Small IT Firm Growing to 20 Employees: How Do I Navigate PF and ESIC Rules?

I am working in a small IT firm, and we are now crossing 20 employees. I want to have a clear understanding of PF and ESIC rules. What I know is that for PF and ESIC, a minimum of 20 employees is compulsory. I am planning to introduce PF and ESIC here. Please help.

Dear Shubhatiwari,

Your company is eligible for PF and ESI registrations. Below are the details required for various registrations:

PF Registration

1. Coverage Performa
2. Form No. 5A
3. Rental Agreement copy
4. Service Tax Copy
5. PAN Card copy
6. List of employees
7. Attendance and salary statement copy
8. Cancelled Cheque
9. Shops and Establishment copy

ESI Registration

1. Form No. 01
2. Cancelled Cheque copy
3. Rental Agreement copy
4. Service Tax
5. PAN Card copy
6. List of employees
7. Attendance and salary statement copy
8. Shops and Establishment copy

Regards,
Sampath
Nisarga HR Solutions
[Phone Number Removed For Privacy Reasons]

Thank you so much for your response, Sampath! I just wanted to confirm a few things about PF and ESIC. If all employees are drawing a basic salary above ₹6,500, do we need to deduct ₹780 for everyone? Or is ESIC applicable only if the minimum gross salary is less than ₹15,000, meaning those earning more than ₹15,000 are not entitled to ESIC? Please revert.

Employees drawing a salary above Rs. 15,000/- are not entitled to ESIC. Regarding PF, it is not mandatory to enroll employees whose basic and DA exceed Rs. 6,500. It is the option of employees to become a member of PF.

Regards,
Kumar

Thank you, Kumar. I am confused because, in my company, the total number of employees is 20 or more, and all are drawing a basic salary of more than 6500. So, if I do not register for PF, will it be okay?

You need to register with EPFO. If the basic salary of all employees is more than ₹6,500/-, then there will be no contribution, but administration charges will be payable every month. When employees have a basic salary more than ₹6,500/-, it becomes optional for the management to contribute or not to contribute. It is voluntarily decided by management and staff.

ESIC will be applicable only to those who are drawing a gross salary less than ₹15,000/-.

Hi, thank you so much! Please help me with the calculation of administrative charges. I tried to search, is it a minimum of Rs 780 or 1.1% of basic + DA? These administration charges will be payable by the employer, not the employee. Am I right? Please guide.

Coverage Under the ESI Act

Before going for coverage of your factory/establishment under the ESI Act, please confirm from the appropriate office of ESIC whether the area where your establishment is located is an implemented area. If so, your factory/establishment will be coverable if employing 10 or more persons for wages and where a manufacturing process is carried on.

Under the ESI Act, employees receiving wages of exactly Rs. 15,000/- will also be coverable. Employees are not coverable only if their wages (excluding the amount of OT) exceed Rs. 15,000/- per month. I hope these remarks will be of some help to you.

Regards,
Harsh Kumar Mehta.

Sir,

EPF Act Applicability

The EPF Act applies to all establishments employing 20 or more persons. Please note that this count includes security staff, temporary staff, assistants, etc. If all employees are earning more than Rs. 6500, there is currently no need for coverage. However, you will have to start contributing when any employee is hired at a salary below Rs. 6500.

Administrative Charges

Regarding the payment of minimum administrative charges, I believe that if there are no employees for whom you are contributing, there is no need to pay administrative charges. You can inform the relevant PF office of the actual situation and also mention that you will apply for a code number once you hire any employees who are statutorily eligible to contribute to PF.

Regards,
Pradheep

Whether the basic salary is ₹6,500 or not, if the employee count exceeds 20 plus 1 (MD/proprietor), we have to deduct PF and ESI. Now, the ESI limit will be increased to ₹25,000. The Government Order (GO) is expected at any time, and it is under discussion. For PF and ESI, it is statutory for the organization, and we can protect the employees' families in case of a death claim.

Can anyone inform us about the effective date for the applicability of the ESIC limit of Rs. 25,000?