Once you employ people, payroll stops being arithmetic and becomes compliance. EPF and ESI are the two that arrive first, and they do not arrive at the same time — the thresholds differ.
When each one applies
| EPF | ESI | |
|---|---|---|
| Employee threshold | 20 or more employees | 10 or more persons |
| Wage ceiling | Rs 15,000 per month (basic wages) | Rs 21,000 per month (gross wages) |
| Ceiling for persons with disability | — | Rs 25,000 per month |
| Contribution due | 15th of the following month | 15th of the following month |
ESI generally bites first, at ten persons. A business that has grown past ten and not registered is often unaware that the obligation has already started, because EPF — the scheme people have heard of — has not yet applied.
The rates
| Scheme | Employee | Employer |
|---|---|---|
| EPF | 12% of basic wages | 3.67% to EPF, 8.33% to EPS (capped at Rs 1,250), 0.50% EDLI (capped at Rs 75), 0.50% administration (minimum Rs 75) |
| ESI | 0.75% of gross wages | 3.25% of gross wages |
ESI is computed on gross wages, EPF on basic wages. Running both off the same figure is one of the most common payroll errors we correct.
The ceiling is a floor for your obligation, not a cap on membership
The EPF wage ceiling of Rs 15,000 is the level up to which contribution is compulsory. Employees earning more are not excluded — the employer may contribute on full wages, and many do. Once you establish that practice it is generally not reversible, so decide deliberately rather than by default.
What the monthly cycle actually involves
- Compute contributions from that month’s attendance, joiners and leavers.
- Generate and pay the challan by the 15th.
- File the ECR for EPF and the monthly return for ESI.
- Keep employee records current — a leaver not marked as such creates problems at withdrawal.
If you are already behind
Arrears can usually be regularised, with the contributions due plus interest and damages. The cost grows with time, and unpaid employee contributions are treated more seriously than unpaid employer contributions — that money was deducted from someone’s wages.
Registering voluntarily below the threshold is permitted. Some employers do it early because it helps in recruitment and avoids a disruptive mid-year transition when they cross the line.