Two deductions show up on almost every Indian payslip — PF and ESI — and most people couldn't tell you what triggers them or how much they should be. The Code on Social Security, 2020, in force since 21 November 2025, folded the old EPF and ESI Acts into one framework, shifted the base they're calculated on, and pulled gig workers into the net for the first time. The rates didn't change much. The base and the paperwork did.
Here's what employers and employees actually need to know in 2026.
Quick answer: EPF is mandatory for establishments with 20+ employees; the wage ceiling stays ₹15,000/month (re-notified 29 May 2026). ESI covers establishments with 10+ employees and applies to those earning up to ₹21,000/month (₹25,000 for persons with disabilities). Under the Labour Codes, the ESI and contribution base shifted from "gross" to basic + DA, employers must now register a new hire for ESI on or before their first day, and gig and platform workers are being brought into social security.
Who has to register for EPF and ESI?
- EPF (Provident Fund): mandatory for establishments employing 20 or more workers. Under the Code it now applies universally across sectors, not just the notified industries the old 1952 Act listed.
- ESI (State Insurance): applies to establishments with 10 or more persons (20+ in some states), now nationwide rather than limited to notified areas. It covers contract, casual, and fixed-term workers, and increasingly gig and platform workers.
EPF: the ceiling and the contribution 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 works like this:
- Employee: 12% of basic + DA.
- Employer: 12% of basic + DA, but split — 8.33% to the Employees' Pension Scheme (EPS), capped at ₹1,250/month (8.33% of the ₹15,000 ceiling), and the balance (3.67%) to the EPF account.
- Plus an employer administrative charge of 0.5%, with a minimum of ₹500/month.
For employees earning basic + DA above ₹15,000, contribution above the ceiling is voluntary — though many employers compute on actual basic + DA.
ESI: ceiling, rates and benefits
- Wage ceiling: ₹21,000/month (₹25,000 for persons with disabilities). This has not changed since January 2017, despite industry pressure to raise it.
- Contribution: employee 0.75% of wages, employer 3.25% — 4% total.
- Benefit period: ESI medical and sickness benefits continue for six months after the contribution period ends. An employee who crosses the ceiling mid-period keeps coverage until that period closes.
ESI buys real protection — medical care, sickness pay, maternity benefit, disability and dependants' benefits — which is why getting eligibility right matters as much as the deduction.
How the 50% wage rule changes the base
The Codes' uniform definition of "wages" (basic + DA + retaining allowance, with other allowances capped at 50% of pay) shifted ESI's base from gross salary to basic + DA. Many payroll templates still compute ESI on gross — that's now an error in both directions, leading to over- or under-deduction.
💡 The subtle point: the broader wage base hits ESI immediately, but PF stays anchored to the ₹15,000 ceiling under transitional provisions. Don't apply the same logic to both.
The new ESI onboarding rule
The Social Security (Central) Rules, 2026 (notified 8 May 2026) tightened onboarding: you must complete a new employee's ESI registration on or before their first day of joining — not "before employment" loosely. HR and payroll workflows need to register day-one, and keep system logs showing the date and time, which become your first defence in an ESIC inspection.
Gig and platform workers
For the first time, gig and platform workers are inside the social-security framework, through a separate mechanism that doesn't use the ₹21,000 ESI ceiling. Aggregators must register these workers on the designated portal and contribute toward their social security. Rollout is happening state by state, so platform-heavy businesses should track their state's status closely.
Penalties for getting it wrong
Delay is expensive. EPF dues attract interest plus damages (damages graded from roughly 5% to 25% depending on the delay); ESI carries its own graded damages. There's also a goodwill window: the Employees' Enrolment Campaign ran from November 2025 to April 2026, letting employers regularise past non-compliance with reduced penalties.
Worked example
An employee earns ₹18,000/month in basic + DA.
- EPF: 12% of ₹15,000 (the ceiling) = ₹1,800 employee. Employer matches ₹1,800 (₹1,250 to EPS, ₹550 to EPF), plus 0.5% admin.
- ESI: the employee earns above the ₹21,000 gross-wage threshold only if total wages exceed it — if their total wages are ₹21,000 or below, ESI applies at 0.75% (employee) and 3.25% (employer); above it, ESI doesn't apply.
The two schemes use different ceilings and different triggers, which is exactly why payroll errors cluster here.
Common mistakes
- Computing ESI on gross. The base is basic + DA now, not gross.
- Applying the wrong ceiling. ₹15,000 for PF, ₹21,000 for ESI — they're not the same.
- Missing day-one ESI registration. The 2026 rule made the timing strict.
- Capping EPS wrong. The ₹1,250/month EPS cap assumes the ₹15,000 ceiling.
- Ignoring gig workers. Aggregators have registration obligations.
Checklist
- Confirm EPF applies (20+ employees) and ESI applies (10+ employees).
- Recompute ESI on basic + DA, not gross.
- Register every new hire for ESI on or before day one, and log it.
- Apply the ₹15,000 PF ceiling and the ₹1,250 EPS cap correctly.
- If you're an aggregator, register gig and platform workers.
- Check your state's rules and rollout status.
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 (₹25,000 for persons with disabilities). It has not been raised since 2017.
What are the contribution rates? EPF: 12% employee + 12% employer (plus 0.5% admin). ESI: 0.75% employee + 3.25% employer.
Did the 50% wage rule increase my PF? Not necessarily. PF stays tied to the ₹15,000 ceiling under transitional provisions, while ESI's base shifted to basic + DA immediately.
Do gig workers get PF and ESI now? The Code extends social security to gig and platform workers through a separate framework; aggregators must register them. Rollout is state by state.
This article is for legal awareness and education only and is not legal advice. Ceilings, rates and rollout vary and may change by notification; confirm the current position for your state and consult a qualified professional before acting.