Statutory Components

Statutory components are salary components governed by labour laws and regulations enforced by government bodies. These contributions, made by both employers and employees, support employees’ long-term financial security and social well-being.

Employee Provident Fund (EPF)

The Employee Provident Fund (EPF) is a retirement benefits scheme designed to help employees build long-term savings. Under this scheme, a portion of the employee’s salary is contributed every month by both the employee and the employer. These savings can be withdrawn at retirement or in the event of permanent disability.

EPF is a retirement benefit scheme available to all employees. The main purpose of this scheme is to help employees save a fraction of their salaries every month (12% of Basic Pay + DA), so that they can use it when they retire or if they develop any disability.

EPF Guidelines

• EPF is mandatory for employees earning ₹15,000 or less per month.
• Both the employee and employer contribute 12% of Basic Pay + Dearness Allowance (DA).
• The employer’s 12% contribution is split as follows:
  • 3.67% towards the Employee Provident Fund (EPF)
  • 8.33% towards the Employee Pension Scheme (EPS)
• In addition, the employer contributes 1.01% towards:
  • 0.50% as EPF administrative charges
  • 0.50% towards the Employees’ Deposit Linked Insurance (EDLI) scheme
  • 0.01% as inspection charges
• EPF contributions must be deposited on or before the 15th of the following month.
• Employees can voluntarily contribute more than 12% through Voluntary Provident Fund (VPF).
• The current EPF interest rate is 8.10%.

Set up EPF for your organization

To configure EPF for your organization:

1. Click Settings in the top-right corner.
2. Click Statutory Components under Setup & Configurations.
3. Switch to the EPF tab.
4. Click Enable EPF.
5. Enter your EPF Number, available in the registration letter issued by EPFO.
6. Select the Employer Contribution Rate:

• 12% of Actual PF Wage, or
• Restricted to ₹15,000 of PF Wage

If you restrict the employer’s contribution to ₹15,000, contributions are calculated only on that amount even if the PF wage exceeds it. If the PF wage is below ₹15,000, 12% of the actual PF wage is considered.

7. Select if you want to include the employer’s contribution as a part of employees’ salary structure. If you select this option, select if you want to Include employer’s EDLI contribution in employee’s salary structure and include admin charges in employee’s salary structure.

8. Choose whether to allow employee-level overrides for PF contribution rates.
9. Select whether PF contributions should be pro-rated based on the number of days worked.
10. Choose whether to consider all applicable salary components if the PF wage falls below ₹15,000 due to Loss of Pay (LOP).

• This ensures statutory compliance when earnings drop due to unpaid leave.

Any changes made to EPF settings after saving will apply only to new employees.

Override EPF contribution for an employee

If employee-level overrides are enabled:

1. Go to Employees under People in the left sidebar and select an employee.
2. Switch to the Salary Details tab.
3. In the Other Deductions section, click the Edit icon next to EPF.
4. Update the contribution rates and click Save.

Once configured, EPF contributions will be deducted and processed automatically during each pay run.

Employee State Insurance (ESI)

The Employee State Insurance (ESI) scheme is a self-financing social security and health insurance program applicable to employees earning ₹21,000 or less per month. It provides medical and cash benefits in cases of sickness, maternity, disability, or employment injury.

ESI is applicable in all states except Manipur, Sikkim, Arunachal Pradesh, and Mizoram.

ESI Guidelines

• Applicable only to employees earning ₹21,000 or less per month.
• Employee contribution: 0.75% of Basic Pay + Dearness Allowance (DA)
• Employer contribution: 3.25% of Basic Pay + Dearness Allowance (DA)
• Contributions must be deposited by the 15th of the following month.

Set up ESI for your organization

1. Click Settings in the top-right corner.
2. Click Statutory Components under Setup & Configurations.
3. Switch to the ESI tab.
4. Enter your ESI Number.

Ensure ESI is configured while adding eligible employees.

Professional Tax (PT)

Professional Tax is levied by State Governments on salaried individuals and professionals. The tax amount varies based on salary slabs and differs by state or municipality. The deduction cycle may be monthly, half-yearly, or yearly depending on state regulations.

Set up Professional Tax

1. Click Settings in the top-right corner.
2. Click Statutory Components under Setup & Configurations.
3. Switch to the Professional Tax tab.
4. Enter your Professional Tax Registration Number.
5. Tax slabs are automatically configured based on your state.
6. Modify the slabs if required.

You only need to configure PT while adding a new employee.

Labour Welfare Fund (LWF)

The Labour Welfare Fund (LWF) promotes employee welfare and improved working conditions. Applicability, contribution amount, and deduction frequency depend on state-specific rules.

• Typically applicable to employees earning ₹15,000 or less per month
• Deduction frequency may be monthly, half-yearly, or yearly

To configure LWF:

1. Click Settings in the top-right corner.
2. Click Statutory Components under Setup & Configurations.
3. Switch to the Labour Welfare Fund tab.
4. Click Enable or Disable for each applicable state.

Statutory Bonus

Statutory Bonus is mandated under the Payment of Bonus Act, 1965 and applies to establishments employing 20 or more employees. It ensures employees receive a fair share of the organization’s profits based on statutory requirements.

Bonus eligibility and amount depend on:

• Salary or wages (Basic Pay + DA)
• Profits of the establishment
• Number of days worked during the accounting year
• Minimum bonus: 8.33%
• Maximum bonus: 20%
• Bonus must be paid within 8 months from the end of the accounting year.
• Employee eligibility:
  • Have worked at least 30 days during the accounting year
  • Earn ₹21,000 or less per month

Enable Statutory Bonus

1. Click Settings in the top-right corner.
2. Click Statutory Components under Setup & Configurations.
3. Switch to the Statutory Bonus tab.
4. Click Enable Statutory Bonus.

Configure Statutory Bonus

1. Click Settings in the top-right corner.
2. Click Statutory Components under Setup & Configurations.
3. Switch to the Statutory Bonus tab.
4. Select the Payment Frequency (Monthly or Yearly).
5. Enter the Bonus Percentage (between 8.33% and 20%).
6. Add minimum wages for applicable states by clicking + Add Minimum Wage.
7. Click Save.

Once configures, statutory bonus calculations will be processed along with employee payroll.

Disable Statutory Bonus

1. Click Settings in the top-right corner.
2. Click Statutory Components under Setup & Configurations.
3. Switch to the Statutory Bonus tab.
4. Click Disable Statutory Bonus.

Once disabled, statutory bonus will no longer be included in pay runs.