Is EPF Mandatory for All Employees? Understanding the ₹15,000 Salary Threshold

Who Must Be Enrolled Under EPF?

• All employees working in establishments with 20 or more employees must be considered for EPF coverage.
• For employees earning a monthly salary (Basic + DA) of ₹15,000 or less, EPF registration is mandatory.
• For employees earning more than ₹15,000/month, EPF is optional—but employers are still encouraged to cover them.

The ₹15,000 Salary Threshold – What It Means

The EPF Act draws a line at a basic wage of ₹15,000/month to distinguish mandatory coverage:

• Employees earning ≤ ₹15,000/month: Must compulsorily be registered under EPF. There is no opt-out.
• Employees earning > ₹15,000/month: May opt out of EPF only if they were not members of EPF in the past and submit a formal declaration (Form 11) at the time of joining.

In other words, once an employee becomes an EPF member—even with a salary above ₹15,000—they cannot opt out later.

Can High-Earning Employees Opt Out?

Yes—but only under specific conditions:

• They must be joining EPF for the first time (i.e., no previous UAN or PF account).
• They must submit Form 11, declaring they do not wish to be part of the EPF scheme.
• This declaration must be accepted and validated by the employer.
• Once opted in and UAN is generated, the employee is considered a “member for life” under the EPF system.

What is Form 11?

Form 11 is a self-declaration form used by new employees to declare whether they were part of EPF in any previous employment. It also serves as the formal basis to opt out of EPF in the case of employees earning above ₹15,000/month.

• Must be submitted at the time of joining
• Signed by both employee and employer
• Stored as part of compliance records and shared with EPFO if requested

Employer Obligations Regardless of Salary

• EPF registration is mandatory for establishments with 20+ employees.
• Employers must deduct contributions from all eligible employees’ salaries and deposit them along with their own share.
• Even for employees earning above ₹15,000/month, if they choose to participate, the employer must comply.
• Maintain Form 11 and keep UAN records properly updated.
• Timely ECR filing and challan payments are mandatory every month.

Can an Employer Deny EPF to Employees Earning Over ₹15,000?

No, employers cannot deny EPF coverage to higher-earning employees if:

• The employee requests to opt in voluntarily
• The employee has an existing UAN (i.e., a previous EPF membership)

In such cases, the employer must continue or initiate contributions accordingly.

What Happens If a Company Doesn’t Comply?

• Penalties up to 25% of unpaid contributions under Section 14B
• Interest at 12% per annum for delayed payment under Section 7Q
• Legal notices and inspections by the EPFO
• Disqualification from government tenders and legal liability for directors

Contribution Limits for Employees Above ₹15,000

Even though ₹15,000 is the wage threshold, if an employee earning more than that opts in:

• The standard contribution of 12% is still applied to the entire salary or capped at ₹15,000 based on employer policy.
• Employers may choose to contribute only on ₹15,000 (statutory cap) or on full salary (higher contribution).
• The decision must be uniform across employees to avoid discrimination.

When is EPF Voluntary?

EPF is voluntary only when:

• The employee earns more than ₹15,000/month
• The employee is not an existing EPF member
• The employee submits Form 11 at the time of joining

How OurTaxPartner.com Can Help

• ✔ Employee classification for EPF applicability
• ✔ UAN generation and Form 11 documentation
• ✔ Monthly EPF return filing (ECR)
• ✔ EPF registration for new businesses
• ✔ Advisory on voluntary vs. statutory contributions
• ✔ Handling EPFO inspections and penalty notices

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Frequently Asked Questions (FAQs)

Is EPF compulsory for employees earning more than ₹15,000?

Only if they were EPF members previously or if they choose to opt in voluntarily. Otherwise, it is not mandatory.

Can a new employee earning ₹20,000 opt out of EPF?

Yes, but only if they’ve never been part of EPF and submit Form 11 upon joining.

What if an employee’s salary crosses ₹15,000 after joining?

Once registered under EPF, employees remain members irrespective of future salary increases.

Can the employer decide not to contribute for high earners?

No. If such employees have a UAN or choose to participate, the employer must contribute.

Conclusion

EPF is a valuable benefit that promotes long-term financial stability. While not mandatory for every employee above the ₹15,000 threshold, businesses must understand the rules and maintain proper documentation for every employee decision. Missteps can lead to penalties and compliance risks.

Want to ensure your EPF handling is compliant and accurate? Let OurTaxPartner.com assist you with employee assessments, registrations, and monthly filings.

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