Understanding the applicability of EPF and ESI

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EPF (Employees’ Provident Fund) and ESI (Employees’ State Insurance) are two of the most commonly discussed topics when it comes to employee benefits and statutory compliance. But how well do we understand their applicability? This article provides a clear overview, starting with EPF.

Employees’ Provident Fund and Miscellaneous Provisions Act, 1952

The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 applies across India, except for the state of Jammu & Kashmir.
The applicability details are provided as follows.:
The Act applies to:
1. Establishments engaged in industries specified in Schedule I of the Act or any activity notified by the Central Government in the Official Gazette.
2. Businesses employing 20 or more individuals.
3. Cinema theatres employing 5 or more individuals.

The Exemptions details are provided as follows.:
The Act does not apply to:
• [Section 16(1)(a)] Co-operative societies with fewer than 50 employees and operating without the aid of power.
• [Section 16(1)(b)] Establishments under the control of the state/central government, where employees receive contributory provident fund (P.F.) or old-age pension benefits as per government regulations.
• [Section 16(1)(c)] Establishments set up under any central, provincial, or state act, where employees receive similar contributory P.F. or pension benefits.
Voluntary Coverage:
If an establishment does not meet the above criteria but both the employer and the majority of employees wish to participate, voluntary registration can be obtained.
Important Note: Once an establishment falls under the purview of the Act, it remains applicable even if the number of employees drops below 20 at a later date. [Section 1(5)]

PF Contribution Breakdown:
• Employee’s Contribution: X% of wages
• Employer’s Contribution: Y% of wages
• Total: Z% of wages

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ESI Act, 1948 – Applicability, Wages, and Contributions

The Employees’ State Insurance (ESI) Scheme is a comprehensive social security program designed to provide financial protection to workers and their dependents in cases of sickness, maternity, or employment-related injury.
Applicability:
The ESI Act applies to:
1. Factories using power and employing 10 or more workers.
2. Non-power using factories and establishments employing 20 or more workers.
3. Shops, hotels, restaurants, cinemas (including preview theatres), road-motor transport undertakings, and newspaper establishments employing 20 or more workers (as per Section 1(5)).
Contribution Structure:

The scheme is primarily funded through contributions from both employers and employees:
• Employee Contribution: 1.75% of wages
• Employer Contribution: 4.75% of wages
• Total Contribution: 6.5% of wages
Updated Wage Ceiling:
Effective from January 1, 2017, the wage ceiling for ESI coverage has been raised from ₹15,000 to ₹21,000 per month, expanding coverage to a larger pool of employees.

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