Is PF/ESIC Payment Mandatory for Employers with Mixed Contract and Permanent Staff?

Dear Seniors,

Is paying of PF/ESIC compulsory for the employer (proprietor) if the establishment has about 14 employees on rolls and about 17 employees on fixed-term contract basis? Please guide.

Regards, Sura

Well, it's a good question.

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Under the PF Act, a proprietor is not different from an employer. Please inform me of the total contractual period of these 17 employees first. Also, please let me know the minimum basic salary of the 14 employees.

Hi Sura,

For any organization with 20 or more employees, PF & ESI will be applicable. Wages up to 6500 @ 12% of Basic+DA PF is mandatory. If the employee is drawing a gross salary <=10,000, he/she will be eligible for ESI.

Regards,
Charvaka Reddy

For the 17 employees, it's a Fixed Term Contract for 1 year (mentioned in the appointment letter itself), and the salary range is from 4500 to 9000. Regarding the rest 14, I guess since their range is above 10k basic, it should not matter.

Thank you, sir, for the inputs.

As I understand, PF is mandatory if the employee numbers are 20 or more, irrespective of whether they are on Contract, FTC (Fixed Term Contract), or regular employees. Therefore, depending on the salaries, PF & ESIC come into force.

Dear,

There is a clause in the PF Act that states (under sec 56b) that the act is not applicable to any other establishment newly set up until the expiry of a period of three years from the date on which such establishment is, or has been, set up.

Hello, Mr. Medavarapu,

Thank you for the information. I would be obliged if you could also confirm the same regarding ESIC applicability. Our company is a startup and in its second year of operations.

Thanks,
Suresha Salian

Hello Mr. Medavarapu,

Is this true? Our company has been in operation for 2 years. Should we wait for the completion of 3 years before proceeding with PF and ESIC?

According to the rule, if the basic salary is more than 6500, then PF is not compulsory. The ceiling for gross salary for ESI is 10,000.

Thank you.