Question 1

What makes the employer cost higher than the gross salary?

Accepted Answer

On top of gross, employers mandatorily contribute 12% of basic towards EPF (capped at ₹1,800 on the ₹15,000 wage ceiling), EDLI charges of 0.5%, ESI at 3.25% for employees earning up to ₹21,000, and a gratuity accrual of 4.81% of basic. Together these typically add 4–20% depending on the salary level.

Question 2

Why is the PF contribution capped at ₹1,800?

Accepted Answer

Statutory EPF applies to wages up to ₹15,000 a month, so 12% of that ceiling is ₹1,800. Employers and employees can voluntarily contribute on the full basic (unrestricted PF), which this tool supports with a toggle.

Question 3

When does ESI apply?

Accepted Answer

ESI covers employees whose gross monthly wages are ₹21,000 or less. The employer contributes 3.25% of gross and the employee contributes 0.75%. Above the wage limit ESI does not apply.

Question 4

What is gratuity provisioning?

Accepted Answer

Under the Payment of Gratuity Act, eligible employees earn 15 days of wages for every year of service, payable on exit. Prudent employers accrue this monthly. The standard accrual is 4.81% of basic, which is 15/26 × 1/12 expressed as a percentage.

True employer cost calculator

Frequently asked questions