PF /ESI
We will be covering the following topics in this chapter
Concept and provision of PF & ESI
Documentation and e-Filling of PF & ESI
Payroll Processing through Tally Payroll
Real Life project on PF & ESI
Concept & Provision of EPF
As per the Employees' Provident Fund Scheme 1952 an employee is defined as any individual who is performing a manual or any other operation in lieu of wages.
An employee could also be a person who is connected to the activities of an organization and is paid either directly or indirectly for his or her efforts by the employer. A professional who is recruited via a contractor can also be regarded as an employee of a company
An excluded employee is one who has collected the entire amount that was accumulated in the fund and would have been paid to him after he reached the age of 55. The term can also be used to denote employees who earn more than 500 rupees per month and can become a part of the fund.
Membership of the Employee Provident Fund
The day the Employees Provident Fund Scheme 1952 comes into effect in an organization, all its workers including the casual, daily wage workers, contracted laborers, and the part timers, will be part of the scheme
Concept of Basic Wages
The term basic wages signifies all the remuneration an employee earns while they are working or are on holiday. The calculations are primarily done on the basis of the terms of the contract signed by the employer and the employee and the cash transactions are only taken into account.
However, the cash value of food concessions is not included while contributing the EPF. Similarly, dearness allowance and presents given by the employers are not part of these calculations.
The term 'pay' is used to signify the basic wages combined with retaining allowance, dearness allowance, and the cash worth of food concessions.
Employee Provident Fund Scheme Areas Covered
The Employee's Provident Fund Scheme 1952 deals with the following requirements of its members:
Retirement
Family obligation
Medical care
Education of children
Employee Provident Fund Scheme-How it works
According to the amendment to the Employees' Provident Fund Scheme 1952, done on September 22, 1997, the employees and the employers both contribute to the fund at 12 percent from the basic wage, retaining allowance, and dearness allowance. The rate though, comes down to 10 percent in case of the following companies or organizations
Covered establishments that have less than 20 workers. This benefit is provided only to companies that were covered prior to September 22, 1997.
A company that has incurred losses that are either equal to or more than its total net worth. A sick industrial organization as stated in the clause (O) of Sub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. The company also needs to have been certified as sick by the Board for Industrial and Financial Reconstruction in order to receive the benefit.
Companies that manufacture jute, coir, breed and guar gum industries.
Employee Provident Fund Scheme - Benefits
The members of the EPF can take out the full amount that has been credited to their account when they retire after becoming 55 years old. However, the total amount can also be collected under these circumstances:
If their services have been terminated before they reached the age of 55 years.
If they migrate permanently or take jobs outside India.
If they are totally and permanently disabled for mental or physical problems
If there is individual or mass retrenchment
In case of the following instances the provident fund is paid two months after the withdrawal application is put in by a member
If an employee of a covered organization is transferred to an organization that is not part of the Employees Provident Fund Scheme 1952
Il a member is relieved of his duties and provided retrenchment compensation as per the Industrial Dispute Act, 1947
Employee Provident Fund Scheme Withdrawals
A member of the fund can take out a maximum of 90 percent of the amount credited to their respective accounts. This can be done after the member is 54 years old or if he or she is a year away from her retirement on superannuation. The later date is taken into consideration in this regard. For withdrawals the applicant needs to submit the Form 19 in the respective Provident Fund office
Employee Provident Fund Scheme - Nominations and Payment
Upon the death of a member the entire amount is provided to either their legal heirs or nominees. The Form 20 needs to be provided to the concerned PF office for the purpose
The nominations are done through the Form 2 whereby the member names the person's who will receive the total amount credited to his/her account upon death. Through the form the members provide details of the families which can be used later on by the Provident Fund office for building up its data bank
Concept & Provision of ESIC
The Employees State Insurance Act, was enacted by the Government of India in 1948. The major objective of the Act was to provide certain benefits to employees in case of sickness, maternity and injury (during employment) and for providing other benefits in relation to the main objectives.
Applicability
The ESI Act, 1948 in the first instance, applies to:
Factories using power in the manufacturing process and employing 10 or more persons
Non-power using factories or establishments employing 20 or more persons for wages.
The Act contains an enabling provision under which Appropriate Government is empowered to extend the provision of the ESI Act, 1948 to other classes of establishments
Industrial
Commercial
Agricultural or otherwise
Under these provisions the State Governments have extended the provisions of the ESI Act to the following classes of establishments
Shops
Hotels & Restaurants
Cinemas including preview Theaters
Road Motor Transport Undertaking
News Paper Establishments
Wage Ceiling
With effect from 1" May 2010 employees of covered units and establishments drawing wages upto Rs. 15,000/- per month come under the purview of the ESI Act 1948 for multi dimensional social security benefits.
