Statutory compliance

Jon Boyes
Employability and Graduate Development
CHMP
www.hrspot.co.in
Kolkata | Bhubaneswar | Hyderabad
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Statutory Compliance
Certified Human Resource Management Professional

PF Act 1952

Features of Provident Fund
is described according to
PF Act 1952

 Mainly focus on old age benefit.
 It provides for payment of terminal benefits in various
contingencies.
Objectives

 Employees' Provident Fund Scheme takes care of many needs
of the members.
 For example- Retirement, Medical Care, Housing, Family
obligation, Education of Children, Financing of Insurance
Polices
Employee
Provident
Fund
Scheme

 Every specific factory or establishment where 20 or more
persons are or were employed.
 Any factory or establishment can also voluntarily cover under
the act. If even the member of employees are less than 20.
Applicability

 Person employed for work of an establishment and drawing
salary up to Rs 15,000 per Month.
 Any disable employee appointed after 1st April 2008 drawing
salary up to Rs 25,000.
 Any international workers (irrespective salary limit).
Eligibility

Different Accounts of PF
and Contribution Rates

Account
Head
Scheme
Name
Employees
Contribution
Employers
Contribution
Total
Contribution
A/C 1 Employees Provident Fund 12% 3.67% 15.67%
A/C 2
Employees Provident Fund
Administrative Charges
0% 0.50%* 0.50%
A/C 10 Employee Pension Scheme 0% 8.33% 8.33%
A/C 21 Employee Deposit Linked Insurance 0% 0.50% 0.50%
Total Contributions 12% 13% 25%
In certain cases, 10% PF rate is applicable, wherein Employee Share to A/c No. 1 will become 10% and
Employer share will become 1.67%.
PF Admin Charges reduced to 0.5% w.e.f. 1 June 2018
*Minimum 500/- per month

EPF EPS EDLI EPF EDLI
EMPLOYEE 12 % / 10 % 0 0 0 0
EMPLOYER DIFFERENCE OF
EE SHARE AND
PENSION
CONTRIBUTION
8.33 % 0.5 % 0.50 %
[W.E.F.
01/06/2018]
0
[W.E.F.
01/04/2017]
BY CONTRIBUTION ACCOUNTS ADMINISTRATION ACCOUNTS
BY CONTRIBUTION ACCOUNTS ADMINISTRATIVE ACCOUNTS

 10% rate is applicable for
 Any establishment in which less than 20 employees are employed.
 Any sick industrial company and which has been declared as such by the Board for
Industrial and Financial Reconstruction
 Any establishment which has at the end of any financial year, accumulated losses equal
to or exceeding its entire net worth and
 Any establishment in following industries : (a) Jute (b) Beedi (c) Brick (d) Coir and (e)
Guar gum Factories.

 Contribution is rounded to the nearest rupee for each employee, for the employee share,
pension contribution and EDLI contribution.
 The Employer Share is difference of the EE Share (payable as per statute) and Pension
Contribution.
 Monthly payable amount under EPF Administrative charges is rounded to the nearest rupee
and a minimum of Rs 500/- is payable.
 Note:- If the establishment has no contributory member in the month, the minimum
administrative charge will be Rs 75/-
 In case Establishment is exempted under PF Scheme, Inspection charges 0.18%, minimum Rs
5/- is payable in place of Admin charges.
 In case the Establishment is exempted under EDLI Scheme, Inspection charges 0.005%,
minimum Re 1/- is payable in place of Admin charges.

UNDER EPF
 The contributions are payable on maximum wage ceiling of Rs. 15000/-
 The employee can pay at a higher rate and in such case employer is not under any obligation
to pay at such higher rate.
 To pay contribution on higher wages, a joint request from Employee and employer is required
[Para 26(6) of EPF Scheme].
 In such case employer has to pay administrative charges on the higher wages (wages above
15000/-).
 For an International Worker, wage ceiling of 15000/- is not applicable.

UNDER EPS
 Contribution is payable out of the employer’s share of PF and no contribution is payable by
employee.
 Pension contribution not to be paid when an employee crosses 58 years of age and is in
service (EPS membership ceases on completion of 58 years). When an EPS pensioner is
drawing Reduced Pension and re-joins as an employee.
 In both the cases the Pension Contribution at 8.33% is to be added to the Employer Share of
PF. (Pension contribution is not to be diverted and total employer share goes to the PF).
 In case an employee, who is not existing EPF/EP member joins on or after 01-09-2014 with
wages above Rs 15000/- In these cases the pension contribution part will be added to
employee share, EPF.

