Two statutory registrations catch most growing Indian employers in their first few years: provident fund under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and employees’ state insurance under the Employees’ State Insurance Act, 1948. They have different headcount triggers, different wage ceilings and different contribution rates, and both are enforced retrospectively with interest and damages, so a late registration is more expensive than an early one. Here is what triggers each, and what you have to do once it does.
EPF: the trigger is 20 employees
Provident fund becomes mandatory once an establishment covered by the Act employs 20 or more persons. The count includes contract and casual workers engaged through a contractor, not only your own payroll, which is the point most first-time employers get wrong. Registration is done through the EPFO’s unified portal, and you are expected to register promptly once the threshold is crossed rather than at the end of the year.
Two consequences follow that are worth knowing in advance. Coverage is sticky: once the Act applies, the establishment stays covered even if headcount later falls below 20. And employers below the threshold may register voluntarily, which is common where a client or a tender requires it, or where employees want the benefit.
The ₹15,000 wage base and the 12% rate
Membership is mandatory for employees whose monthly PF wages — broadly basic plus dearness allowance and retaining allowance — are up to ₹15,000. An employee joining above that figure who has never been an EPF member is an “excluded employee” and need not be enrolled, though many employers enrol everyone anyway to keep the payroll simple. Once someone is a member, they remain one even if their wages later cross the ceiling.
Both sides contribute 12% of PF wages. The employee’s 12% goes to the provident fund account. The employer’s 12% is split: 8.33% is diverted to the Employees’ Pension Scheme, restricted to the ₹15,000 wage base, and the balance of 3.67% goes to the provident fund. The employer additionally pays a contribution towards the Employees’ Deposit Linked Insurance scheme and administrative charges, each a small percentage subject to a monthly minimum. A reduced statutory rate of 10% applies to a narrow set of establishments, including certain industries specified by notification and establishments with fewer than 20 employees that are covered voluntarily — worth checking rather than assuming, because it changes every payslip.
Employers may also contribute on wages above ₹15,000 by agreement. Do it deliberately, in writing, because the higher base is difficult to reverse later.
ESIC: the trigger is 10 employees in most states
Employees’ state insurance applies to non-seasonal factories and, through state notifications, to shops, hotels, restaurants, cinemas, road transport undertakings, newspaper establishments, educational and medical institutions and other classes of establishment. In most states the threshold is 10 employees. In a few — Maharashtra and Chandigarh among them — the threshold for shops and other establishments is 20. The Act also applies area by area: it operates in areas the government has notified as implemented, so a unit in a newly developing industrial belt may not be covered on the day it opens.
Because of both variations, “ESIC starts at 10” is a useful rule of thumb and a bad basis for a decision. Check the notification position for your state and for the specific area your establishment sits in. Registration is expected within fifteen days of the Act becoming applicable.
The ₹21,000 ceiling and the 0.75/3.25 split
ESIC covers employees drawing gross monthly wages up to ₹21,000, and up to ₹25,000 in the case of employees with disability. Note the difference from PF: the ESIC ceiling runs on gross wages, not on basic plus DA, so an employee can be inside the PF wage base and outside the ESIC one, or the reverse.
The employee contributes 0.75% of wages and the employer 3.25%, rates that have been in force since July 2019. Employees earning an average daily wage up to ₹176 are exempt from their own share, but the employer still pays its 3.25%. Contributions run in two six-month contribution periods, April to September and October to March; an employee whose wages cross ₹21,000 in the middle of a period continues to contribute until the end of that period, and coverage ceases from the start of the next one.
Monthly deadlines
Both are monthly, and both fall on the 15th of the following month. For provident fund that means generating the electronic challan-cum-return, verifying it and paying the challan by the 15th; for ESIC it means filing the monthly contribution and paying by the 15th. Late payment attracts interest at 12% a year under section 7Q of the EPF Act, with damages assessed separately under section 14B, and ESIC likewise charges interest at 12% a year and can levy damages. The damages rates have been revised in recent years, so confirm the current figure rather than relying on an older slab table.
There is a further trap for principal employers. If you engage contract labour, you remain liable for the provident fund and ESI contributions of the contractor’s workers if the contractor fails to pay. Collecting the contractor’s monthly challans, and reconciling them against the headcount actually deployed on your site, is part of the job rather than an optional courtesy.
What a PF and ESIC consultant does
- Registers the establishment, obtains the codes and adds employees, including UAN generation and KYC seeding on the PF side and insurance number allotment on the ESIC side.
- Prepares the monthly ECR and ESIC return from your payroll output and generates the challans before the 15th.
- Handles transfers, withdrawals, pension claims, nomination records and the KYC corrections that block most employee claims.
- Reconciles contractor challans for the workers deployed on your premises.
- Represents you in inspections and in section 7A inquiries, where the EPFO determines dues for past periods.
Fees are usually a monthly retainer scaled to headcount. Consultants listed on Veritas publish their monthly fee band and minimum engagement, so you can compare before you enquire. The question worth asking at the outset is how they handle employee grievances about unsettled claims — that, rather than the monthly filing, is where most complaints about consultants arise.
This is general information, correct as at September 2026, and not legal advice. Thresholds, wage ceilings and state notifications change; confirm your own position with a consultant before registering or deciding not to.
Find help
- Compare PF and ESIC consultants in India by fee band, minimum engagement and city.
- If registers, returns and inspections across several acts are the wider problem: labour law compliance consultants.
- To hand over the payroll run itself: payroll service providers in India.