Published by: OurTaxPartner.com | Get Expert ESI & EPF Registration and Compliance Support
Introduction
As a business owner or HR professional in India, understanding your statutory responsibilities is essential. Two of the most important social security legislations—Employees’ State Insurance (ESI) and Employees’ Provident Fund (EPF)—are mandatory for eligible establishments. Non-compliance not only affects employees’ welfare but also exposes businesses to heavy penalties and legal scrutiny.
In this comprehensive blog, we will walk you through a step-by-step checklist to help you determine whether your business is liable to register for ESI and EPF. If you’re unsure or need help with the process, OurTaxPartner.com provides end-to-end services for EPF/ESI compliance across India.
Step 1: Determine the Type of Establishment
- Is your business a factory, private limited company, LLP, partnership, proprietorship, or NGO/trust?
- Are you engaged in manufacturing, service, trading, education, or healthcare?
- All commercial and charitable organizations employing workers are covered under EPF/ESI if eligibility thresholds are met.
Step 2: Count the Number of Employees
Employee count is the primary trigger for ESI and EPF registration.
| Scheme | Minimum Employees Required | Applicable To |
|---|---|---|
| EPF | 20 or more | All establishments including IT firms, factories, schools, NGOs, service providers |
| ESI | 10 or more (20 in Maharashtra & Chandigarh) | All establishments in ESI-notified areas |
Include: Full-time, part-time, temporary, contractual, admin, clerical, and technical staff while calculating employee strength.
Step 3: Evaluate Employee Salary Structure
- For EPF: Mandatory for employees earning a basic salary + dearness allowance of ₹15,000/month or less.
- For ESI: Mandatory for employees earning gross salary of ₹21,000/month or less (₹25,000 for the disabled).
- Employees earning above the limit may opt in voluntarily (EPF), but ESI is strictly based on wage ceiling.
Step 4: Check If Your Location Is in an ESI Notified Area
- ESI is applicable only in areas notified by the Employees’ State Insurance Corporation (ESIC).
- Use the ESIC coverage checker tool or consult a professional to verify if your PIN code is covered.
- Most urban, semi-urban, and industrial zones across India are ESI notified.
Step 5: Review Business Status – Voluntary vs. Mandatory Registration
If you don’t meet the mandatory threshold, you can still opt for voluntary registration:
- EPF Voluntary Registration: Allowed under Section 1(4) of the EPF Act with consent of majority employees.
- ESI Voluntary Registration: Not typically permitted unless the conditions under ESI Act are satisfied.
- Once registered voluntarily, your business must comply fully like a mandatory entity.
Step 6: Identify Employee Categories Covered
EPF and ESI apply to:
- ✔ Full-time and part-time staff
- ✔ Probationers and trainees (if paid wages)
- ✔ Temporary/contractual employees (if under direct supervision)
- ✔ Housekeeping, security, drivers, helpers, and admin workers
- ✘ Not applicable to unpaid interns, consultants, or partners not on payroll
Step 7: Consider Contractual & Third-Party Labor
- If your business uses contract staff and the contractor doesn’t have ESI/EPF registration, you are liable as the principal employer.
- Ensure contractors submit compliance reports (EPF challan, ESIC return).
- Maintain audit-proof documentation of outsourced manpower.
Step 8: Understand the Compliance Requirements
- ✅ EPF: UAN generation, monthly ECR filing, employer/employee contribution, annual returns
- ✅ ESI: IP registration, contribution returns, employee e-pehchan card, benefit records
- ✅ Maintain salary registers, Form 11 (EPF), and ESIC registers
- ✅ Payment due dates: EPF & ESI by 15th of every month
Penalties for Non-Compliance
- EPF: Interest (12% p.a.) under Section 7Q + Penalty (up to 25%) under Section 14B
- ESI: Penalty up to ₹5,000 per default and criminal liability for repeated violations
- Employees may file online grievances and trigger government inspections
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- ✔ Quick assessment of your EPF/ESI liability
- ✔ End-to-end registration on EPFO and ESIC portals
- ✔ UAN and IP number generation for employees
- ✔ Monthly return filing, payroll support, and challan payments
- ✔ Handling inspections, audits, and legal representations
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Frequently Asked Questions (FAQs)
Is EPF/ESI applicable to new businesses?
Yes, as soon as employee thresholds are crossed. Even new or small firms must register when they meet eligibility conditions.
Do I need EPF/ESI if all employees earn above ₹21,000?
ESI is not required in such cases, but EPF still applies based on employee count and basic salary of ₹15,000 or less.
Are we liable if we use contract staff?
Yes, if the contractor is not compliant. Principal employers are responsible for ensuring ESI and EPF compliance of contract labor.
Can I avoid EPF/ESI if I’m a startup?
No. There is no exemption for startups under ESI/EPF Acts if thresholds are met.
Conclusion
Determining whether your business is liable for ESI and EPF compliance is not just a formality—it’s a legal requirement. Every employer must monitor employee count, salary slabs, and contract labor arrangements to stay on the right side of the law. Ignorance or delay can result in penalties, backdated dues, and damaged credibility.
Not sure where to start? Let OurTaxPartner.com guide you through the entire process—from liability check to compliance management.
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