Enter an employee’s monthly pay to estimate the EPF and ESI contributions for both sides and the gratuity payable on exit, under the Labour Codes as they stand in 2026.
Enter the monthly pay and Basic + DA to see PF, ESI and gratuity.
Based on the Code on Social Security, 2020 (in force 21 November 2025), the EPF wage ceiling of ₹25,000 from 17 September 2026 (S.O. 5109(E)), EPFO and ESIC contribution rates, and the ₹20 lakh gratuity ceiling. “Wages” uses the Code’s 50% rule: if allowances excluded from wages exceed half of total pay, the excess is added back. This tool gives an estimate only and is not legal or payroll advice. Your actual figures depend on your salary components and scheme choices.
How the numbers are worked out
Step 1: wages under the Code
Under the Code on Social Security, “wages” means Basic, DA and retaining allowance. If allowances left out of wages (HRA, conveyance, overtime and the like) come to more than half of total pay, the excess is added back. So on ₹40,000 a month with ₹16,000 Basic + DA, wages become ₹20,000. This figure drives PF and gratuity, which is why allowance-heavy salary structures cost more than they used to.
Step 2: EPF
Both employee and employer pay 12% of wages, worked on a ceiling of ₹25,000 a month from 17 September 2026. Of the employer’s 12%, 8.33% goes to the pension scheme (EPS), capped at ₹2,083, and the rest to EPF. The employer also pays 0.5% for EDLI insurance and 0.5% administrative charges, with a minimum admin charge of ₹500 a month per establishment. Employees earning above ₹25,000 are not mandatorily covered.
Step 3: ESI
ESI applies to employees earning ₹21,000 a month or less. The employee pays 0.75% of wages and the employer 3.25%, due within 15 days of the end of the month.
Step 4: gratuity
Gratuity is 15 days’ wages for every completed year of service, using a 26-day month: monthly wages × 15 ÷ 26 × completed years. A part year of more than six months counts as a full year. Permanent employees need five years of continuous service, except on death or disablement; fixed-term employees qualify after one year. The statutory ceiling is ₹20 lakh, though a contract or settlement can provide more. The employer must pay within 30 days of it becoming due, with simple interest for any delay.
Sources: Code on Social Security, 2020 and PIB backgrounder on the Labour Codes (Nov 2025); PIB release 2314111 and EPFO FAQs on the ₹25,000 ceiling (S.O. 5109(E), 17 Sep 2026); esic.gov.in contribution and coverage pages; Labour Ministry statement on the ₹20 lakh gratuity ceiling (Aug 2026).
Need this run every month? See our payroll outsourcing in Chennai service, the guide to PF and ESI registration in Chennai, or our labour law compliance review if your salary structures need reworking for the 50% rule.
Frequently asked questions
Is PF calculated on basic salary or gross?
On wages as the Code defines them: Basic, DA and retaining allowance, plus any excess where excluded allowances are more than half of total pay. It is not calculated on the full gross, and the statutory contribution can be limited to the ₹25,000 ceiling.
What is the maximum employer EPS contribution?
₹2,083 a month, which is 8.33% of the ₹25,000 ceiling. The rest of the employer’s 12% goes to the employee’s EPF account.
Does ESI apply if salary is above ₹21,000?
No. ESI covers employees whose wages are ₹21,000 a month or less, so contributions stop when pay rises above that limit (subject to the scheme’s contribution-period rules).
How is gratuity calculated for 4 years and 8 months of service?
Eight months is more than six, so it counts as 5 completed years. Gratuity is monthly wages × 15 ÷ 26 × 5, provided the employee is eligible: 5 years for permanent staff, or 1 year for fixed-term staff.
What is the gratuity ceiling in 2026?
₹20 lakh. An employment contract, settlement or award can provide a higher amount.
Last reviewed: 27 October 2026. Estimates only; not legal or payroll advice.
