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Business Compliance & Labour Law

PF & ESIC Compliance

PF & ESIC

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Regulatory Framework

Employees' Provident Fund obligations arise under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (Section 6), the Employees' Provident Fund Scheme, 1952 (Paragraph 29) and the Employees' Pension Scheme, 1995 (Paragraph 3). The employer must contribute 12% of "basic wages" (subject to the statutory wage ceiling of ₹15,000 per month, or on actual wages where the employer voluntarily covers above-ceiling employees), matched by an equal 12% employee contribution; of the employer's 12%, 8.33% is diverted to the Employees' Pension Scheme (capped at ₹1,250 per month, i.e., 8.33% of the ₹15,000 ceiling) and the remaining 3.67% credited to the Provident Fund account. Establishments employing 20 or more persons are covered under Section 1(3) of the Act.

Employees' State Insurance obligations arise under Section 39 of the Employees' State Insurance Act, 1948, as revised by G.S.R. 423(E) dated 13 June 2019: the employer contributes 3.25% and the employee 0.75% of wages, applicable where an employee's gross wages do not exceed ₹21,000 per month (₹25,000 for persons with disability).

Note: the Wages, Industrial Relations, Social Security and Occupational Safety, Health and Working Conditions Codes were notified as commenced with effect from 21 November 2025 per PIB release PRID 2192463, with the central rules under the Codes expected to follow around May 2026. Until those central rules take final effect, EPF and ESI compliance continues to be administered under the base Acts and contribution rates above; this page will be updated with the corresponding Code-era citations once the rules are notified.

Overview

PF and ESIC compliance is the combined management of the provident fund and the employees' state insurance for an employer — the registrations under the Employees' Provident Funds Act 1952 and the ESI Act 1948, the monthly contributions and the filings (the ECR for the PF and the monthly ESI contribution payment and the returns), the employee enrolment and the changes, and the claims and the inspections. The two statutes are the twin pillars of the Indian social security, and their compliance runs together on the payroll.

The PF and the ESI are the statutory layers of the employment cost — the retirement savings and the medical and the cash benefits — and the employer is the collector and the remitter of both. The contributions are computed on the wages at the statutory rates, deposited monthly, and reported; the ESI applies to the establishments above the prescribed strength, and the PF applies on the same workforce. The compliance is the discipline of the monthly cycle.

The cost of a broken PF-ESI compliance is the cumulative exposure: the contributions short or late with the interest and the damages, the registrations missed and the prosecutions, the benefits that the employees could not claim. The two statutes are the most inspected in the employment space, and their positions compound when they are managed separately.

This service is for employers with PF and ESI obligations. We register the establishment under both the statutes, compute and deposit the monthly contributions, file the ECR and the ESI returns, manage the employee enrolments and the claims, handle the inspections and the notices, and review the combined position so the twin pillars of the employment compliance run cleanly.

How It Works

  1. 1

    Dual Registration

    We register the establishment under the PF and the ESI Acts.

    Harun Raaj & Associates does this2-4 weeks
  2. 2

    Contribution Computation

    We compute the PF and the ESI contributions on the wages.

    Harun Raaj & Associates does thisMonthly
  3. 3

    ECR & ESI Filings

    We file the monthly ECR and the ESI returns and payments.

    Harun Raaj & Associates does thisMonthly
  4. 4

    Enrolment & Claims

    We manage the employee enrolments, the changes and the claims.

    Harun Raaj & Associates does thisAs required
  5. 5

    Inspections & Review

    We handle the inspections and review the combined PF-ESI position.

