PF and ESIC Registration: Applicability and Compliance

Summary: Provident Fund and Employees’ State Insurance compliance requires employers to distinguish between establishment-level applicability and individual employee eligibility. Under the Code on Social Security, 2020, PF generally applies to establishments employing 20 or more persons, while ESI generally applies at 10 or more persons, subject to relevant statutory conditions and exceptions. Employers must consider qualifying contract workers, existing registrations, employee wage levels and previous membership before determining their contribution obligations. Notification S.O. 5109(E), effective 17 September 2026, increased the general wage ceiling relevant to Chapter III provident fund coverage from ₹15,000 to ₹25,000 per month. The general ESI wage ceiling remains ₹21,000 under the transitional position described in this article, with separate treatment for eligible persons with disabilities. Standard employee and employer contributions are generally 12% each for PF, while ESI contributions are 0.75% and 3.25%, respectively. However, the actual wage base, pension allocation, statutory exclusions and applicable exemptions require separate examination. This guide explains establishment thresholds, employee eligibility, treatment of salary increases, the statutory wages definition, contribution calculations, registration documents and electronic registration procedures. It also provides payroll examples, a monthly compliance checklist, contribution deadlines and practical guidance on delayed registration, contractor verification and existing UAN or ESI insurance numbers.

Introduction

A company hires its 20th employee and begins reviewing its Provident Fund obligations. Some employees earn above the PF wage ceiling, while others already have a PF account from a previous job. The company also received an ESIC code at incorporation. Its payroll team now must answer three questions. When did each scheme become applicable to the company? Which employees must be enrolled? How much does the employer need to file and pay each month?

The answer starts with two separate checks. The establishment’s headcount determines whether PF or ESI generally applies to the business. Each employee’s wages and membership history determine whether contributions are payable for that employee.

What Are PF and ESI?

Employees’ Provident Fund (EPF) is a retirement savings scheme administered by the Employees’ Provident Fund Organisation (EPFO). Both employees and employers contribute under the applicable rules. Eligible employees may also receive pension benefits under the Employees’ Pension Scheme (EPS) and insurance benefits under the Employees’ Deposit Linked Insurance Scheme (EDLI).

Employees’ State Insurance (ESI) provides medical care to insured employees and eligible dependants. Employees who meet the scheme conditions may also receive benefits relating to sickness, maternity, employment injury or disablement. The Employees’ State Insurance Corporation (ESIC) administers the scheme.

When Is PF Registration Mandatory in India?

Chapter III of the Code on Social Security, 2020 generally applies to establishments with 20 or more employees. When calculating headcount, the employer should consider qualifying workers engaged through contractors. Branches and departments that form part of the same establishment may also need to be counted together.

An employee can count toward the headcount even when their wages put them outside compulsory PF enrolment. For example, an establishment with 18 direct employees and two qualifying contract workers can reach the 20-employee threshold. Once the establishment is covered, the employer assesses each worker’s enrolment and contribution requirements separately.

PF Wage Ceiling and Employee Eligibility

Notification S.O. 5109(E) raised the general PF wage ceiling from ₹15,000 to ₹25,000 per month, effective 17 September 2026. The earlier ceiling remains relevant when reviewing payroll periods in which it applied.

For example, if a new hire joins at ₹28,000 in applicable monthly wages with no continuing PF membership, they may count toward the establishment’s headcount even though compulsory enrolment generally does not apply to them. If another employee already belongs to PF and receives a raise to ₹28,000, the employer should continue to assess contributions based on that employee’s existing membership and the applicable rules.

When Is ESIC Registration Mandatory in India?

Chapter IV of the Code on Social Security, 2020 generally applies to establishments employing 10 or more persons, excluding seasonal factories. An establishment carrying on a hazardous or life-threatening occupation notified by the Central Government can fall within ESI coverage even if it employs only one person. The First Schedule also provides a specific option for plantations, subject to the applicable conditions.

