EPF and ESIC compliance requires employers to identify covered employees, calculate contributions correctly, meet payment deadlines and maintain accurate statutory records. Errors in wage calculations, employee eligibility or filing can lead to financial liabilities and employee grievances.
The Code on Social Security, 2020, came into effect on 21 November 2025. Employers must follow the applicable statutory provisions, schemes and notifications when determining their obligations. The reported increase in the EPF wage ceiling to ₹25,000 from 17 September 2026 should be verified against the operative notification before payroll changes are implemented.
EPF: The Basics
The Employees' Provident Fund (EPF), administered by the Employees' Provident Fund Organisation (EPFO), provides retirement savings. The associated Employees' Pension Scheme (EPS) and Employees' Deposit Linked Insurance Scheme (EDLI) provide pension and insurance benefits, subject to eligibility.
Who is covered?
EPF generally applies to establishments employing 20 or more employees, subject to the applicable statutory coverage provisions. Smaller establishments may obtain voluntary coverage where prescribed conditions are satisfied.
The established EPF wage ceiling was ₹15,000 per month. The reported revision to ₹25,000 from 17 September 2026 must be confirmed through the applicable notification before being treated as legally operative. Employee eligibility also depends on membership status and the applicable scheme provisions; the ceiling alone does not determine every enrolment decision.
How much is contributed?
The standard contribution is 12% of applicable wages from the employee and 12% from the employer, subject to prescribed exceptions. Where the employee is eligible for EPS, 8.33% of applicable pensionable wages, subject to the prescribed ceiling, is allocated from the employer's contribution towards EPS. The remaining employer contribution is credited to EPF. Applicable EDLI contributions and administrative charges are additional employer obligations.
When is it due?
EPF contributions and the Electronic Challan-cum-Return (ECR) are generally due by the 15th of the following month. Employers should follow current EPFO instructions for contribution calculations and filing.
ESIC: The Basics
The Employees' State Insurance (ESI) scheme provides medical care and prescribed cash benefits, including sickness, maternity and disablement benefits, to eligible insured employees.
Who is covered?
ESIC generally covers eligible employees in covered factories and establishments employing 10 or more employees, subject to applicable statutory provisions and notified coverage requirements.
The general wage ceiling is ₹21,000 per month, increasing to ₹25,000 for employees with disabilities. Employees whose wages exceed the applicable ceiling during a contribution period generally remain covered until that period ends, subject to the applicable provisions.
How much is contributed?
- Employee: 0.75% of applicable wages.
- Employer: 3.25% of applicable wages.
Employees whose average daily wages do not exceed ₹176 are exempt from their own contribution, but the employer's contribution remains payable.
When is it due?
ESIC contributions are generally payable by the 15th of the following month. The contribution periods run from April to September and October to March, but these periods do not replace the monthly payment obligation.
Key Compliance Challenges
1. Determining the correct wage base
The Code on Social Security, 2020, contains a statutory definition of wages that employers must consider when calculating applicable contributions. Certain components may be excluded, but amounts excluded beyond the prescribed 50% threshold of total remuneration must be added back in accordance with the statutory mechanism.
This is not a blanket exemption for allowances. Employers should review salary components against the applicable definition of wages and scheme-specific contribution rules rather than assume that existing exclusions remain valid.
2. Monitoring employee eligibility
Employers should review coverage whenever headcount, salaries or statutory wage ceilings change. Any increase in the EPF ceiling must be implemented in accordance with the operative notification, including its commencement and transitional requirements.
For ESIC, an employee whose wages exceed the applicable ceiling during a contribution period generally remains covered until that period ends. Payroll teams should account for this continuation rule when processing salary revisions.
3. Meeting payment deadlines
Delayed contributions may attract statutory interest, damages and recovery action, as applicable. Employers should establish internal payroll cut-offs before the 15th and reconcile deductions, employer contributions, challans and filed returns every month.
Correcting an error promptly is important, but it does not automatically eliminate statutory liabilities.
4. Maintaining accurate employee records
Incorrect UANs, mismatched names, incomplete bank details, insurance-number errors and missing joining or exit dates can delay account updates, transfers, claims and benefit processing. Employers should validate records during onboarding and correct discrepancies through the prescribed procedures.
5. Managing joiners and exits
Employers must assess coverage when employees join, complete the required enrolment formalities and update exit details when employment ends. Accurate records support contribution continuity, employee claims and statutory reporting.
EPF vs ESIC at a Glance
| Particulars | EPF | ESIC |
|---|---|---|
| Purpose | Retirement savings and pension, subject to eligibility | Medical care and cash benefits |
| General establishment threshold | 20 or more employees, subject to coverage provisions | Generally 10 or more employees in covered establishments |
| Wage ceiling | ₹15,000 under the established framework; verify the reported ₹25,000 revision | ₹21,000; ₹25,000 for employees with disabilities |
| Employee contribution | Generally 12% | 0.75% |
| Employer contribution | Generally 12%, plus applicable charges | 3.25% |
| Monthly deadline | Generally the 15th of the following month | Generally the 15th of the following month |
Note: Establishment coverage, membership eligibility, contribution calculations and exceptions must be assessed under the applicable statutory provisions.
What Employers Should Do
- Verify coverage: Review establishment registration and employee eligibility whenever headcount or statutory thresholds change.
- Reconcile payroll: Match deductions, employer contributions and challans before filing and payment.
- Monitor wage ceilings: Assess employees affected by changes in statutory thresholds.
- Validate employee data: Check UANs, insurance numbers, bank details and joining and exit dates.
- Maintain records: Retain payroll registers, calculations, challans and payment confirmations.
- Review salary structures: Ensure wage components comply with the applicable statutory definition.
- Track legal updates: Monitor official notifications, amendments and filing requirements.
In Short
EPF and ESIC compliance depends on correct employee coverage, accurate wage calculations, timely payments and reliable records. Employers should review payroll practices regularly and verify legal changes before implementing them.
Talent Compliance India can assist employers with reviewing statutory coverage, contribution calculations, payroll compliance and filing practices.
Disclaimer: This article is for general informational purposes and does not constitute legal advice. Verify current legislation, notifications, schemes and procedural requirements before acting.