PF & ESIC Registration

Social Security Schemes for Employees in India: EPF & ESIC Explained

In India, social security schemes play a crucial role in safeguarding the well-being of employees. Among various benefits available under labour laws, the two most sought-after schemes are:

• Employees’ State Insurance Scheme (ESI)
• Employees’ Provident Fund Scheme (EPF)

Both are contributory schemes, where a fixed percentage is deducted from the employee’s salary and an equal or proportionate amount is contributed by the employer. The total amount is then deposited into the employee’s respective ESI or EPF account, providing financial security and health protection.

Employees’ State Insurance Scheme (ESI)

The Employees’ State Insurance (ESI) scheme is a self-financed healthcare insurance fund for workers in India. It is managed by the Employees’ State Insurance Corporation (ESIC), an autonomous body under the Ministry of Labour and Employment.

Legal Framework

The scheme is governed by the ESI Act of 1948 and is designed to protect employees in times of health-related contingencies and job-linked risks.

Benefits of the ESI Scheme

The ESI scheme offers:

• Medical care for the insured employee and dependents
• Sickness benefits (cash compensation during illness)
• Maternity benefits
• Disablement benefits (temporary or permanent)
• Dependents’ benefit in case of death due to employment injury
• Funeral expenses
• Vocational rehabilitation and medical care after retirement

Eligibility for ESI

The ESI scheme applies to:

• All establishments employing 10 or more persons
• Units such as factories, corporate offices, restaurants, hospitals, cinema halls, educational and medical institutions

Note: Employees earning ₹21,000 or less per month (₹25,000 for persons with disabilities) are eligible under the scheme.

Employees’ Provident Fund (EPF)

The Employees’ Provident Fund (EPF) is a retirement benefit scheme governed by the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. It is administered by the Employees’ Provident Fund Organisation (EPFO).

Unlike the ESI which focuses on health and short-term welfare, EPF is aimed at long-term savings for retirement and offers financial support after an employee leaves or retires from service.

Contributions to EPF

Both the employee and employer contribute:

• 12% of the employee’s basic salary + DA + allowances
• The employer’s contribution is split between EPF and EPS (Employee Pension Scheme)

Breakdown of Employer Contribution

• 8.33% of the salary goes to EPS (up to ₹1,250)
• Remaining 3.67% goes to EPF

Employees may contribute more than 12% voluntarily (known as VPF – Voluntary Provident Fund), but employers are not obligated to match the additional contribution.

Salary Components Considered for EPF

• Basic Wages
• Dearness Allowance (DA)
• Conveyance Allowance
• Special Allowance

Important Note: If an employee earns more than ₹15,000/month, the employer is required to contribute only ₹1,800/month (12% of ₹15,000).

Key Differences Between EPF and ESIC

Feature	EPF	ESIC
Purpose	Post-retirement savings	Health and insurance benefits
Applicability	Organizations with 20+ employees	Establishments with 10+ employees
Salary Limit	No upper limit for employee contribution	₹21,000/month (₹25,000 for disabled)
Employee Contribution	12% of salary	0.75% of salary
Employer Contribution	12% (3.67% EPF + 8.33% EPS)	3.25% of salary
Administered by	EPFO	ESIC

 

Conclusion

Both EPF and ESI are cornerstones of India’s employee welfare structure. While EPF ensures financial security post-retirement, ESI protects the employee and their family from medical emergencies and income loss due to health issues.

Understanding these schemes helps employees make better financial decisions and ensures employers remain compliant with Indian labour laws.