 In all other cases Pension Contribution is payable. A member joining after 50 years age, if not
a pensioner does not have choice of not getting the Pension Contribution on grounds that he
will not complete 10 years of eligible service.
 The social security cover is applicable till he/she is a member.
 For International Worker, higher wage ceiling of 15000/- is not applicable from 11-09-2010.
 Note, In case an existing EPS member (as on 01-09-2014) whose Pension contribution was
paid erstwhile EPS wage ceiling of 6500/- contribution to contribution above Rs 15000/- wage
ceiling from 01-09-2014 he will have to give a fresh consent and an amount of 1.16% on
wages above 15000/- will have to be contributed by him in pension Fund (A/C No 10) through
the employer.

UNDER EDLI
 Contribution to be paid on up to maximum wage ceiling of 15000/- even if PF is paid on
higher wages.
 Each contribution is to be rounded to nearest rupee. (Example for each employee getting
wages above 15000, amount will be 75/-)
 EDLI contribution to be paid even if member has crossed 58 years age and pension
contribution is not payable.
 This is to be paid as long as the member is in service and PF is being paid.

PF Withdrawal

PF Transfer

EPS Calculation

EPS = (Pensionable Salary/70) * no. of years working
pensionable salary is the Last 5 years average salary
the ‘salary’ is basic salary plus DA

EDLI Calculation

 The claim amount of the EDLI is decided by the last drawn salary of the employee.
 The claim amount would be the 30 times of the salary. Along with this, you would
also get a bonus. This bonus would be 50% of the balance in your EPF account.
 The maximum bonus would be Rs 1.5 L. The maximum sum insured would be Rs 6
L. For this calculation salary is ‘basic pay plus DA’.

Class Activity

EPS and EDLI Calculations
Mr. XYZ joined ABC company on 01/09/1990. Last working day is
10/07/2018. Monthly Basic 15,000. Calculate EPS amount.
Mr. ABC joined XYZ company on 01/09/1990. Last working day is
10/07/2018. Monthly Basic 15,000. Calculate EDLI amount.
All Students will be asked to do Gratuity and Bonus calculations for different
set of examples.
Individual Activity: 40 min

ECR Format
ECR File

PF
calculation
from
payroll ECR
form
fill
up
make
the
payment
online
or
offline
upload
ECR save
ECR
in
.csv
file

Demonstration of
Submission of PF Chalan
Microsoft Office
PowerPoint Presentation

ECR Calculations
All Students will be asked to do ECR calculation for 5 members for different
set of examples.

ESI Act 1948

Features of Employees’ State Insurance
is described according to
ESI Act 1948

 To provide social-insurance for the employees.
 To provide certain benefits to employees in case of sickness,
maternity and employment injury after employment.
Objectives

 It is extended in area wise to factories employing 10 or more
person.
 And establishment 20 or more persons.
Applicability

 Sickness benefit, Maternity benefit.
 Disablement benefit, Dependent benefit.
 Medical benefit, Funeral expenses.
Benefits

 Employee’s contribution 1.75% wages.
 Employer’s contribution 4.75% of wages.
 Hence total contribution 6.50% of the wages.
 The state govt. as per provision of the act contributes 12.50%
of the expenditure on medical cares or ESI Beneficiaries in
their respective state.
Contribution

Pehchan Card

 All Insured Persons will be issued with two magnetic cards, one for the Insured
persons & the other for family members.
 Central database will be created with demographic and biometric details of
Insured persons and their families.
 Insured Persons and their family members can avail treatment in any ESI Hospital
or dispensary across India.

 Biometric details (finger prints) to verify and authenticate Insured Persons and
their families through card swipe.
 Employers can submit their Return of Contribution online
 Employers can collect information on employees’ benefit availed by respective
employees online.
 One time registration. Employees will carry forward with same set of cards every
time they change employment, duplication of enrolment can be avoided.

