EPF: EPF stands for Employees Provident Fund. This is a fund for which an special account is made in which employee’s and employer’s contribution is transferred. This is a great long term saving which is good for our future as employees earn tax on EPF which is tax free and can also take funds for temporary period of time for some basic needs such as children education and purchase of new house.
ESI: ESI stands for Employees’ State Insurance Scheme in which funds are contributed by the Employees’ and Employers. The contribution to this scheme allows Indian employees to take advantage of health care insurance and self financing. It is the most need-based social insurance which protect employees’ from some uncertain events.
Rules to calculate EPF and ESI:
- Employee and Employer both have to contribute towards EPF to earn interest which is tax free. Employees’ contribution towards EPF is 12 per cent and Employer’s contribution is 10 per cent.
- To motivate women sector of the society to work with formal sector government has decreased the rate of EPF from 12 per cent to 8 per cent for women which encourages more women to work with formal sector.
- ESI is applicable to mostly all types of businesses such as factory, cinema theatre and restaurants which have 10 or more than 10 workers working in it. Employees whose monthly income does not exceed 21000 are eligible for this scheme.
- ESI is applicable to the gross salary of an employee which means ESI is applicable to the salary earned by an employee before deductions such as dearness allowance of health care insurance or social insurance.
- Employees contribution in ESI scheme is 1.75 percent and employer contribution is 4.75 per cent.
Final Words: EPF is managed by Employees’ Provident Fund Organization (EPFO) and ESI is controlled by managed by Employees State Insurance Corporation.