PF and ESI Compliance

Ensuring statutory compliance involves organizations that must follow established laws and regulations. Indian companies and organizations are required to meet various statutory compliances, such as PF, Factories Act, ESI Act, Minimum Wages Act, Bonus Act, Professional Tax Act, and Shop and Establishment Act.

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    Employees’ Provident Fund

    The Employees’ Provident Fund is a program designed for Indian employees, governed by the Provident Funds and Miscellaneous Provisions Act, 1952. It falls under the jurisdiction of the Employees’ Provident Fund Organization, widely recognized as EPFO.

    Any establishment with 20 or more employees is eligible to seek PF registration in India. However, in specific scenarios and exempted cases, establishments with fewer than 20 employees may still qualify for PF registration. Upon retirement or resignation, the employee receives a sum comprising both their own and the employer’s contributions along with accrued interest.

    Who qualifies for EPF registration?

    For Employers:

    PF Registration is obligatory for all establishments that:

    • 1. Employ 20 or more individuals.
    • 2. In the case of establishments with less than 20 people, the central government must specify the same in a notification.

    For Employees:

    Employees earning less than Rs. 15,000 per month are mandated to become EPF members. As per guidelines, those with a basic pay exceeding Rs. 15,000 monthly at the time of joining are not obligated to contribute to PF.

    However, an employee with a monthly pay surpassing Rs. 15,000 can still opt to be a member and contribute, in collaboration with the employer and the Assistant PF Commissioner.

    Contribution Amount for PF:

    Employers must secure PF registration within a month of reaching the stipulated employee strength; failing to do so may result in applicable penalties. A registered establishment remains under the Act’s purview even if the number of employees falls below the required limit.

    Employers contribute 12% of (Basic Salary + Dearness Allowance + Retaining Allowance), with an equal contribution from the employee. If the establishment employs fewer than 20 individuals, EPFO rules limit the contribution rate for both employees and employers to 10%. In the private sector, the entire contribution is typically calculated based on the basic salary of the employees.

    Documentation Needed for EPF Registration

    The registration form must be accompanied by the following documents:

    PAN of the Partner, Proprietor, or Director
    Address proof (any utility bill, not exceeding 2 months old)
    Aadhar card of Proprietor, Partner, or Director
    Cancelled Cheque or Bank Statement
    Digital Signature of the Proprietor/Partner or Director
    If applicable, the Hired/Rented or Leased Agreement.

    Employee State Insurance (ESI)

    The Employee State Insurance (ESI) is overseen and governed by the Employee State Insurance Corporation, an autonomous entity under the Ministry of Labour and Employment, Government of India. The ESI scheme was initiated for Indian employees, offering financial, medical, and various benefits from the employer to the employee.

    As of now, any factory, employment, or establishment engaging more than 10 employees with a minimum salary of Rs. 21,000 is obligated to undergo mandatory registration with the ESIC.

    Eligibility

    To meet the criteria for ESI registration, one must have a workforce exceeding 10 individuals. In certain regions, establishments are eligible for ESI registration only if they employ more than 20 personnel. Various conditions must be met to secure ESI registration.

    An employee earning a gross salary of up to Rs. 21,000 per month can obtain ESI registration with the assistance of the employer. The establishment must be registered with the EPFO. The total ESI contribution is 6.5% of the gross salary, divided as follows:

    • 4.75% by the employer
    • 1.75% by the employee

    For industrial units where there is a risk of injury or health issues, all employees earning less than Rs. 21,000 must mandatorily obtain ESI registration.

    Documents needed for ESI registration

    To obtain ESI registration in India, the employer must submit the following documents along with the application:

    Registration Certificate of the Shops and Establishment Acts.
    Factories Act Address proof of the principal place of business
    Copy of PAN Card
    Latest bank statement
    Memorandum and Articles of Association or the partnership deed or trust deed, depending on the nature of the entity.
    Certificate of Commencement registration number
    The monthly pay sheet is also required to calculate the contribution amount for each employee in ESI filings.

    Benefits of ESI Registration in India

    ESI registration provides employees with a range of benefits under the Employees State Insurance Corporation scheme.

    Medical Aid:

    Registered ESI members and their family members enjoy comprehensive medical care and insurance benefits from the first day of employment. Retired members,permanently disabled insured persons, and their spouses can also access medical care by paying an annual premium of Rs. 120.

    Maternity Benefit:

    Pregnant women can receive maternity benefits for up to twenty-six weeks. This maternity leave period can be extended by 30 days at the full wage rate, subject to contributing for 70 days in the preceding year, based on medical advice.

    Disablement Benefit:

    Employees receive 90% of their wage from the first day of temporary disability, regardless of whether they have made any contributions. Permanent disablement benefit is paid at 90% of the wage as a monthly payment.

    Sickness Benefits:

    Employees can be absent from work due to illness for a maximum of 91 days per year, receiving 70% of the monthly wages.

    Dependent Benefits:

    In the event of the sudden demise of an employee during employment, the dependents of the deceased employee will receive 90% of his or her monthly salary.

    Funeral Expenses:

    Family members of deceased employees are entitled to an additional amount of Rs. 10,000 for funeral expenses.

    Confinement Expenses:

    Confinement expenses can be availed in cases where an insured woman or the wife of the employee undergoes confinement without access to medical facilities under the ESI scheme.

    Sadique and Ameen Associates provide comprehensive services to ensure statutory compliance for Indian businesses, covering essential regulations like PF and ESI Act.By availing these services, organizations can navigate complex compliance requirements seamlessly, allowing their HR teams to focus on core responsibilities without the burdensome complexities of statutory obligations.

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