Gratuity Act 1972

 A sum of money paid to an employee at the end of a period of employment.
 A gratitude from the company to the employee for the longer duration of service
rendered.
 Gratuity is a monetary benefit given by the employer to his employee at the time of
separation.

Rules and Benefits of
Gratuity

 For companies covered under the Act, this benefit is paid when an employee
completes 4 years and 240 days of service with the employer.
 An employee gets gratuity when he/she resigns, retires or is laid off.
 In case of death or disablement there is no minimum eligibility period.

 For government employees, Rs. 20 L is the maximum amount that can be paid as
gratuity.
 The Seventh Pay Commission had recommended increase in the gratuity ceiling
to Rs. 20 L from the earlier level of Rs. 10 L.

 For government employees, entire amount of gratuity received on retirement or
death is currently exempted from income tax.
 In case of non-government employees, income tax rules on gratuity are applicable
depending on whether employees are covered under the Act or not.

Calculation of
Gratuity

Entry Formula
Exit Formula
4.81 % of Basic
*
no. of years worked
Monthly basic
*
(15/26)
*
no. of years worked

 According to this formula, the time period of over six months or more is
considered as one year.
 This means if the employee completes five years and seven months of service, the
number of years would be considered as six years for calculation of gratuity
benefit.

 On the other hand, if the service period is five years and five months, for gratuity
calculation it will be considered five years.
 An employer can however give higher gratuity than the amount under the
prescribed formula.

Bonus Act 1965

 The extra payment given to employees
in addition to their salary.
 The purpose is to motivate the
employees.
 From the enactment of the Act, bonus
has become mandatory obligations for
all establishments to whom it is
applicable.

 The act has set two limits for bonus
payment, one is minimum bonus and
other is maximum bonus.
 The bonus paid under the Act is also
called statutory bonus since this bonus
is paid as per law.

Rules of Bonus

 The Act extends to the whole of India.
 The Act shall apply to the following factories/establishments:
 The factory defined as per Factories Act 1948.
 Every other establishment in which 20 or more persons are employed on any day
during an accounting year.

 The act to also apply to public sectors in certain cases.
 If in any accounting year an establishment in public sector sells any goods produce or
manufacture by it or render any services in competition with an establishment in
private sector and the income such sale or services or both is not less than 20% of the
gross income of the establishment in private sector for that year then the provision of
such act shall apply to such establishment in public sector.

 Otherwise nothing in this act shall apply to employees employed by any establishment
in public sector.

Exempted establishment
 Employees of Life Insurance Corporation
 Sea-men, defined in the merchant shipping act 1958
 Employees under, the dock workers act 1948

 Employees of any industry controlled by central/state government
 Employees of Indian red cross society/university/education
institutions/non profit institutions
 Employees employed through contractor on building operations
 Employee of RBI

 Employees of IFCI, any financial corporation under the state financial
corporation act 1951, deposit insurance corporation, agriculture
refinance corporation, UTI, IDBI or any financial institution being any
establishment in public sector which central government notifies in
official gazette
 Employees of inland water transport establishment operating on
routes passing through any other country

Benefit to new establishments
For the first 5 accounting year following the
accounting year in which the employers
sells goods/render services, bonus is
payable only in respect of the accounting
year, in which profit is made

Where for any accounting year the
allocable surplus exceeds the amount of
maximum bonus payable to the
employees in the establishment, then,
the excess shall, be carried forward for
being set on in the succeeding
accounting year
Set On Bonus
Set On Bonus

Where for any accounting year, there is
no available surplus or the allocable
surplus in respect of that year falls short
of the amount of minimum bonus
payable to the employees in the
establishment, and there is no amount
or sufficient amount carried forward and
set on, which could be utilized for the
purpose of payment of the minimum
bonus, then, such minimum amount or
the deficiency, shall be carried forward
for being set off in the succeeding
accounting year
Set Off Bonus
Set Off Bonus

Eligibility of Bonus

An employee is eligible for bonus if satisfies both the conditions mentioned below:
 If the employee completes 30 days in that year as per section 8
 An employee drawing Basic Salary and DA of Rs. 21,000 or below per month
 An apprentice is not eligible for bonus

Bonus Calculation

According to Act, bonus is to be calculated as under:
 It depends upon the percentage on which your company wants to give bonus to
its employees
 Minimum bonus is 8.33% of basic salary earned during the accounting year
 Maximum bonus is 20% of basic salary earned during the accounting year

Gratuity and Bonus Calculations
Mr. XYZ joined ABC company on 01/09/2000. Last working day is
10/07/2018. Monthly Basic 15,000. Calculate Gratuity amount.
Mr. ABC joined XYZ company on 01/09/2000. Monthly Basic 15,000.
Company is providing 15% Bonus in the financial year. Calculate Bonus
amount.
All Students will be asked to do Gratuity and Bonus calculations for different
set of examples.

