Can We Skip EPF for a New Factory with Just 5 Employees, or Is It Mandatory?

Hi Sir, I want to know if we are starting a new factory at a different address where only 5 employees will work. In the new factory, while our main branch, where 23 employees work, follows factory rule measures like EPF & ESIC, I have a doubt. Can a new factory with only 5 employees also apply EPF and deduct, or can we omit that requirement for the new factory? Please advise.

Hi, if the new factory is going to be a separate entity with 5 employees, then PF will not be applicable now. However, if you are planning to operate it as a branch with one PF Establishment code, then PF will be applicable for those 5 employees as well.

Yes, you can indeed omit the need for a license because the worker count has not reached 20 without power, and with power, it is at 10.

Hi Nabeel,

Typically, the applicability of EPF (Employee Provident Fund) and ESIC (Employee State Insurance Corporation) depends on the number of employees and the specific regulations of your country. In India, for instance, EPF and ESIC are mandatory for factories or establishments that employ 20 or more persons.

Since your new factory employs only 5 employees, it may not be mandatory for you to apply EPF and ESIC according to the general rules. However, you might want to consider the following:

Check Local Regulations

Laws regarding EPF and ESIC may vary from state to state or region to region. It's essential to verify the specific regulations in the area where your new factory is located.

Consider Future Growth

While it might not be mandatory now, consider the potential for growth. If you foresee hiring more employees in the near future, it might be prudent to implement EPF and ESIC from the outset to avoid any compliance issues later on.

Employee Benefits and Attraction

Offering EPF and ESIC benefits can be an attractive feature for potential employees, even if it's not mandatory. It shows that you value their long-term financial security and well-being.

Thanks,

If both of these factories are managed by a single management, then you can cover the employees of the new factory under the Registration Certificate of EPF and ESI under the existing company. If the new factory is situated away from the present factory for which RCs are available, you can take subcodes for ESI and EPF. For EPF, you can even register the employees of the new factory without a subcode, but it is advisable to get a subcode for ESI.

If the new factory is separate from the existing establishment by all means, with a separate balance sheet, then it is a separate independent establishment. In such a scenario, taking ESI registration is not possible. For the registration of EPF, there is a scope of getting voluntary registration. But that process involves a lengthy process because voluntary registration is granted by the Central PF Commissioner and not by the regional offices of EPFO. For ESI, there is no voluntary coverage. However, you can get registration by including some casual workers for a single day and exiting them on the other day. This method has worked in many establishments that have sought guidance from me, and you can also follow this approach.