Starting a new venture brings excitement and responsibility, especially when it comes to navigating the intricacies of Employees’ Provident Fund (EPF) and Employees’ State Insurance Corporation (ESIC) compliance. In India, even newly incorporated companies are assigned EPF and ESIC registration numbers, irrespective of immediate eligibility. This blog untangles the complexities surrounding EPFO and ESIC regulations for new businesses, addressing when these mandates apply, considerations like marking ESIC registration as “dormant,” and handling compliance notices from PF or ESIC departments.
About EPFO
The Employees’ Provident Fund Scheme (EPF) in India acts as a safety net for working professionals, providing both long-term retirement savings and short-term financial assistance. Every month, employees and employers contribute a percentage of their salary to the scheme, which accumulates in a personal fund that can be accessed for retirement, specific needs like medical treatment or house purchase, or even unemployment. This scheme not only provides financial security for workers but also encourages savings and economic stability. However, the EPF Scheme only applies when the number of employees is more than twenty in the establishment. Companies can opt for voluntary coverage for their employees with their consent.
About ESIC
ESIC is a comprehensive insurance package for employed individuals in India, offering immediate financial and medical support during contingencies. It covers sickness, maternity, disablement, dependents, and death benefits. ESIC also operates a vast network of hospitals and dispensaries across India, offering subsidised medical care for insured employees and their dependents. The ESIC is mandatory for companies employing ten or more employees.
Applicability of EPFO/ESIC
| Particulars | EPFO | ESIC |
|---|---|---|
Employee Threshold | 20 or More | 10 or More |
Coverage |
|
|
Return Filing | Mandatory after registration in both ESIC and EPFO | |
Relief to newly incorporated Companies | Newly incorporated companies are issued a registration number under the PF and ESIC, regardless of whether or not they are eligible for coverage. The central government has issued a Press Release stating that such companies are not required to file PF or ESIC returns as they are not yet eligible for coverage. However, once the number of employees reaches the threshold for applicability, these companies will be required to comply with the EPFO and ESIC Acts, | |
The Importance of Compulsory Registration for EPF/ESI for New Company in India
- Legal Compliance: The Employees Provident Fund and Miscellaneous Provisions Act, 1952, and the Employees State Insurance Act, 1948 make it mandatory for companies employing 20 or more workers to register for EPF and ESI schemes. Failure to comply with these regulations can result in legal penalties, fines, and imprisonment.
- Employee Benefits: By registering for the EPF and ESI schemes, companies can provide their employees with a range of social security benefits such as pensions, health insurance, and maternity benefits. This can help to attract and retain quality employees and improve employee morale and satisfaction.
- Tax Benefits: Companies that are registered for EPF and ESI are eligible for tax benefits under the Income Tax Act, of 1961. This can help companies to reduce their overall tax liability and improve their financial health.
- Record Keeping: By registering for EPF and ESI, companies are required to keep detailed records of their employees’ contributions, including the amounts contributed, the frequency of contributions, and the manner in which contributions are made. This helps to ensure that the employees’ contributions are accurately recorded and that they can access their benefits when they are needed.
Notice of Non-Compliance from PF or ESIC Department
Sometimes, the PF or ESIC office may send a notice to an establishment of non-compliance with regards to the non-filing of PF or ESIC Return. This happens because the establishment is registered with them. In such cases, the establishment should reply to the notice stating the reason for non-filing. For instance, the number of employees may not have reached the threshold. We can assist with drafting and filing a reply to such notices.
Marking of ESIC Registration as “Dormant”
The ESIC Department came up with Circular No. P-11/14/19/Misc/02/2022-Rev. II. Dated 21/11/2022, which requires that newly registered companies on or after 15.02.2020 shall comply with the ESI Act, 1948 provisions only when they reach the threshold limit of employment under the ESI Act (Ten at present). Suppose the companies registered through the MCA portal are found not coverable per the ESI Act’s statutory provisions. In that case, they are not required to comply for the next six months or until they reach the threshold ESIC coverage, whichever is earlier. However, such companies will have to mark the establishment status on the ESIC portal as “Dormant” on their first login and after every six months
FAQs
Is PF filing mandatory for Pvt Ltd company?
PF (Employee Provident Fund) filing is mandatory for all companies, including private limited companies, if they employ 20 or more employees.
How many employees are required for ESI and PF registration?
ESI (Employees’ State Insurance) registration is mandatory for companies that employ 10 or more employees, while PF registration is mandatory for companies that employ 20 or more employees
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