Shop and Establishment Act

A Commercial Establishment including
 A commercial or trading or banking or
insurance establishment, or
 An establishment or administrative service
in which persons employed or mainly
engaged in office work, or
 A hotel, restaurant, boarding or eating
house, a cafe or any other refreshment
house or
 A theatre, cinema or any other place of
public amusement or entertainment

Regulations under the Act
 Working hours per day and week
 Guidelines for spread-over, rest interval,
opening and closing hours, closed days,
national and religious holidays, overtime
work
 Rules for employment of children, young
persons and women

Regulations under the Act
 Rules for annual leave, maternity leave,
sickness and casual leave, etc.
 Rules for employment and termination of
service
 Maintenance of registers, records and
display of notices
 Obligations of employers as well as
employees

Every business has to be maintain the
following records under the Act:
 Approval from Department of Labour
 Various registers giving details of
employment, fines, deductions, advances,
salary, holidays, etc.

 The names of the register may vary from
state to state, and hence, it is a prudent
practice to request the exact nature of
documents that your state might need from
municipal corporation
 Files related to annual holidays, number of
employees need to be submitted at the
office of the municipal corporation annually

Procedures under the Act
Every shop/establishment is
compulsorily required to register itself
under the Act within 30 days of
commencement of work

Registration Certificate
The business owner should send to the
Inspector (Chief Inspector under the Act) of
the area concerned, an application form and
fees detailing

Registration Certificate
 Name of the establishment, the employer
and the manager, if any
 Postal address of the establishment
 Such other particulars as may be prescribed

 The Inspector, on verifying the statement,
shall register the establishment in the
register of establishments and issue a
registration certificate
 This certificate has to be prominently
displayed at the establishment and needs to
be renewed before it expires
 If there is any change in the initial
statement, the same has to be
communicated within 15 days to the
Inspector and he will make changes in the
register of establishments and issue a fresh
registration certificate.

Closure of Business
In case of closure, the same has to be
communicated to the authorities
within 15 days from the closing of the
establishment

Important Note
The rules under this act vary as per the
states. Administrative office/municipal
corporation in the concerned locality should
be consulted

Maternity Act 1961

The object of the Act is
 To provide for maternity benefit to women
workers in certain establishments
 To regulate the employment of women
workers in such establishments for certain
period before and after child birth

The Act applies to
 Every establishment being a factory, mine,
plantation or circus
 Every shop in which 10 or more persons are
employed
 Any other establishment to which the Act is
applied by the State Government

Eligibility
Every woman employee, whether employed
directly or through a contractor, who has
actually worked in the establishment for a
period of at least 80 days during the 12
months immediately preceding the date of
her expected delivery, is entitled to receive
maternity benefit

Eligibility
There is neither a wage ceiling for coverage
under the Act nor there is any restriction as
regards the type of work a woman is
engaged in

Benefits under
Maternity Act

The Act provides maternity leave up to 12
weeks for all women. The Bill extends this
period to 26 weeks. However, a woman with
two or more children will be entitled to 12
weeks of maternity leave
The Bill introduces maternity leave up to 12
weeks for a woman who adopts a child
below the age of three months, and for
commissioning mothers

The period of maternity leave will be
calculated from the date the child is handed
over to the adoptive or commissioning
mother
The Bill requires every establishment with 50
or more employees to provide for crèche
facilities within a prescribed distance. The
woman will be allowed four visits to the
crèche in a day

An employer may permit a woman to work
from home, if the nature of work assigned
permits her to do so. This may be mutually
agreed upon by the employer and the
woman
The Bill requires an establishment to inform
a woman of all benefits that would be
available under the Bill, at the time of her
appointment. Such information must be
given in writing and electronically

Statutory compliance

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