EPF & ESIC Full Practical Guide (Q&A Session) | Salary, Payroll, UAN, Compliance Explained in Detail

Arun Sharma from Commerce Hub Udaipur introduces Bagwat Choudhary from Kolkata, an expert in PF, ESI, and payroll. The session aims to answer common questions from their YouTube channel subscribers regarding these topics and discuss best possible solutions. Sharma also mentions Commerce Hub Udaipur's expert panel, courses, and consultancy services for practical exposure in PF, ESI, and payroll.

Bagwat Choudhary explains that EPF is calculated on 'EPF wage,' which includes basic salary, Dearness Allowance (DA), and retaining allowance, as per the Social Security Code. In cases where DA is absent, basic salary alone is considered the EPF wage. Retaining allowance is specific to seasonal industries. He then addresses the ₹15,000 limit, clarifying that if an employee's basic plus DA exceeds this, they can opt out of PF only if they haven't been enrolled in PF previously or have withdrawn their PF completely from their last company. If an employee's salary increases above ₹15,000 while already enrolled, PF deduction must continue.

Choudhary details PF contributions: 12% deduction from the employee's salary (entirely to PF Fund) and 13% from the employer. Out of the employer's 13%, 8.33% goes to the Pension Fund, 3.67% to the PF Fund, 0.5% to admin charges for the PF challan, and another 0.5% to the Employees' Deposit Linked Insurance (EDLI) scheme, providing a lump sum to nominees in case of an employee's death on duty. Total contribution becomes 25% of wages.

The concept of Voluntary Provident Fund (VPF) is discussed, where an employee can contribute extra to their PF fund beyond the mandatory 12%. The employer's contribution remains unchanged. To opt for VPF, a joint declaration form and a VPF form must be submitted to the EPF office. Importantly, VPF contributions do not qualify for the ATC benefit under the old income tax regime; only the statutory PF deduction does.

Choudhary explains the new process for UAN activation, which involves employees generating their UAN using Umang and Aadhaar Face RD apps, and then submitting it to the employer. He also details the steps for UAN activation to access the member portal, including generating a password. Older issues like name/DOB mismatches, which hindered claim settlements, are less common now due to Aadhaar linking. He stresses that UAN activation is a simple, quick process crucial for accessing PF accounts.

Employers must register eligible new joiners in PF and ESI portals promptly. Salary structures need to be prepared, and monthly returns for PF and ESI must be filed and payments made by the 15th of the following month. Late payments for PF now directly incur penalties added to the challan. There are no quarterly, half-yearly, or yearly compliances; only monthly.

Employee compliance primarily involves ensuring correct personal details (name, DOB, gender, father's name) match Aadhaar for claims and KYC (PAN, bank account). PAN is crucial to avoid extra deductions during withdrawal. Bank accounts must be solely in the employee's name. E-nomination, done by the employee via the member portal, is vital for beneficiaries. For partial withdrawals (Form 31), employees can access a percentage of their PF fund for specific reasons, but cannot withdraw from the pension fund if their service period exceeds 9 years and 6 months.

The current ESI applicability is based on gross salary, with a wage limit of ₹21,000 (₹25,000 for physically challenged individuals). Employees contribute 0.75% and employers 3.25% of the gross salary. Choudhary mentions upcoming changes with the Social Security Code, which may shift ESI calculation to basic plus DA plus retaining allowance, similar to PF, potentially expanding coverage to those earning above ₹21,000 gross. ESI challan submission deadlines are similar to PF: by the 15th of the next month, though ESI still allows a separate process for late fines.

Choudhary highlights the negative consequences of non-compliance, such as lack of employee welfare in unforeseen circumstances. He emphasizes that PF and ESI are employee welfare schemes. Due to increased social media activity and government efforts like tracking businesses with MSME, PAN, Trade License, or GST registrations, companies are increasingly receiving notices for non-compliance. He explains that for new companies (Private Limited, LLP, OPC) incorporated after 2020 through the Ministry of Corporate Affairs, PF and ESI registrations are automatically generated alongside GST for 'ease of doing business,' with a 6-month exemption period.

If employers deduct PF/ESI but delay submission, employees may lose out on interest in their PF fund and face issues with advance withdrawals. For new joiners, companies must collect KYC details (Aadhaar, PAN, bank details) and nominee information for timely registration in PF/ESI. For employees exiting, their exit date must be promptly updated in the portals; otherwise, it can complicate future nil returns and potentially lead to inquiries about active employees' missing contributions.

For PF, revised salaries can be updated even after filing, allowing for additional contributions for past periods, though penalties apply for late filings. ESI also allows supplementary challans for increased contributions due to salary hikes, but timelines are stricter, with limits based on 6-month contribution periods (e.g., April-Sept contributions have a deadline until Nov 12th). If an employee's salary exceeds ₹21,000 ESI coverage limit, contributions continue until the end of the current 6-month contribution period.

PF and ESI are applicable to contractual employees, part-time workers, gig workers, and platform workers. Employers must file PF/ESI for them during their work period and can file nil returns when work is paused. Common issues discussed include multiple UANs (less likely now due to Aadhaar linking, older UANs should be withdrawn offline), ECR errors (often due to calculation mistakes or incorrect pension contributions for employees above 58), and unapproved KYC (due to inactive DSC/e-sign or employer negligence).

Revising ESI returns is difficult online and often requires an offline process at the ESI office, especially for significant errors. One can increase contributions via supplementary challans but not decrease them. PF returns can be revised online before payment; once paid, only increases are possible, not decreases, with penalties for any delays. The video concludes by encouraging viewers to share the video, comment with their practical doubts, and utilize Commerce Hub Udaipur for PF/ESI compliance and practical learning courses, and announces an upcoming session on the New Wages Code.