PF and ESI Compliance for Employers: A Complete Guide for FY 2026-27

For any business that employs people in India, Provident Fund (PF) and Employee State Insurance (ESI) compliance are non-negotiable. These are not just statutory obligations — they are fundamental employee benefits that protect your workforce. Yet they remain among the most commonly mismanaged compliance areas, particularly for growing businesses that cross the threshold without realising it.

This guide covers everything an employer needs to know: who must register, contribution rates, due dates, the filing process, and the consequences of getting it wrong.

The Employees' Provident Fund is governed by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, administered by the Employees' Provident Fund Organisation (EPFO). It is a retirement savings scheme where both the employer and employee contribute a percentage of the employee's basic salary every month.

Mandatory registration applies to:

• Any establishment employing 20 or more employees at any point during the year
• Certain notified industries (like cinemas, hotels, restaurants) with 10 or more employees

Voluntary registration is available for establishments with fewer than 20 employees.

Important: Once an establishment is covered, it remains covered even if the employee count later falls below 20.

Total employer cost: approximately 13% of basic salary + DA (for employees with basic salary above ₹15,000).

Salary ceiling: The mandatory contribution is calculated on basic salary + DA. There is no upper limit on the employee's contribution, but the employer's EPS and EDLI contributions are capped at a basic salary of ₹15,000.

Under the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) and subsequent schemes, the government has periodically subsidised employer EPF contributions for new employees. Check the EPFO portal for current schemes.

EPF contributions must be deposited by the 15th of the following month.

For example, contributions for August 2026 must be deposited by September 15, 2026.

Every month, employers must file the ECR (Electronic Challan cum Return) on the EPFO Unified Portal. The ECR contains:

• Details of all employees (UAN, name, wages)
• Contribution amounts for each employee
• Challan for payment

The ECR must be filed and payment made by the 15th of the following month.

• Form 3A: Individual member-wise annual contribution statement — submitted to EPFO by April 30 each year
• Form 6A: Consolidated annual contribution statement — submitted along with Form 3A

With the shift to the Unified Portal and ECR system, these annual forms are largely auto-generated from monthly ECR data.

Every employee must have a UAN — a 12-digit number that remains constant throughout their career, even when they change employers. Employers must:

• Generate UAN for new employees (through the EPFO Unified Portal)
• Seed Aadhaar, PAN, and bank account details with the UAN
• Activate the UAN for the employee

Failure to seed Aadhaar with UAN can result in the employer's contribution being blocked.

Additionally, delayed deposits attract interest at 12% per annum under Section 7Q.

The Employees' State Insurance scheme is governed by the Employees' State Insurance Act, 1948, administered by the Employees' State Insurance Corporation (ESIC). It provides medical, sickness, maternity, disability, and dependent benefits to employees and their families.

Mandatory registration applies to:

• Any establishment employing 10 or more employees (in most states)
• Employees earning a gross salary of ₹21,000 or less per month (₹25,000 for persons with disabilities)

Important: Once covered, an employee remains covered even if their salary subsequently exceeds ₹21,000 — until the end of the contribution period (April–September or October–March).

Exemption: Employees earning up to ₹176 per day (approximately ₹4,576 per month) are exempt from the employee's share of contribution — the employer still contributes.

ESI operates on two contribution periods:

• April 1 to September 30 (First half)
• October 1 to March 31 (Second half)

Monthly contributions must be deposited by the 15th of the following month.

Employers must file half-yearly returns on the ESIC portal:

• Return for April–September: due by November 11
• Return for October–March: due by May 11

Covered employees and their dependents are entitled to:

• Medical benefit: Full medical care from ESIC dispensaries and hospitals
• Sickness benefit: Cash benefit during certified sickness (70% of wages for up to 91 days)
• Maternity benefit: Full wages for 26 weeks (for insured women)
• Disablement benefit: Monthly payment for employment injury
• Dependent benefit: Monthly payment to dependents in case of death due to employment injury
• Funeral expenses: Lump sum payment

Many employers structure salaries with a low basic component and high allowances to reduce EPF liability. The Supreme Court (in the Surya Roshni case and others) has held that allowances that are paid universally to all employees and are not linked to any specific work must be included in the EPF wage base. Structuring salaries purely to avoid EPF can expose employers to significant back-demand.

If you engage contract workers through a contractor, you are the principal employer and are responsible for ensuring EPF and ESI compliance for those workers. If the contractor defaults, the principal employer is liable.

For employees who work across states, the ESI registration must be in the state where the employee is primarily based. EPF is centralised through UAN, so state is less of an issue.

Foreign nationals working in India are generally exempt from EPF if they are covered under a social security agreement between India and their home country. India has such agreements with several countries (Germany, Japan, South Korea, etc.). Check the applicable agreement before enrolling foreign employees.

Gratuity (under the Payment of Gratuity Act) is separate from EPF. Employers with 10 or more employees must pay gratuity to employees who have completed 5 years of continuous service. This is not a monthly contribution — it is a lump sum payable on separation.

• Generate UAN for new employee (if not already existing)
• Seed Aadhaar, PAN, and bank account with UAN
• Enrol employee in ESI (if salary ≤ ₹21,000)
• Issue ESI card / Pehchan card to employee

• Calculate EPF and ESI contributions for all eligible employees
• Deposit EPF contributions by the 15th of the following month
• Deposit ESI contributions by the 15th of the following month
• File ECR on EPFO Unified Portal
• Update ESI portal with monthly wage details

• File ESI half-yearly return by November 11 (April–September period)
• File ESI half-yearly return by May 11 (October–March period)

• File Form 3A and Form 6A with EPFO (by April 30)
• Review employee salary structures for EPF wage base compliance
• Update ESIC records for employees whose salary has changed

• Process EPF transfer or withdrawal (Form 13 for transfer, Form 19/10C for withdrawal)
• Update ESIC records for separated employees
• Issue Form 16 (for TDS on salary)

Following the Supreme Court judgment in the EPFO vs RC Gupta case, employees who were members of the EPF scheme before September 1, 2014, and whose employers had contributed on actual salary (above ₹15,000), had the option to apply for higher pension. The deadline for this option has passed, but employers should be aware of potential back-demands if they did not contribute on actual salary.

The government has been expanding ESIC coverage to new districts and sectors. Employers in newly covered areas must register within 15 days of the notification.

Our payroll compliance team manages PF and ESI compliance for businesses of all sizes:

• Initial registration with EPFO and ESIC
• Monthly ECR filing and contribution deposit
• Half-yearly ESI return filing
• UAN generation and Aadhaar seeding
• Handling EPFO/ESIC inspections and notices
• Payroll structuring advice to optimise compliance

Contact us to set up a compliant payroll process for your business.