Two lines appear on almost every Indian payslip, PF and ESI, and most people who see them every month could not say what triggers either one or whether the amount is right. Since 21 November 2025 the rules behind both sit in a single Code, and the base they are calculated on has moved.
The Code on Social Security, 2020 folded the old EPF and ESI Acts into one framework: EPF applies at 20 or more employees with a ₹15,000 monthly wage ceiling, ESI at 10 or more employees for those earning up to ₹21,000 a month, and the contribution base shifted from gross pay to basic + DA.
The bottom line
EPF: mandatory at 20 or more employees. The wage ceiling stays ₹15,000 a month, re-notified on 29 May 2026.
ESI: applies at 10 or more employees, covering those earning up to ₹21,000 a month, or ₹25,000 for persons with disabilities.
What changed: the base moved from gross to basic + DA, a new hire must be registered for ESI on or before their first day, and gig and platform workers are being brought into the net.
Who has to register
- EPF (Provident Fund): mandatory for establishments employing 20 or more workers. Under the Code it applies across sectors rather than only the industries the old 1952 Act had notified.
- ESI (State Insurance): applies at 10 or more persons, or 20 or more in some states, and now nationwide rather than in notified areas only. It reaches contract, casual and fixed-term workers, and increasingly gig and platform workers too.
EPF: the ceiling and the split
The PF wage ceiling remains ₹15,000 per month, formally re-notified by the Ministry of Labour on 29 May 2026 under the Code on Social Security.
The contribution splits three ways:
- Employee: 12% of basic + DA.
- Employer: 12% of basic + DA, but divided — 8.33% to the Employees' Pension Scheme, capped at ₹1,250 a month, which is 8.33% of the ₹15,000 ceiling, and the balance of 3.67% into the EPF account.
- Administrative charge: 0.5% on the employer, with a floor of ₹500 a month.
Where basic plus DA runs above ₹15,000, contributing on the excess is voluntary. Plenty of employers do compute on actual basic plus DA anyway.
ESI: ceiling, rates and what it buys
- Wage ceiling: ₹21,000 a month, or ₹25,000 for persons with disabilities. It has not moved since January 2017, despite steady industry pressure to raise it.
- Contribution: 0.75% from the employee and 3.25% from the employer, so 4% in total.
- Benefit period: medical and sickness benefits continue for six months after the contribution period ends, so an employee who crosses the ceiling mid-period keeps cover until that period closes.
What ESI buys is substantial — medical care, sickness pay, maternity benefit, disability and dependants' benefits — which is why getting eligibility right matters more than getting the deduction arithmetic right.
The base moved, and payroll templates did not
The Codes' uniform definition of wages — basic plus DA plus retaining allowance, with other allowances capped at 50% of pay — shifted ESI's base from gross salary to basic plus DA.
A lot of payroll templates still compute ESI on gross. That is now wrong in both directions depending on the salary structure, producing over-deduction for some employees and under-deduction for others in the same run.
The distinction to hold on to: the broader wage base reaches ESI immediately, while PF stays anchored to the ₹15,000 ceiling under the transitional provisions. Applying one rule to both is the single most common error here.
Day-one ESI registration
The Social Security (Central) Rules, 2026, notified on 8 May 2026, tightened onboarding. A new employee's ESI registration has to be completed on or before their first day of joining, which is stricter than the loose "before employment" standard it replaced.
That makes it an HR workflow question rather than a payroll one. Register on day one and keep the system logs showing the date and time — those logs are the first thing that helps you in an ESIC inspection.
Gig and platform workers
Gig and platform workers are inside the social-security framework for the first time, through a separate mechanism that does not use the ₹21,000 ESI ceiling. Aggregators must register these workers on the designated portal and contribute towards their social security.
Rollout is running state by state, so a platform-heavy business needs to track its own state's status rather than the national position.
What delay costs
EPF dues attract interest plus damages, with damages graded from roughly 5% to 25% depending on how long the delay ran. ESI carries its own graded damages.
There was a goodwill window: the Employees' Enrolment Campaign ran from November 2025 to April 2026 and let employers regularise past non-compliance at reduced penalties.
A worked example
An employee earns ₹18,000 a month in basic plus DA.
- EPF: 12% of ₹15,000, the ceiling, is ₹1,800 from the employee. The employer matches ₹1,800, of which ₹1,250 goes to EPS and ₹550 to EPF, plus the 0.5% admin charge.
- ESI: applicability turns on total wages against the ₹21,000 threshold. At or below it, ESI applies at 0.75% from the employee and 3.25% from the employer. Above it, ESI does not apply.
Two schemes, two ceilings, two triggers. That is precisely why payroll errors cluster here rather than anywhere else on the payslip.
Common mistakes
- Computing ESI on gross. The base is basic plus DA now.
- Using one ceiling for both schemes. It is ₹15,000 for PF and ₹21,000 for ESI.
- Registering a new hire for ESI in the first week. The 2026 rule made it day one.
- Capping EPS on the wrong number. The ₹1,250 monthly cap comes off the ₹15,000 ceiling.
- Leaving gig workers out. Aggregators have their own registration obligation.
Frequently asked questions
What is the EPF wage ceiling in 2026? ₹15,000 per month, re-notified on 29 May 2026 under the Code on Social Security.
What is the ESI salary limit in 2026? ₹21,000 per month, or ₹25,000 for persons with disabilities. It has not been raised since 2017.
What are the contribution rates? EPF is 12% from the employee and 12% from the employer, plus a 0.5% administrative charge. ESI is 0.75% from the employee and 3.25% from the employer.
Did the 50% wage rule increase my PF? Not necessarily. PF stays tied to the ₹15,000 ceiling under the transitional provisions, while ESI's base shifted to basic plus DA immediately.
Do gig workers get PF and ESI now? The Code extends social security to gig and platform workers through a separate framework, with aggregators required to register them. Rollout is happening state by state.
What happens if I contribute late? Interest plus graded damages on EPF, and separate graded damages on ESI. The cost rises with the length of the delay.