EPF and ESI Compliance in India — Complete Employer Guide

EPF registration is mandatory for every establishment with 20 or more employees. Once registered, EPF compliance is mandatory even if the number of employees later falls below 20. Voluntary registration is also available for establishments with fewer than 20 employees.

The EPF contribution rate is 12 percent of basic wages plus dearness allowance from the employer and 12 percent from the employee. Of the employer's 12 percent, 8.33 percent goes to the Employee Pension Scheme and 3.67 percent to the EPF. The employer also contributes 0.5 percent to EDLI (Employee Deposit Linked Insurance) and 0.5 percent as EPF administrative charges.

ESI registration is mandatory for establishments with 10 or more employees where any employee earns up to Rs 21,000 per month (Rs 25,000 for persons with disability). The ESI scheme provides medical, sickness, maternity, and disablement benefits to covered employees.

The ESI contribution rate is 3.25 percent of gross wages from the employer and 0.75 percent from the employee. Employees earning up to Rs 21,000 per month must be covered under ESI. The contributions are deposited monthly with the ESIC.

Penalties for EPF non-compliance include interest at 12 percent per annum on delayed payments, damages ranging from 5 to 25 percent of arrears, and criminal prosecution for wilful default. ESI non-compliance attracts penalties up to Rs 10,000 for first offences and up to Rs 25,000 for repeat offences, plus imprisonment in serious cases.