PF/ESI Registration

What is Provident fund (PF)

It is a retirement saving scheme where employees save a part of their salary for their retirement. The scheme is designed to encourage long-term savings and provide financial security to employees during their post-retirement years.

In a provident fund scheme, a portion of the employee’s salary is deducted every month and contributed to the fund, along with a matching contribution from the employer.

The funds are then invested in various financial instruments such as stocks, bonds, and other securities to generate returns.

The accumulated funds, including the returns on investment, are paid out to the employee upon retirement or termination of employment.

Applicability of Provident Fund

When we talk about PF applicability in India, the government has laid down a clear framework to make things easier.

There are certain points that business owners need to keep in mind to find out if they are required to avail of EPF. They are as follows:

Employee strength: The EPF scheme applies to establishments that employ 20 or more employees. However, establishments with less than 20 employees can also voluntarily register for the scheme.
Salary threshold: EPF contributions are mandatory for employees whose basic salary is up to Rs. 15,000 per month. Employees with a salary above Rs. 15,000 can choose to contribute voluntarily. It’s worth noting that the 15,000 limit is subject to change by the government.
Exemptions: Certain establishments or employees are exempt from the EPF scheme. For example, employees who are already covered under other retirement benefit schemes, such as the National Pension Scheme (NPS), are exempted from the EPF scheme. Similarly, establishments engaged in certain industries or activities, such as cinema exhibitions, newspaper establishments, and educational institutions, may be exempted from the scheme subject to certain conditions.
Contribution rates: Both employers and employees are required to contribute 12% of the employee’s basic salary towards the EPF. The contribution rate may be higher for certain establishments, such as those engaged in hazardous activities.
Registration and compliance: Employers are required to register their establishment for PF within 30 days of hiring the first employee. They must also file regular returns and maintain records and registers as required by law.

What is ESI?

ESI stands for Employee’s State Insurance, which is a social security and health insurance scheme for Indian employees.

The scheme is managed by the Employees’ State Insurance Corporation (ESIC) and provides medical care and other benefits to workers who earn less than a specified amount per month and are employed in certain sectors.

Under the ESI scheme, both the employer and the employee contribute a certain percentage of the employee’s salary towards the scheme.

The contributions are then used to fund healthcare services and other benefits for employees, including medical treatment for employees and their family members, maternity benefits, and disability benefits.

The ESI scheme is designed to provide financial protection to employees and their families against unforeseen medical emergencies and to ensure that employees have access to quality healthcare services.

ESI is a crucial social security scheme in India that provides healthcare and other benefits to employees, especially those working in sectors with a higher risk of accidents and illnesses.

Applicability of ESI

There are certain points that business owners need to keep in mind when dealing with ESI. They are as follows:

This Act applies to all non-seasonal factories that employ ten or more people and use electricity. It also applies to non-power-using manufacturing organizations and establishments that pay wages to twenty or more people and are located in an implemented geographic area. Employees of places of business, corporations, or factories that come under the coverage area and make no more than Rs. 15,000 per month are currently covered under this ESIC Scheme.
The ESIC Act’s provisions have been made applicable to the following types of establishments under Section 1(5) of the Act:
stores and other commercial spaces
theatres
Accommodations & Dining
Clubs
Newspaper businesses
businesses engaged in road motor transport
Employee strength: The ESI scheme applies to establishments that employ 10 or more employees. However, establishments with less than 10 employees can also voluntarily register for the scheme.
Salary threshold: ESI contributions are mandatory for employees whose gross salary is up to Rs. 21,000 per month. Employees with a salary above Rs. 21,000 can choose to contribute voluntarily.
Exemptions: Certain establishments or employees are exempt from the ESI scheme. For example, establishments engaged in certain industries or activities, such as educational institutions, may be exempted from the scheme subject to certain conditions. Similarly, employees who are covered under other social security schemes, such as the EPF scheme, are exempt from the ESI scheme.
Contribution rates: Both employers and employees are required to contribute to the ESI scheme. The employer’s contribution rate is 3.25% of the employee’s gross salary, while the employee’s contribution rate is 0.75% of their gross salary.
Registration and compliance: Employers are required to register their establishment for ESI within 15 days of hiring the first employee. They must also file regular returns and maintain records and registers as required by law.