How Do PF and ESI Apply to a Private School's Staff?
In short: a private school with 20 or more staff generally has to register for PF, and one with 10 or more may fall under ESI. Both are deducted from salary every month, and the school adds its own share on top. Which staff are covered depends mainly on their monthly wages. Check your own case with the official bodies or a professional.
The figures below are what the sources said at the time of writing. Rates and limits change, so check the current notice before you run salaries.
Who is covered by PF
PF is run by the Employees' Provident Fund Organisation (EPFO). According to Wikipedia's EPFO article, firms employing 20 or more employees must be registered with the fund.
Count everyone on your payroll, not only teachers. Clerks, drivers, helpers and peons all count towards the number. A school with fewer than 20 people may still choose to register, so ask your accountant.
The same article says the pension scheme's wage ceiling was raised to 15,000 rupees a month from 1 September 2014. Many schools therefore calculate PF on a capped wage for higher-paid staff. Whether to cap it or contribute on full wages is a decision to confirm with a professional.
What PF deducts each month
PF is worked out on basic wage plus specified allowances, not on gross salary, as the same article explains. The split is:
| Part | Rate on PF wages |
|---|---|
| Employee share (deducted from salary) | 12% |
| Employer to pension scheme (EPS) | 8.33% |
| Employer to provident fund (EPF) | 3.67% |
| Employer administrative charges | 0.50% |
| Employer insurance (EDLI) | 0.50% |
The employer's total is 13% of PF wages. The 12% employee share comes out of the teacher's pay. Everything else is the school's own cost on top of salary.
Who is covered by ESI
ESI is run by the Employees' State Insurance Corporation. Wikipedia's ESI article says the scheme applies to establishments with 10 or more workers. It also says the wage limit is 21,000 rupees a month, effective 1 January 2017.
This is the part many schools get wrong. ESI covers only staff who earn up to the wage limit. A peon earning 15,000 rupees may be covered, while a senior teacher earning 35,000 rupees is not.
Whether a particular school must register depends on how your state has notified the scheme for educational institutions. The sources I could confirm do not settle this. Check the current notice on the ESIC website or ask a professional.
What ESI deducts each month
The same ESI article gives these rates from 1 July 2019:
- Employee share: 0.75% of wages
- Employer share: 3.25% of wages
- Total: 4%
The employee share comes out of salary. The employer share is the school's cost. In return, covered staff get benefits such as medical, sickness and maternity cover, as listed in the same article.
A worked example
Take a clerk with a basic wage of 12,000 rupees and a monthly gross of 18,000 rupees. These are made-up numbers for illustration.
- PF wages are the basic plus specified allowances. Assume 12,000 rupees here.
- Employee PF is 12% of 12,000, which is 1,440 rupees.
- Employer PF is 13% of 12,000, which is 1,560 rupees.
- ESI applies to the gross of 18,000 rupees, which is under the 21,000 limit. Employee ESI is 0.75%, about 135 rupees.
- Employer ESI is 3.25%, about 585 rupees.
Take-home before other deductions is 18,000 minus 1,440 minus 135, which is 16,425 rupees. The school pays another 1,560 plus 585 rupees as its own cost.
Which allowances count towards PF wages is a legal question. Confirm it with a chartered accountant.
What a monthly salary run needs
Most mistakes come from wrong inputs, not wrong maths. Before you run salaries, check these:
- Attendance and leave are final. Unpaid leave and half days change the wages PF and ESI are worked on.
- Joiners and leavers are prorated. A teacher who joins on the 12th should not get a full month's pay.
- Staff above the ESI limit are excluded. Recheck each person after every increment.
- Each payslip shows the deductions. Staff should be able to see PF and ESI as separate lines.
- Totals reach your accounts. Salary, PF and ESI should be posted once, not typed twice.
Deposits to the PF and ESI portals have monthly due dates. Check the current dates on the official sites rather than relying on memory.
Where software helps
A spreadsheet can do this, but it breaks when someone rebuilds attendance from memory every month. 8plabs school payroll software runs salaries from the staff register. It reads attendance from biometric devices and registers you already use, and it handles leave types, balances and approvals. It then makes the monthly salary from days actually served. PF and ESI appear on the payslip as statutory deductions your school operates, and the page says different schools' deduction rules can be accommodated.
If you also want attendance captured properly, see school attendance software. For the books, see school accounting. The wider payroll from attendance and leave page explains the idea in general.
Next step
Write down your headcount, who earns above 21,000 rupees, and which allowances you treat as part of basic. Then take that list to your accountant and the official portals.
If your monthly salary run is slow or error-prone, see how 8plabs School Payroll handles staff salary, PF, ESI and leave and book a demo with your own staff records.