Are Software Companies Required to Pay PF and ESI? Clarifying the Terms and Conditions

Hi all,

I have a doubt whether software companies are bound to pay PF and ESI or not. If so, then what are the terms and conditions? Though it is written in the conditions that every company having more than 20 employees using power for its processes comes under ESI, I am not clear what "using power" means.

Hope someone will help me.

Thank you,
AJIT

Any company with more than 20 employees has to register itself with the PF (as per the Government of India rule). After that, if an employee's basic salary is more than 6500, they can choose whether or not to become a member of EPF. It's up to them.

Dear Ajit,

Software companies are covered under the Shops and Establishment Act. Therefore, both the ESI and PF Acts will apply to them if the number of employees is more than 20 in both cases.

You seem to be confused in the case of a factory where if the number of employees is 10 and power is being used, then the ESI Act becomes applicable to all 10 employees. However, in your case, its applicability is on 20 employees only.

In ESI, if the gross salary of an employee is less than 10k, then it will be applicable to them. In the case of PF, if the basic salary + DA is less than 6500 at the time of joining, then the PF Act will be applicable to them.

Regards,
J. S. Malik