Starting a New Factory: Do We Need to Deduct ESI and PF for Our Employees?

Hi Seniors,

I have a small doubt. We are starting a new food factory, and more than 23 employees are working. Among the 23 employees, 15 employees earn more than 15,000 in salary. In this situation, should we compulsorily contribute to ESI and PF? Please advise. We have decided to deduct only ESI; is this correct or not? Please advise.

Sir, you are required to obtain a Code Number under the ESI Act, 1948, and also register under the EPF & MP Act, 1952.

Yes, you have to get registered under the Employees' State Insurance Act, 1948, and the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ("EPF Act"). You have 23 employees. Those who are earning more than Rs. 15,000 as gross salary per month should be covered under any other compensation policy (The Workmen's Compensation Act 1923, now changed to the Employee Compensation Act 2010, and The Fatal Accidents Act, 1855) apart from ESIC. Please take the signatures of your employees on Form-2 and Form-11 under the EPF Act.

Regards, Mohan Kumar

PF Registration Requirements

1. You need registration under PF.

2. For all employees with a basic salary plus DA less than ₹15,000 (not gross salary), you need to deduct and pay to the PF department along with your contribution. There is no option of not paying.

3. For all employees who had a basic salary plus DA over ₹15,000 on the day the coverage became due, or on the date of joining, whichever is earlier, you can exclude them if they fill out Form 11.

ESIC Registration Requirements

4. You need registration under ESIC.

5. You have to cover all employees under ESIC whose gross salary is not more than ₹15,000.

6. For other employees, take workman compensation cover as explained by Mr. Ghosh.

Regards

You have to take registration codes for both ESIC and PF because the total strength is 23. It doesn't matter how much the Basic + DA is, whether it's more than 15000 or less than 15000.

Both PF and ESI are compulsory in your case. Any delay in paying PF or avoiding it would invite penalties. Your company would also be required to pay PF to employees who leave the company.

Can anyone tell me if an employee is involved in an accident outside the company premises, is he liable for ESIC compensation?

EPF and ESI Contribution Clarification

We want to calculate the EPF alone and not include the ESI amount. Those who are earning more than 15,000 will not be considered for ESI. Our company is situated in Chennai.

Regards, Sathyanarayanan T

As already mentioned, our comment has been sent to you. The ESI should be calculated within ₹15,000/- and not more than ₹15,001/-. For EPF, there should be a minimum of ₹15,000/-, and the maximum should be other than that, etc.

Kind regards,
Sathyanarayanan T
Senior Advisor – HR Compliance
NI Consulting Services Private Limited
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