PF, ESI and Professional Tax Calculation in Payroll

Every Direct Payroll line carries the statutory deductions Indian payroll teams check first. Employee PF is the PF rate, 12 percent by default, on Basic plus DA up to the PF wage ceiling in your settings. ESI applies when the monthly wage is within the ESIC ceiling, at 0.75 percent from the employee and 3.25 percent from the employer. Professional tax follows the slabs you set for each state, and employer PF is shown split into EPS and EPF.

How it works

Set the statutory values once in Settings, Statutory Payroll Rules: PF rate and PF wage ceiling, ESI employee percentage and ESIC wage ceiling, and professional tax slabs by state.
For each line, PF is the PF rate on Basic plus DA, with Basic plus DA capped at the PF wage ceiling.
ESI coverage is tested on the monthly wage in the salary structure, not on a short month's earnings. When covered, the employee pays 0.75 percent and the employer 3.25 percent of the earned gross.
Professional tax comes from the slab for the employee's state, or the company's state if none is recorded, based on the month's earned gross.
Employer PF is split into EPS at 8.33 percent of the PF wage, capped at ₹1,250 a month, and EPF for the rest.
The run shows PF, ESI, professional tax and employer cost on every line, and the payslip lists employer contributions as not deducted from the employee.

What you can set

PF rate for the employee, 12 percent by default, and PF wage ceiling, ₹15,000 by default.
ESI employee percentage, 0.75 by default, and ESIC wage ceiling, ₹21,000 by default.
Professional tax slabs per state, each with a gross range and an amount.
Month-specific professional tax slabs, where a state charges a different amount in one month.
A flat professional tax amount, ₹200 by default, used for any state with no slabs set up.
Employer ESI at 3.25 percent of earned gross for covered employees.
EPS at 8.33 percent of the PF wage, capped at ₹1,250 a month, with EPF taking the rest of the employer's PF.

Why statutory math belongs in the engine

The common mistakes are small and costly. ESI gets charged to someone on ₹25,000 because a short month brought earnings under the ceiling. PF is taken on the full Basic when the ceiling should apply. Professional tax for a Kolkata employee is deducted at the Pune rate. Direct Payroll tests ESI coverage on the monthly wage, caps PF at the ceiling, and picks professional tax by the employee's state, the same way every month. The glossary explains EPF, ESI and professional tax if your team needs a refresher.

Worked example: two employees in Ahmedabad

Both work a full October 2026, and the Gujarat slab set up in this example deducts ₹200 of professional tax from each. Neha, an accounts assistant, has a gross of ₹18,000 with Basic plus DA of ₹12,000. Her PF is ₹1,440, her ESI is ₹135 because ₹18,000 is within the ₹21,000 ceiling, and her net pay is ₹16,225. Her employer adds PF of ₹1,440, split into EPS of ₹1,000 and EPF of ₹440, and ESI of ₹585, for a total cost of ₹20,025.

Vikram, a sales manager, has a gross of ₹40,000 with Basic plus DA of ₹20,000. His PF is capped at 12 percent of ₹15,000, which is ₹1,800, and he is outside ESI. With ₹200 of professional tax his net pay is ₹38,000. Employer PF of ₹1,800 splits into EPS of ₹1,250 and EPF of ₹550, so his cost to the company is ₹41,800.

Checks before the first run

Confirm the professional tax slabs for every state where you have staff, and record each employee's state, since that decides the slab. Keep the PF and ESIC ceilings in settings aligned with current notifications. Check who must be covered using the EPF applicability and ESI applicability pages, and try a salary in the PF calculator if a figure looks wrong.

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Frequently asked questions

How is PF calculated in ZeniaHR payroll?

Employee PF is the PF rate, 12 percent by default, on Basic plus DA, with Basic plus DA capped at the PF wage ceiling in your settings, ₹15,000 by default. The employer's matching PF is shown separately and split into EPS, at 8.33 percent capped at ₹1,250 a month, and EPF.

When does ESI apply to an employee?

When the employee's monthly wage in the salary structure is within the ESIC wage ceiling in your settings, ₹21,000 by default. Coverage is tested on the monthly wage, so a short month does not bring someone into ESI. The contribution is then 0.75 percent from the employee and 3.25 percent from the employer on the earned gross.

Does ZeniaHR handle professional tax for different states?

Yes. HR sets professional tax slabs for each state, and each employee's professional tax comes from the slab for their own state, or the company's state if none is recorded, based on that month's earned gross. A state can also have a month-specific slab where its rules call for one.

Is the employer's share of PF and ESI shown on the payslip?

Yes. Below net pay, the payslip shows employer contributions that are not deducted from the employee: PF with its EPS and EPF split, and ESI where the employee is covered. The run also shows each person's total employer cost.