Understanding PF & ESI Rules: Employee Count, Salary Impact, and Contractual Obligations

Hi Guys,

Sorry if these questions were asked beforehand, but I searched the forums and could not find any similar posts. My questions are:

1. How many employees must be present in a partnership/private/ownership firm to make it mandatory to deduct and deposit PF & ESI?

2. Does the amount of salary make any difference to the count of the employees? For example, if someone is getting a salary of 3000, is he not counted in the number of employees? If yes, what is the maximum amount of salary which is exempted from the mandatory deduction of PF & ESI? Or are the total number of employees counted regardless of the salaries?

3. What are contractual employees in the sense of PF & ESI? Does the term "contractual" mean we are hiring employees from a third party? In such a case, is it mandatory to pay service tax to such a contractual firm?

Thanks for any help coming this way. :)

Regards, Yogesh.

Hi friend,

There is no specific minimum number of employees required to be employed in a partnership or other companies. However, for any organization to be recognized, there must be at least 20 employees to apply for ESI and PF matters. As the principal employer, you are responsible for paying the service charges and service tax as per the rules.

Regards,
Ram

Any organization having more than 10 employees whose salary is below 15,000, then it's mandatory for the company to register for the ESI Act/Scheme. Any organization having a minimum of 10 employees, then it's mandatory for PF Registration. For PF Registration, employees' Basic + DA should be less than or equal to 6,500. If it's above 6,500, it depends on the company for PF registration for employees.

Regards,
Vidya

For coverage of establishments as specified under the ESI Act, 1948, there is a requirement of 10 or more persons and not "more than 10 employees" as mentioned by one of the members above. Similarly, persons receiving wages up to and including Rs. 15,000 per month are covered under the said Act.