    Harun Raaj & Associates does thisAnnual

Frequently Asked Questions

When is a company required to register under EPF and what is the wage threshold for employee coverage?
Under Section 1(3) of the Employees' Provident Funds and Miscellaneous Provisions Act 1952, registration with the EPFO is mandatory for every establishment engaged in any industry specified in Schedule I (or notified by the Central Government) that employs 20 or more persons. Once the threshold is crossed, registration must be done within 30 days by the employer; coverage continues even if the head count subsequently falls below 20. An employee earning basic wages up to ₹15,000 per month is mandatorily covered; employees earning above ₹15,000 may be covered voluntarily. The employer's contribution is 12% of basic wages (including dearness allowance and retaining allowance), of which 8.33% goes to the Employees' Pension Scheme 1995 (capped at ₹1,250 per month on a ₹15,000 ceiling) and 3.67% goes to the EPF account, plus 0.5% to EDLI and 0.5% (approx.) to administrative charges.
What is the ESI wage ceiling and how is the contribution rate split between employer and employee?
Under the Employees' State Insurance Act 1948, employees earning gross wages up to ₹21,000 per month (₹25,000 for persons with disability) are covered under the scheme, as notified by the Ministry of Labour and Employment. The current contribution rate as per the latest gazette notification is 3.25% of gross wages paid by the employer and 0.75% by the employee, totalling 4% — revised from the earlier 4.75% to reduce compliance burden. ESI contributions are payable for the contribution period April–September (paid by November 11) and October–March (paid by May 11) under Rule 31 of the ESI (Central) Rules 1950. An employee whose wages cross ₹21,000 during the contribution period remains covered until the end of that contribution period under Regulation 26 of the ESI (General) Regulations 1950 and exits from the subsequent period onwards.
What are the consequences of not registering for PF despite crossing the 20-employee threshold?
Failure to register under the Employees' Provident Funds and Miscellaneous Provisions Act 1952 within 30 days of crossing the 20-employee threshold exposes the employer to assessment of arrears of contribution under Section 7A, interest at 12% per annum under Section 7Q, and damages (penalty) ranging from 5% to 25% of arrears under Section 14B depending on the period of default. The EPFO Enforcement Officer may conduct an inspection under Section 13 and initiate recovery proceedings under Section 8 (including attachment of property). In cases of persistent default, the employer and the person responsible for the default (typically the director or partner) can be prosecuted under Section 14(2A) with imprisonment up to three years and/or a fine of ₹10,000. The EPFO's Bhavishya Nirman Bond scheme and recent EPFO circulars encourage voluntary compliance with reduced penalties for genuine first-time defaulters.
Can employees in our startup opt out of PF if they are highly paid and prefer self-managed investments?
Under Paragraph 26(6) of the Employees' Provident Fund Scheme 1952, an employee who is not already a PF member at the time of joining and whose pay exceeds ₹15,000 per month may be excluded from mandatory membership. However, once a member, an employee cannot unilaterally opt out of PF — membership is continuous until withdrawal on exit from service. An employee earning above ₹15,000 who was covered from a prior employer remains covered and can contribute on actual wages above the ceiling. Importantly, both employer and employee can voluntarily contribute up to 100% of basic wages to the VPF (Voluntary Provident Fund) under Paragraph 62 of the EPF Scheme, but the employer's mandatory contribution is capped at the statutory ceiling. The employee's own EPF contribution above ₹2.5 lakh per year is taxable on interest from FY 2021-22 onwards under Section 10(11)/(12) as amended by Finance Act 2021.
What monthly filings are required for PF and ESI, and what are the deadlines?
For EPF, the employer must file the Electronic Challan cum Return (ECR) on the EPFO Unified Portal and deposit contributions by the 15th of the month following the month of deduction (e.g., June contributions by July 15) as per Para 38 of the EPF Scheme 1952; late payment attracts interest under Section 7Q and damages under Section 14B. For ESI, the employer must deposit monthly contributions by the 15th of the following month via the ESIC portal and file the half-yearly return (Form 6) within 42 days of the end of each contribution period (i.e., by November 11 for April–September and May 11 for October–March) under Rule 31 of the ESI (Central) Rules 1950. New joiners must be registered on the EPFO portal via Form 11 and on the ESIC portal within 10 days of joining, and exit reporting must be done promptly to avoid mismatch notices from both EPFO and ESIC.

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