After determining that the establishment is covered, the employer checks which employees meet the ESI wage criteria. As of the date of this article, the general ESI wage ceiling of ₹21,000 per month continues to be used under the transitional position. The carried-forward ceiling for eligible employees with disabilities is ₹25,000 per month. The September 2026 notification raising the PF ceiling concerns Chapter III. For subsequent wage periods, check whether a separate Chapter IV notification or ESIC instruction changes the ESI position.

What Happens if an Employee Crosses the ESI Wage Ceiling?

ESI has two regular contribution periods, April to September and October to March. If an insured employee’s wages rise above the ceiling after a contribution period begins, coverage ordinarily continues until that period ends. During that period, contributions are calculated on the applicable wages.

Suppose Aman earns ₹20,000 in applicable monthly wages and is covered by ESI in October. He receives a raise to ₹23,000 in December. His ESI contributions ordinarily continue through March, and the employer reassesses his eligibility in April. A new employee joining in December at ₹23,000 generally exceeds the ordinary wage ceiling at the time of joining. The two employees can therefore have different ESI treatment even though they earn the same amount.

How Are Wages Calculated for PF and ESI?

Section 2(88) of the Code on Social Security, 2020 defines wages. The calculation includes basic pay, dearness allowance and retaining allowance, where payable. It also provides for specified exclusions. If the excluded payments covered by the statutory add-back rule exceed 50% of the relevant remuneration, or another percentage notified by the Central Government, the excess is added back to wages.

Consider a simplified example where relevant monthly remuneration is ₹30,000. It includes ₹12,000 in pay components that count as wages and ₹18,000 in excluded payments subject to the add-back rule. Half of ₹30,000 is ₹15,000. Since the excluded payments exceed ₹15,000 by ₹3,000, the excess is added to the ₹12,000. In this example, statutory wages are ₹15,000.

The payroll team should classify each salary component before using the amount to check eligibility or calculate contributions. The CTC stated in an offer letter, gross salary and statutory wages can be different amounts.

PF and ESI Contribution Rates with Examples

PF Contribution Example

Assume an eligible employee has monthly PF wages of ₹25,000 and the standard 12% rate applies. The employee contributes ₹3,000 and the employer contributes another ₹3,000 under the standard calculation. If the employee qualifies for EPS, approximately ₹2,083 of the employer’s share goes to EPS and ₹917 goes to EPF.

Applicable EDLI contributions and administrative charges are separate employer costs. Specified establishments may be subject to a different PF contribution rate. The employer should also verify EPS eligibility before allocating its contribution between pension and provident fund.

ESI Contribution Example

Assume an insured employee earns ₹20,000 in applicable monthly ESI wages, and the standard rates apply.

The employer deducts ₹150 from the employee’s wages, adds its own ₹650 and deposits ₹800 with ESIC. If the calculation produces a fraction, Rule 19 of the Social Security (Central) Rules, 2026 requires each share to be rounded up to the next whole rupee. Specific exemptions or concessions may affect the amount payable in eligible cases.

Documents Required for PF and ESIC Registration

The documents depend on the establishment’s legal structure, its existing registrations and the information requested by the portal.

Keep records showing when the establishment reached each threshold. These records help establish the correct date of coverage, particularly when an employer completes registration after the obligation arose.

How to Register for PF and ESIC

• Determine the coverage date: identify when the establishment first reached the applicable threshold. PF and ESI may start on different dates.
• Check for existing employer codes: Companies incorporated through MCA may already have EPFO and ESIC codes through SPICe+ and AGILE-PRO-S. Retrieve the existing codes before preparing an application. The code allotment date and the date on which contributions become payable can differ.
• Apply through the appropriate route: For a previously unregistered establishment, Rule 5 of the Social Security (Central) Rules, 2026 provides for electronic registration through
• common Form I on the Shram Suvidha Portal: Submit establishment details, upload the required documents and authenticate the application as prescribed.
• Verify the registration certificate and employer details: Check the establishment name, codes and applicable dates. Under the common registration route, Rule 5 provides for electronic issuance within seven days of a complete application, with deemed registration where the applicable conditions are met.
• Enrol eligible employees: For PF, link the employee’s existing Universal Account Number (UAN) or help a first-time member obtain one. For ESI, register eligible new employees before or on their joining date or link their existing insurance numbers. Where a new ESI insurance number is allotted, complete the required declaration within 30 days.
• Complete the first contribution cycle: Calculate contributions from the applicable date, file the employee-wise details and save proof of payment. If registration was completed after coverage began, review the earlier wage months for outstanding filings and contributions.

