Understanding PF and ESI Benefits for Start-Ups: What Are the Enrollment Criteria?

Our company is a start-up. We want to provide our employees with PF and ESI benefits. Could you please provide me with the details regarding this? Are there any criteria for a company to enroll in PF?

Thanks & Regards

I read somewhere that the company should be at least 3 years old before it is eligible to apply for PF. Is it true?

Dear Team,

I am now associated with a business group. They have three manufacturing companies (one started in the year 2002 and the other two in 2008) - all three are partnership companies (family partners), one trading company (proprietary firm), and one logistics company (partnership firm). However, all these companies are not covered under labor statutes - viz. PF, ESI, Gratuity, etc. Now we want to get all companies covered under these statutes and submit a suitable proposal to the ownership management. But the questions before us are:

1. Coverage of all statutes, by all means, shall be from a prospective effect. If so, what about the case of old employees who joined in the starting stage of the companies, up to the date of coverage?

2. Whether to apply the main code for the Group and apply sub-codes to individual companies? OR should we apply individual codes to individual companies?

As per the accounting standards, all group companies are different profit/cost centers and have individual balance sheets and P&L accounts.

3. What are the other points we have to take care of regarding this?

Experienced members working in this area are invited to post their expert views on this matter.

Thanks.
Regards,
R K Nair

I refer to my earlier posting regarding the coverage of labor statutes, such as PF/ESI, etc. Cite HR team members are requested to express their views.

Thanks,
R K Nair

Understanding PF and ESIC Requirements

PF is a mandatory saving for all employees who have a basic salary of less than ₹6,500 per month. Additionally, PF is required for any organization that has more than 25 employees on the roll. The same applies to ESIC. In any organization with more than 25 employees, an employee with a gross salary of ₹15,000 per month or less is eligible for ESIC. Both contributions are deducted from the employee's salary: PF at 12% of the basic salary and ESIC at 1.96% of the gross salary (though I'm not 100% sure about the exact percentage).

Hope this helps. I would recommend asking the MD/owner to get complete details from their Chartered Accountant to ensure compliance. All the best!

Regards

For the coverage of any factory or establishment under the EPF & Misc. Provisions Act or ESI Act, 1948, there is no waiting period or qualifying period. The unit is covered right from the very day on which the minimum number of persons, as required under the Acts, are employed.

Clarification on ESIC Contribution

One member in the above remarks has noted, "ESIC: 1.96% of gross (not 100% sure)." This information is not correct. In my opinion, we should consult the relevant Labour Law Acts and rules/regulations framed thereunder before expressing any opinion. The relevant Acts or rules/regulations are readily available on the websites of the said departments.

If we express our opinion based on the provisions of the relevant Acts and rules/regulations, the readers can benefit properly. Otherwise, wrong information may lead to confusion only and sometimes may result in actions or omissions that are not required by the relevant law.

Thank you.

PF Contribution

12% Employer (3.67% = PF and 8.33% = Pension) + 12% Employee's Contribution + 1.1% PF admin charge + 0.5% EDLI + 0.01% EDLI admin charge = 25.61%

ESI Contribution

1.75% Employee's Share + 4.75% Employer's Share = 6.5%

Thank you.