Contribution
ESI scheme is financed by contribution raised from employees covered under this scheme and their employers as a fixed percentage of wages. Rates of contribution are as follows:
Employees contribution 1.75% of wages (Employees earning up to Rs. 50 per day are exempted from payment of their contribution)
Employer's contribution 4.75% of wages
Social Security Benefits
Various benefits that the insured employees and their dependents are entitled to are as follows
Medical benefits
Sickness benefits
Maternity benefits
Disablement benefits
Dependent benefits
Other benefits (like funeral expenses, vocational rehabilitations, free supply of physical aids etc.)
Safeguard for Insured Employees
Right to receive payment of any benefit under the Act are not transferrable
Employer shall not dismiss, discharge or reduce the wages or otherwise punish a covered employee during the period he she is in receipt of Sickness Benefit or Maternity Benefit etc.
By reason of his liability to pay his share of contribution under the ESI Act, no employer shall directly or indirectly
reduce the wages of a covered employee
Right to register their grievances/complaints at any level for immediate redressal
Right to approach ESI Court against any action/ decision of the Medical Board etc.
Cash Benefits payable under the Act are not liable to attachment or salein execution of any degree or order of any court
Duties of Employer
An employer shall apply in Form 01 for coverage under the ESI Act, within 15 days after the Act becomes applicable to a factory or establishment
The employer shall submit Declaration Form in respect of all coverable employees in the unit.
The employer shall deposit both employees and employers contribution as per specified rates within 21 days of the following month.
The Employer shall maintain all such records and registers as are required under the Act and produce them for verification/inspection before the authorized officers of the Corporation.
The employer shall submit half-yearly Return of Contributions (RC) by 12th May/ 11th November every year with all columns properly filled
The employer will report any change in business activity, address, ownership or the management to ESIC authorities forthwith
An employer will also ascertain the liability towards ESI dues, while taking over the ownership of a factory/establishment through purchase, gift, lease, license or otherwise as the new owner is liable to discharge past liabilities.
ESIC & EPF Required Documents:
ESIC REGISTRATION
1. Copy of PAN Card
2. 1st Sales Bill/Service Bill
3. Lease Deed/Rental Agreement
4. Partnership Deed/MOA and AOA
5. Copy of Telephone Bill
6. Copy of TNVAT/CST Certificate
7. Any proof of Trial Product/Work order
8. Resisted in Contracts Act-Copy of Registration Certificate
9. Statement showing Employee Strength from Date of Starting the Business with Date of Joining
10. List of Partners/Directors
11. Copy of P&L and Balance Sheet last 3 years
12. Details of Bank Account details
13. Nomination form in Form 2
EPF REGISTRATION
1. Copy of PAN Card
2. 1st Sales Bill/Service Bill
3. Lease Deed/Rental Agreement
4. Partnership Deed/MOA and AOA
5. Copy of Telephone Bill
6. Copy of TNVAT/CST Certificate 7. Any proof of Trial Product/Work order
8. Resisted in Contracts Act-Copy of Registration Certificate
9. Statement showing Employee Strength from Date of Starting the Business with Date of Joining
10. List of Partners/Directors
11. Copy of P&L and Balance Sheet last 3 years
12. Details of Bank Account details
13. Form 5A
14. Form 13 performance of coverage
Payroll Processing through Tally Payroll
Payroll refers to a series of accounting transactions involved in the process of paying employees for services rendered after taking into account all statutory and non-statutory deductions. The efficient payroll system in Tally facilitates error-free, accurate and timely employee payments while ensuring that the employment is well within the valid work permit.
Payroll in Tally ERP 9 handles all the functional, accounting and statutory requirements of the payroll department. It provides you with the flexibility to define earning & deduction heads and supports the computation and deduction of ESI, EPF, Gratuity, etc. It supports user defined production units like attendance, production, time based remuneration, and other methods of calculating payroll. Comprehensive reports based on cost centers and employee wise cost can be generated.
Enable Payroll
To activate payroll feature,
Go to Gateway of TallyF11: Features > Press F1: Accounting Features
Set Maintain Payroll to Yes
Set More than ONE Payroll/Cost Category to Yes
Save screen
To activate Payroll Statutory Features
Go to Gateway of Tally F11: Features > press F3: Statutory & Taxation
Set Enable Payroll Statutory to Yes
Set Set/Alter Payroll Statutory Details to Yes
Save screen
To create payroll masters
Go to Gateway of Tally > Payroll Info.
