Navigating ESI and PF Rules: Do We Still Deduct with Fewer Employees?

We are a two-year-old partnership firm operating a restaurant in Bangalore. We have been deducting ESI from all employees since the start of operations. We understand that the ESI deduction is applicable only if the total employees are more than 10. We have now scaled down our operation to a total staff strength of 6. Do we still need to deduct ESI? Also, what is the process to inform the ESI department about this change?

Similarly, on the PF, we only recently got to know that PF is to be paid only when the employee has a certain salary level. Can you please clarify what is the maximum salary under which PF is paid?

Regards,
Rakesh

Once you enter into ESI or PF schemes, you will have to remain in the scheme as long as you operate this business, regardless of the number of employees on the payroll. Suppose your current strength is only 6, and I assume the existing 6 members are already covered and have been enjoying the benefits. How can you then deny these benefits to them?

Contribute towards the current strength and explain your reduction in manpower to the inspector who is visiting your unit. Concerning PF contributions, the maximum salary (Basic + DA) for contribution is Rs. 6500.

Regards,
S. Sethupathy, Erode.

Thanks for your message, Sethupathy. As I understand, it is imperative that we continue with both the schemes now that we have registered for the same.

Query Regarding PF Calculation

Regarding PF, I still have a query. For those with a Basic + HRA more than 6500, should we calculate the PF only on 6500?

Regards,
Rakesh