PF and ESI registration: when they apply and what they cost an employer

Once covered, an establishment stays covered even if headcount later falls below the threshold. Contract staff engaged through a contractor count, and the principal employer is liable if the contractor defaults. An establishment below the threshold can register voluntarily with the consent of the majority of employees.

A company incorporated through SPICe+ is allotted EPFO and ESIC registration numbers with its incorporation, through the AGILE-PRO-S form; the numbers stay dormant until the thresholds are crossed. Other establishments register online on the Shram Suvidha or the EPFO and ESIC employer portals within one month of becoming covered, with the PAN, the incorporation or constitution document, address proof, a cancelled cheque, the digital signature of the authorised signatory, and the list of employees with their dates of joining, Aadhaar, and wages. There is no government fee.

Each employee then needs a Universal Account Number linked to Aadhaar for provident fund, and an insured person number with the family details for ESI.

1. Run payroll and compute contributions on the wages of the month.
2. By the 15th of the following month, upload the Electronic Challan-cum-Return on the EPFO portal and pay; file the ESI monthly contribution and pay on the ESIC portal by the same date.
3. Add new joiners within the month; mark exits with the date and reason so that the employee can transfer or withdraw.
4. Keep the inspection registers; both organisations inspect, and both compare with the salary expense in your accounts and TDS returns.

Provident fund: interest at 12 percent a year on delayed contributions under section 7Q, and damages under section 14B, rationalised in June 2024 to 1 percent of the arrears per month. The employee’s share deducted and not deposited is treated as the employer’s income and is disallowed under the Income-tax Act if paid after the due date, a point the Supreme Court settled against employers in 2022.

ESI: interest at 12 percent a year, damages of 5 to 25 percent depending on the length of delay, and prosecution for deducting and not paying.

The Code on Social Security, 2020, which absorbs the provident fund and ESI Acts, came into force on 21 November 2025, with central rules following in 2026. The thresholds, ceilings and rates above continue. The change employers feel is the uniform definition of wages: basic pay, dearness allowance and retaining allowance, with the excluded allowances capped at 50 percent of total remuneration. Where allowances exceed half of the pay, the excess is added back to wages.

Salary structures built on a low basic and high allowances therefore produce a higher contribution base, and can pull an employee below the ESI ceiling into coverage or increase the provident fund cost. Review structures now rather than after the first inspection under the Code, and watch for the scheme notifications on gig and platform workers, who are brought into social security for the first time.

Our licences desk handles registration under both, and the annual compliance plans for companies track the monthly cycle alongside the ROC calendar.