Monthly PF and ESIC Compliance Checklist

Where contractors file independently, the employer should obtain employee-wise contribution records and paid challans and match them to the workers actually deployed at the establishment for the relevant wage month. This helps confirm that contributions were paid for the workers covered by the contractor’s filing.

What Happens if PF or ESIC Registration Is Delayed?

Suppose a business reached the ESI threshold in June but registered in October. The payroll team should review records from the actual date of coverage in June. It should identify the employees who qualified in each wage month, check what was deducted and paid, and regularise outstanding filings and contributions through the applicable process.

Delay can lead to recovery of unpaid contributions, interest and damages. Prosecution may also follow where the statutory conditions are met. Before adjusting a past employee contribution against later wages, the employer should check the restrictions on recovering that amount.

Conclusion

PF and ESIC compliance starts with identifying the date each scheme applies to the establishment. From that date, employers need to check employee eligibility, apply the correct statutory wage basis and complete the required enrolments. When reviewing September 2026 payroll, check which PF wage ceiling applied to the period under review.

After registration, match employee records, contractor contribution details and paid challans every month. This makes it easier to identify a missed enrolment, an incorrect deduction or an unpaid contribution while the records for that wage month are still available.

Frequently Asked Questions (FAQ’s)

Q1. Can ESI apply before PF applies?

Ans. Yes. A business with 14 employees can generally fall within ESI coverage while still being below the 20-employee threshold for mandatory PF coverage. It must separately check which employees qualify for ESI.

Q2. Can an employee be covered by both PF and ESI?

Ans. Yes. If both schemes apply to the establishment and the employee meets each scheme’s eligibility requirements, the employer can deduct and remit both contributions in the same payroll cycle.

Q3. Can employees opt out of compulsory PF or ESI?

Ans. An employee’s request does not override compulsory coverage. The employer must apply the eligibility rules of the relevant scheme when deciding whether to deduct and remit contributions.

Q4. Can a small business register voluntarily?

Ans. Yes. The Code provides for voluntary coverage under prescribed conditions. The process can involve agreement between the employer and a majority of employees.

Q5. Does coverage end if the headcount later falls below the threshold?

Ans. Generally, coverage continues after an establishment has become covered. For example, if a business became subject to PF at 20 employees and later dropped to 17, its PF obligations generally continue.

Q6. Do PF and ESI deductions begin when the company receives its employer codes?

Ans. The employer should determine when the relevant statutory coverage began and which employees qualify. A company may receive EPFO and ESIC codes during incorporation before contributions become payable.

Q7. Are contract workers counted for PF and ESIC registration?

Ans. Qualifying contract workers can count toward the establishment’s headcount. For example, a business with 18 direct employees and two qualifying contract workers may reach the 20-employee PF threshold.

Q8. Does an employee need a new UAN or ESI insurance number when changing jobs?

Ans. Generally, the new employer should link the employee’s existing Universal Account Number (UAN) for PF and use their existing ESI insurance number for ESI. Employees should share these details during onboarding so the employer can use the correct records for contributions.

Q9. Can two employees earning the same salary have different ESI deductions?

Ans. Yes. For example, if an insured employee’s applicable wages increase from ₹20,000 to ₹23,000 in December, ESI contributions ordinarily continue through March. A new employee joining in December at ₹23,000 would generally be above the ₹21,000 ESI wage ceiling at the time of joining.

Q10. Can an employer deduct its own PF or ESI share from an employee’s wages?

Ans. The employer deducts the applicable employee share from wages and pays the employer share separately. For example, if the employee’s ESI share is ₹150 and the employer’s share is ₹650, the employer deducts ₹150 from wages and deposits the full ₹800 with ESIC.