: Warn on the payslip
  • On each employee: PF Applies, ESIC Applies, Professional Tax Applies and LWF Applies are ticked to start with

Questions

Does SmartMy HRMS file our PF and ESI returns?

No. It prepares the ECR file and the ESIC sheet from the payroll run. You upload them on the EPFO and ESIC portals and pay the challans there.

Can some employees pay PF on full wages and others on the ceiling?

Yes. PF on Ceiling Only is the Entity's default. Tick PF on Actual Wages on the employees who contribute on full wages. Pension and EDLI stay on the ceiling.

Our staff work in two states. Which professional tax is taken?

The professional tax state of the Entity. Professional tax is kept per Entity, not per employee, so staff in another state need their own Entity.

Are the professional tax slabs kept up to date for us?

Slabs for six states come as a starting point. States revise them, so check them against the current notification and correct them on the form.

What happens if someone is paid below the minimum wage?

The payslip shows the amount due and the shortfall. With Block approval, the run cannot be approved until the salary is corrected and calculated again.

Are PF arrears in the ECR file?

No. The ECR file carries the regular month's figures. PF on arrears is shown apart in the PF Contribution Statement, so you can handle it on the portal.

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See your own month run in it.

Tell us how many people you have, how you take attendance and how your salary is structured. We will show you SmartMy HRMS set up that way.
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