The Payroll Info. Screen is displayed. You can create masters for Employee Groups, Employees, Units(Work), Attendance/Production Type, Pay Heads, Salary Details and Voucher Types.
To Configure Payroll:
Go to Gateway of Tally > F12: Configuration > Payroll Configuration
Set Show Statutory Details to Yes
Set Show Passport & Visa Details to Yes
Set Show Contact Details to Yes
Create Pay Heads
To Create Pay Heads Go to Gateway of Tally > Payroll Info. > Pay Heads > Create
Specify the Name of Pay Head.
Specify the related details under Pay Head Info.
Save screen.
Similarly you can create pay heads for DA, HRA, Conveyance etc.
Create Employee Group
To Create an Employee Group:
Go to Gateway of Tally > Payroll Info. > Employee Groups > Create
Select Category
Specify details for Name & Under
Save screen
Create Employee Master
To Create an Employee Master:
Go to Gateway of Tally > Payroll Info. > Employees > Create
Select Category and type Name of Employee.
Specify all related details - like Under, Date of Joining, etc.
Save screen.
Create Salary Details
To Create Salary Details,
Go to Gateway of Tally > Payroll Info. > Salary Details > Create
Select Employee from Name of Employee/Group
Specify all related details - like Under and Salary Details.
Save screen
Record Attendance Voucher
To record Attendance through Attendance Vouchers:
Go to Gateway of Tally > Payroll Vouchers > Ctrl+F5
Press Alt+A (Attendance Auto Fill) to prefill employee payroll details
In Employee Filters screen,
Type the date values in From and To fields.
Select the appropriate cost category from List of Categories.
Select the Employee/group from List of Group/Employees.
Select the Attendance/Production Type from List of Attendance/Production Types.
Specify the Voucher Date as applicable
Payment of Salarles
To record Salary Payment through Payroll Vouchers
Go to Gateway of Tally Payroll Vouchers > press Alt+A
In Employee Filters screen,
Type the date values in From and To fields.
Select the appropriate cost category from List of Categories. Select the employee/group from List of Group/Employees.
Select the bank account for Payroll ledger.
Press Enter to return to payroll voucher screen. Under Particulars the values against the Pay Heads and Amount appear automatically. This happens for Calculation Type being Flat Rate and As Computed Value.
Type values for Pay Heads whose Calculation Type is User Defined Value.
Save screen.
View Payroll Reports
To view Payroll Reports:
Go to Gateway of Tally > Display > Payroll Reports
You can generate the following reports in Tally ERP 9 viz., Statements of Payroll, Attendance Sheet, Attendance Register, Gratuity Report etc.
To View Payslip
Go to Gateway of Tally > Display > Payroll Reports > Statements of Payroll > Payslip
Select the required Employee and press Enter
To view Pay Sheet
Go to Gateway of Tally >Display >Payroll Reports >Statements of Payroll > pay sheet
To view Payroll Statement
Go to Gateway of Tally > Display >Payroll Reports >Statements of Payroll > Payroll Statement
To view Payment Advice
Go to Gateway of Tally >Display > Payroll Reports >Statements of Payroll >Payment Advice
To view Payroll Register
Go to Gateway of Tally >Display >Payroll Reports >Statements of Payroll >Payroll Register
To view Attendance Sheet
Go to Gateway of Tally > Display > Payroll Reports > Attendance Sheet
To view Gratuity Report
Go to Gateway of Tally > Display > Payroll Reports >Gratuity Report
To view PF Computation Report
Go to Gateway of Tally Display Payroll Reports > Statutory Reports > Computation >Press Alt+F1
To view Form 12A
Go to Gateway of Tally Display Payroll Reports > Statutory Reports > Provident Fund > Form 12A
To view PF Monthly Statement
Go to Gateway of Tally Display Payroll Reports > Statutory Reports Provident Fund Monthly Statement
To view ESI Computation Report
Goto Gateway of Tally Display Payroll Reports > Statutory Reports Computation > F12: Configure > Activate Show Employee State Insurance Details to Yes
To view ESI Monthly Statement
to Gateway of Tally > Display Payroll Reports Statutory Reports Employee State Insurance > Monthly Statement
To view ESI Form 3
to Gateway of Tally Display Payroll Reports > Statutory Reports
Employee State Insurance >Form 3
To view Professional Tax Computation Report
Go to Gateway of Tally Display Payroll Reports Statutory Reports > Professional Tax > Computation Report
To view Professional Tax Statement
Go to Gateway of Tally Display Payroll Reports Statutory Reports Professional Tax >Statement
E-filling of Provident Fund (PF)
HOW TO REGISTER ESTABLISHMENT
Visit the epfindia website having URL: http://www.epfindia.gov.in
the following screen occurs:
The fint time user should click REGISTER for the registration.
