EPF (Provident Fund) becomes mandatory once you employ 20 or more people. Below that it is voluntary. ESI kicks in earlier, at 10 employees. This guide explains both thresholds, how newly incorporated companies get enrolled automatically, and what you actually have to do as you grow your team.
The EPF threshold
The Employees Provident Fund becomes mandatory when your headcount reaches 20 employees. Until then, you can register voluntarily but are not required to. Once mandatory, both employer and employee contribute a percentage of basic wages each month.
The ESI threshold
Employees State Insurance applies earlier, once you have 10 or more employees in a covered area, for employees earning up to the wage ceiling. It provides medical and cash benefits, with contributions shared between employer and employee. Many growing startups hit the ESI threshold before the EPF one.
New companies are enrolled automatically
Since late 2020, newly incorporated companies receive their EPFO and ESIC numbers automatically through the SPICe+ incorporation process, via the linked AGILE-PRO form. So if you registered a company recently, you may already hold these numbers even before you cross the thresholds. LLPs, firms and proprietorships register separately through the Shram Suvidha portal when they become liable.
What you do once liable
Once you cross a threshold, you deduct the employee contribution from salaries, add the employer contribution, and deposit both monthly, along with periodic returns. Missing deposits attracts interest and penalty, so build it into your payroll process from the month you become liable.
Do not forget POSH and professional tax
At 10 or more employees you must also constitute a POSH Internal Committee. And if your state levies professional tax, you register for that when you start paying salaries. Hiring triggers a small cluster of obligations, which the mapper lays out for your exact situation.
Common mistakes to avoid
- Assuming EPF applies from your first employee; it is 20, while ESI is 10.
- Not realising your new company may already have EPFO and ESIC numbers from incorporation.
- Forgetting the POSH Internal Committee duty at 10 employees.
- Missing monthly deposit deadlines once registered.
Get your full compliance checklist
This is one piece of the picture. The free mapper turns your entity, sector and situation into a complete checklist: what is required now, what comes later, and what is worth doing.
See this in the Legal Hub