For any business in India that crosses certain employee headcount thresholds, EPF (Employees' Provident Fund) and ESI (Employees' State Insurance) registrations are not optional they are statutory obligations under two separate Acts of Parliament.
Yet many small and growing businesses remain non-compliant, often because they are unaware of when exactly these obligations kick in, what the correct contribution rates are, and what the penalties for non-compliance look like. In 2025-26, a significant Supreme Court ruling has also changed how EPF liability is assessed for businesses with multiple registrations.
This guide covers everything you need to know as an employer in India in 2026.
What is EPF?
The Employees' Provident Fund (EPF) is a social security and retirement savings scheme governed by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, administered by the Employees' Provident Fund Organisation (EPFO) under the Ministry of Labour and Employment.
Under EPF, both the employer and employee contribute a percentage of the employee's basic wages and dearness allowance into a retirement fund. The employee can withdraw or transfer this corpus when they change jobs or retire.
What is ESI?
The Employees' State Insurance (ESI) is a social insurance scheme governed by the Employees' State Insurance Act, 1948, administered by the Employees' State Insurance Corporation (ESIC) under the Ministry of Labour and Employment.
ESI provides covered employees and their families with medical care, sickness benefits, maternity benefits, disability benefits, and dependent benefits in case of employment injury or death.
When Does EPF Apply to Your Business?
EPF coverage is mandatory for every establishment with 20 or more employees. Once an establishment crosses this threshold, it must register with the EPFO within 30 days. Importantly, once covered under the EPF Act, coverage continues even if the employee count later falls below 20.
EPF is also mandatory in certain industries notified by the Central Government, regardless of employee count. The wage ceiling for mandatory EPF coverage is Rs 15,000 per month employees earning above this are not mandatorily covered, though they can voluntarily opt in through a joint request with the employer.
When Does ESI Apply to Your Business?
ESI coverage is mandatory for all factories and establishments employing 10 or more employees where work is carried out for hire or reward. The wage ceiling for ESI coverage is Rs 21,000 per month (Rs 25,000 for persons with disability). Employees earning above this threshold are exempt from ESI contributions.
EPF Contribution Rates (2026)
|
Contribution |
Employee |
Employer |
|
Provident Fund (PF) |
12% of basic wages + DA |
3.67% (of 12%, balance goes to EPS) |
|
Employees' Pension Scheme (EPS) |
Nil |
8.33% of wages up to Rs 15,000 |
|
EDLI (Insurance) |
Nil |
0.50% of wages |
|
Admin Charges |
Nil |
0.50% of wages (min Rs 500/month) |
|
Total Employer Contribution |
~13% of basic wages + DA |
The standard EPF contribution rate of 12% (both employee and employer) applies to all covered establishments. The employer's 12% is split 8.33% goes to the Employees' Pension Scheme (EPS) and 3.67% goes directly to the EPF account.
ESI Contribution Rates (2026)
|
Contributor |
Rate |
|
Employer |
3.25% of wages |
|
Employee |
0.75% of wages |
|
Total |
4.00% of gross wages |
Due Dates for EPF and ESI Contributions
|
Compliance |
Due Date |
|
EPF Monthly Contribution |
By the 15th of the following month |
|
ESI Monthly Contribution |
By the 15th of the following month |
|
EPF Annual Return (Form 3A/6A) |
30 April of the following year |
|
ESI Annual Return |
11 November of the following year |
Important: Supreme Court Ruling on EPF Liability (2025)
In the case of Torino Laboratories Pvt. Ltd. vs. Union of India & Ors. (2025 INSC 849), the Supreme Court of India ruled that separate registrations under different laws do not make business units legally separate for the purpose of the EPF Act. Entities operating from the same premises can be treated as one establishment for EPF purposes, preventing employers from avoiding EPF liability by creating multiple entities.
This judgment is critical for business groups, startups with multiple entities, and businesses that have separated operations across related companies operating from the same location. If your business structure involves related entities at the same premises, review your EPF compliance position immediately.
Penalties for Non-Compliance
- Delayed EPF payment: Interest at 12% per annum under Section 7Q of the EPF Act, plus penal damages of up to 25% of arrears under Section 14B
- Deliberate non-payment: Can result in arrest and detention of the employer, attachment of bank accounts, and criminal prosecution under Section 14 of the EPF Act
- ESI default: Interest and penalties apply under the ESI Act, with recovery through attachment of property and legal proceedings
Employees can verify whether their employer has been depositing EPF contributions each month through their UAN (Universal Account Number) e-passbook on the EPFO portal.
Post-Registration Compliance Checklist
- Register on the Unified Portal (EPFO) within 30 days of crossing the 20-employee threshold
- Activate UAN for each new employee immediately upon joining
- Deduct employee PF and ESI contributions from monthly salary and remit by the 15th
- File monthly ECR (Electronic Challan cum Return) on the EPFO portal
- Ensure all contract employees engaged through contractors are also covered the principal employer is responsible
- Maintain employee rolls, wage registers, and attendance records as per statutory requirements
Register with EPFO: epfindia.gov.in | Register with ESIC: esic.gov.in
How Targolegal Handles This For You
Our Targo HR service manages complete payroll and statutory compliance including EPF and ESI registration, monthly contribution filing, UAN activation, annual returns, and employee onboarding documentation. We ensure your business stays compliant from the first employee to the hundredth.
Contact Targolegal today to set up your HR compliance framework.