Users who have received temporary user id and password through SMS or those who have created their permanent user id and password should use the Login section.
REGISTRATION
On click of Register Button, the following screen will open:
The employer should select that state of the EPFO Office under the jurisdiction of which his/her establishment is complying
For example if an establishment is located at Delhi, but complying under the Regional Office, Bandra, Mumbai, then he/she should select MAHARASHTRA.
The State can be selected from the drop down box.
The next screen will show all the EPFO Offices in that state.
Select the concemed EPFO Office from the list.
The screen for Registration will open.
You can also enter the details of the additional authorized signatories. However the SMS and e-mail will go to the First Authorised Signatory at present.
Click GET PIN Button.
You will get the PIN immediately on the mobile number entered here.
Click the check box on I Agree. Enter the PIN in the Box. Then click the button REGISTER. You will get the temporary user id and password through SMS.
The following screen will open. Also SMS with the temporary user id and password will be received on your mobile number.
Click the link above.
It will take you to the login screen. Enter the temporary user id and password received through SMS and click sign in.
Following page will open. Enter the New User Name, and password of your choice Click Create permanent Login.
You will get a confirmation SMS regarding successful creation of your user id and password.
The password can be changed any time after login. The user id cannot be changed.
Online Payment Facility for Employers
Visit the epfindia website having URL: epfindia.gov.in/ the following screen occurs:
Click on online payment facility for Employers
Following screen will appear.
User will accept Terms & conditions and Proceed.
In the next screen system will ask for TRRN (Generated on EPFO website) Click Submit.
E-filling of Employees State Insurance (ESI)
REGISTRATION
Registration is the process by which every employer/factory and its every employee employed for wages, is identified for the purpose of the Scheme, and their individual records are set up for them.
The first step in the process is the obtaining of particulars about each coverable factory/shop/establishment, and its identification by allotment of a number i.e. Code No. by the R. O. so as to facilitate keep track of contributions payable paid and the connected obligations of the employers. Subsequent step is the registration of employees of covered factories by the R. O/L O. (where the work of registration of employees is decentralised), and identifying them by allotment of a number i.e., insurance number, and setting up of necessary records for recording the benefits for which the insured employee may be entitled under the Scheme according to eligibility. Individual record of each employer/employee will facilitate necessary changes in future from time to time and proper watch for obtaining compliance from the employers and benefits to concerned insured persons.
REGISTRATION OF EMPLOYERS
Registration of factories and establishments-Every factory or establishment to which this Act applies shall be registered within such time and in such manner as may be specified in the regulations made in this behalf.
As a follow-up of this provision in the Act, Regulation 10B was inserted in the ESI (General) Regulations, 1950. This regulation states as under: -
10B-Registration of factories or establishments
(a) The employer in respect of a factory or establishment to which the Act applies for the first time and to which an Employers' Code No. is not yet allotted, and the employer in respect of a factory or an establishment to which the Act previously applied but has ceased to apply for the time being, shall furnish to the appropriate R. O. not later than 15 days after the Act becomes applicable, as the case may be, to the factory or establishment, a declaration of registration in writing in form 01 (hereinafter referred to as employers registration form).
(b) The employer shall be responsible for the correctness of all the particulars and information required to be furnished on the employer's registration form.
(c) The appropriate Regional Office may direct the employer who fails to comply with the requirements of paragraph (a) of this regulation within the time stated therein, to furnish to that office employer's registration form duly completed within such further time as may be specified and such employer shall, thereupon, comply with the Instructions issued by that office in this behalf.
(d) Upon receipt of the completed employer's registration form, the appropriate R.O. shall, if satisfied that the factory or the establishment is one to which the Act applies, allot to it an employer's code number (unless the factory or the establishment has already been allotted an employer's code number) and shall inform the employer of that number.
(e) The employer shall enter the employer's code number on all documents prepared or completed by him in connection with the Act, the rules and these regulations and in all correspondence with the appropriate office.
Screen shots
Employee wise ESIC statement
Payment of ESIC challan
Registration of new IP
Insertion of new IP details
Updation of IP details
View counter foil
ESI contribution History
RC (Form) to be filled after every 6 months
PF statement
PF summary
In ECR
PF challan
Real Life project on PF & ESI
Illustration 1:
Below is the Gross Salary of employees of ABC & Company, please find Provident Fund (Employees Share, Employers Share & Employer Pension Fund) of the same. Please note maximum basic salary is Rs. 6,500/-
Solution:
III unstriation 2:
Find out the share of ESIC contribution of Employer as well as Employee from below mentioned detail:
Solution:
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