EPF/ESI compliance

WHAT is EPF/ESI

India’s workforce is supported by several social security schemes aimed at ensuring the well-being and financial stability of employees. Among the most prominent are the EPF (Employee’s Provident Fund) and the ESI (Employees’ State Insurance) schemes. Both of them plays a crucial role in the process of safeguarding employees’ interests, providing retirement benefits, ensuring medical and disability coverage.

WHAT IS EPF (EMPLOYEES’ PROVIDENT FUND)?

The EPF (Employee’s Provident Fund) is a saving scheme for employees in the organized sector. It is managed by the EPFO (Employees’ Provident Fund Organisation) under the Ministry of Labour and Employment, Government of India. The major objective of the EPF (Employee’s Provident Fund) is to make sure that the employees have a secure future post-requirement.

ELIGIBILITY:

The EPF (Employee’s Provident Fund) is a saving scheme for employees in the organized sector. It is managed by the EPFO (Employees’ Provident Fund Organisation) under the Ministry of Labour and Employment, Government of India. The major objective of the EPF (Employee’s Provident Fund) is to make sure that the employees have a secure future post-requirement.

• All employees earning a basic salary of up to ₹15,000 per month are eligible.
• EPF is mandatory for companies with 20 or more employees.
• Employees earning more than ₹15,000 can voluntarily join the scheme with employer consent.

KEY FEATURES OF EPF

Some of the major key feature of the EPF are as follows:

• MANDATORY CONTRIBUTIONS: Both the employer and employee contribute 12% of the employee’s basic salary and dearness allowance towards the EPF account. For certain industries, the rate may be lower.
• INTEREST RATE: The EPF account earns interest at a rate declared by the government annually. For FY 2022-23, the interest rate was 8.1%.
• TAX BENEFITS: Contributions to EPF are eligible for tax deductions under Section 80C of the Income Tax Act. The interest earned is also tax-free up to certain limits.
• WITHDRAWAL: The employees can withdraw the full amount on retirement or some partial amount for specific needs like housing, medical emergencies, or higher education.
• UNIVERSAL ACCOUNT NUMBER (UAN): Each EPF (Employee’s Provident Fund) member is allotted a UAN, which remains the same throughout their career, making it easier to manage their PF account.

BENEFITS OF EPF (EMPLOYEE’S PROVIDENT FUND)

The EPF (Employee’s Provident Fund) was created for the benefits of the employees and some of them are discussed as under:

• RETIREMENT CORPUS: Ensures a steady income to the employee after the retirement
• INSURANCE COVERAGE: Includes benefits under the EDLI (Employees’ Deposit Linked Insurance) scheme providing insurance cover in the case of employee’s death during service.
• PENSION SCHEME: Part of the contribution goes toward the EPS (Employee’s Pension Scheme), offering a pension post-retirement.

WITHDRAWAL RULES:

• Full withdrawal allowed at retirement (58 years) or if unemployed for more than two months.
• Partial withdrawals for specific circumstances like home purchase, education, illness, etc.

WHAT IS ESI (EMPLOYEE’S STATE INSURANCE)?

The employee’s State Insurance Scheme is a social security and health insurance scheme for Indian workers. It is governed by the ESIC (Employees’ State Insurance Corporation), an autonomous body under the Ministry of Labour and Employment. The scheme is designed to provide medical, monetary, and other benefits to employees in the case of sickness, maternity, disability, and death due to employment injury.

KEY FEATURES OF ESI (EMPLOYEE’S STATE INSURANCE)

Some of the key features of the ESI are as follows:

• ELIGIBILITY: ESI applies to establishment employing 10 or more people (20 in some state), and to employees earning ₹21,000 or less per month (₹25,000 for person with disabilities).
• CONTRIBUTIONS: The employer contributes 3.25% of the employees’ gross salary, while the employee contributes 0.75%.
• MEDICAL BENEFITS: Provides comprehensive medical care to employees and their families, including hospitalization, specialist consultations, and medication.
• CASH BENEFITS: Includes sickness benefits, maternity benefits, and disability benefits. It also covers dependents’ benefits in case of the death of the insured due to employment injury.
• REHABILITATION ALLOWANCE: Offers rehabilitation allowance for insured persons undergoing vocational rehabilitation.

BENEFITS OF ESI

• MEDICAL CARE: Ensures employees and their families receive quality medical treatment without financial burden.
• FINANCIAL SECURITY: Provides monetary benefits during periods of sickness, maternity, or disability, ensuring financial stability.
• REHABILITATION: Facilitates vocational rehabilitation to help employees get back to work after an injury.
• CASH BENEFITS: Includes sickness benefits, maternity benefits, and disability benefits. It also covers dependents’ benefits in case of the death of the insured due to employment injury.
• REHABILITATION ALLOWANCE: Offers rehabilitation allowance for insured persons undergoing vocational rehabilitation.

MEDICAL BENEFITS:

• Comprehensive medical care including outpatient, inpatient, and diagnostic services.
• Coverage for preventive health check-ups, family welfare services, and emergency medical care.

COMPARING EPF AND ESI

While both EPF (Employee’s Provident Fund) and ESI (Employees’ State Insurance) aim to provide social security to employees, they serve different purposes and cater to different needs.

• COVERAGE: EPF (Employee’s Provident Fund) is primarily a retirement savings scheme, while ESI (Employees’ State Insurance) provides medical and disability benefits.
• ELIGIBILITY: EPF (Employee’s Provident Fund) is mandatory for employees earning up to ₹15,000 per month, whereas ESI (Employees’ State Insurance) covers employees earning up to ₹21,000 per month.
• CONTRIBUTIONS: The contribution rates and sharing pattern between employer and employee differ for EPF (Employee’s Provident Fund) and ESI (Employees’ State Insurance)
• BENEFITS: EPF (Employee’s Provident Fund) focuses on retirement savings and pension, whereas ESI (Employees’ State Insurance) offers comprehensive medical care and monetary benefits for sickness, maternity, and employment-related injuries.
• REHABILITATION ALLOWANCE: Offers rehabilitation allowance for insured persons undergoing vocational rehabilitation.

HOW TO REGISTER FOR EPF AND ESI

• EPF REGISTRATION:
• Visit the EPFO portal.
• Click on “Establishment Registration” and fill in the required details.
• Submit the application along with necessary documents.
• Upon verification, the employer will receive an establishment ID and employees can start contributing to EPF.

• ESI REGISTRATION:
• Visit the ESIC portal.
• Click on “Sign Up” and create a user ID and password.
• Log in and fill in the required details about the establishment and employees.
• Submit the application along with necessary documents.
• After verification, the employer will receive a 17-digit registration number.