FAQs about Statutory Compliance

Statutory compliance is a crucial legal matter for employees’ and employers’ social security. The central government has created several regulations and acts to process employee payments efficiently.

Let’s check out some commonly asked FAQs about statutory compliance:

#1:- What is PF year?

PF accounting is performed between March and February of each year, called the PF Year. This period does not influence other modules but applies only to PF.

#2:- Does every employee contribute to PF?

According to the PF regulations (as of 2004), employees who receive a PF Basic of less than INR 15,000 have to contribute to PF. This is a mandatory requirement for all such employees. However, for employees with a PF Basic of more than INR 15,000, the contribution or deduction will be 15,000. On the other hand, in most companies, the PF applies to all employees. There are only a few exceptions to this rule.

#3:- What is PF Gross or PF Basic?

PF Gross or PF Basic is the amount on which the PF contribution or deduction is calculated. Most companies consider it basic + basic arrears + DA + DA arrears. However, this regulation always has exceptions, and some employers choose to do this a little differently. One can change the PF basic formula according to the client’s requirements in such cases.

#4:- What are the other options for PF Form 10?

Form 10 can be generated according to the settlement date or leaving date. This can be chosen in the General Options. If this option is set to YES, then the Form 10 report will give a list of employees settled during the period. Otherwise, the system selects employees who have resigned during the period.

#5:- How are PF and income tax linked together?

Indian tax law dictates that any contribution from the employee towards PF is eligible for a Section 88 rebate. In effect, any deduction done for PF or VPF is automatically classified for the Section 88 rebate in the Income Tax module.

#6:- What are the different ESI reports?

The ESI Monthly Report is generated every month, with the total contribution/deduction from employees and employers. ESI Form 6 and ESI Form 7 are biannual reports.

#7:-  What are the rules governing ESI?

ESI contribution stops when an employee’s gross income becomes more than INR 15,000. This stoppage of ESI does not occur in any month. You can shift from an ESI deduction to no ESI deduction only in March or September, and the ESI continues until August. In September, the employee’s ESI deduction becomes zero. The whole income and the ESI are compared to determine the actual payment.

#8:- What are the rates for contributions to ESI?

For employees, the ESI deduction rate is 1.75% of the ESI gross salary. On the other hand, ESI contribution is 4.75% of the gross salary for employers.

#9:- What is ESI gross salary?

All parts of an employee’s income are considered when calculating ESI gross salary, and the employer decides it.

#10:- What is a Family Pension Fund?

The payment made by an employer towards PF is divided between PF and the pension scheme.