PF & ESIC compliances

Annual EPF and ESIC Compliances

Annual EPF and ESIC Compliances are essential for providing post-retirement and emergency financial security, as well as health protection for employees relying on their salaries to meet their needs. Employers with a workforce exceeding a threshold limit are required to incorporate EPF and ESIC in their commercial units. Upon enrolling in these schemes, employers must fulfill certain mandatory reporting obligations annually to maintain legal compliance.

To clarify, let’s outline the primary criteria that employers need to meet for EPF and ESIC registration and inclusion in their annual compliances.

EPF

• This scheme is applicable under the guidelines of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 as prescribed by Employees’ Provident Fund Organization (EPFO).
• Mandatory registration for all the companies/organizations that is 3 years old having employee strength more than 20. Voluntary registration is accepted for the units having less number of employees.
• Both employer and employee contribute in equal amount in this scheme.
• In case, the employee number is more than 20, the contribution amount is 12% of Basic + DA. In case, employee number is less the contribution amount is 10% of Basic + DA.

ESIC:

• This scheme is applicable under ESI Act, 1948, as prescribed by Employees’ State Insurance Corporation (ESIC) under Ministry of Labour and Employment.
• Mandatory registration for the establishments/units/factories having 10 employees receiving INR 15,000 p.m. income within 15 days
• 75% of the salary contribution from the employee and 4.75% from the employer should be made under this scheme (Except those employees earning INR 100 per day)

So, any commercial unit fulfilling such conditions is eligible of EPF and ESIC annual compliances per FY as discussed in this article.

EPF and ESIC Compliances After Registration

Once a commercial unit obtains EPF/ESIC registration, the employer should fulfill the following responsibilities and keep the records updated through the official web portal of the respective schemes:

1. Enroll eligible employees in the scheme with their details:
   • For EPF, the employer should enlist new eligible employees providing their KYC. Employees should fill Form 2 (Declaration and Nomination) under the PF Scheme by the 25th of the month’s close.
   • For ESIC, any eligible employee should be enrolled within 10 days of appointment and bear an ESIC card to avail the benefits (the same card is applicable in any other employer enlisted under the ESIC Scheme).
2. Maintain records with all necessary updates:
   • Attendance and Wages Register of employees
   • Form 6 Register (Details of Employer contribution in the respective Schemes)
   • Inspection Books with details of inspections done and reports by the authorities
   • Accident Register of employees
   • Record of monthly Challans and Returns
   • The Account Books and Registers for general compliances, such as P&L Account, Cash Book, Balance Sheet, etc.
3. Complete the Monthly Payment through specific Challan.

Annual PF and ESIC Compliances per FY

For EPF:

1. The eligible employer should clear the Provident Fund payment in the Provident Fund Account through Challan as opened during registration on the 15th of each month.
2. Provide details of new joiners (Form 5) and terminated employees (Form 10). Employers should also provide information on last month’s employees, new and resigned employees within 15 days.
3. Consolidated monthly Statement (Form 12 A).
4. Annual Return by the 30th of April of every year, with a consolidated annual contribution statement (Form 3A and 6A).
5. Conduct PF Audit, as applicable under the guidelines of this Scheme.

For ESIC:

1. The eligible employer should clear the Monthly contribution in the ESIC Account through Challan as opened during registration on the 15th of each month.
2. Provide details of new joiners and terminated employees. Employers should also provide information on last month’s employees, new and resigned employees within 15 days.
3. Bi-Annual Returns (Form 5) as follows:
   • April to September: 11th November
   • October to March: 11th May Note: Submission dates are subject to change.
4. Immediately report accident/death cases (Form 16), wherever applicable.
5. Conduct ESIC Audit, as applicable under the guidelines of this Scheme.

Note: Employees are to file and submit certain forms, such as withdrawal, declaration, termination, transfer, etc., based on specific circumstances. They should be given proper assistance from the employer/concerned zonal office.

Penalties on Failing the EPF and ESIC Compliances

For EPF:

• Penalty of 12% per year interest for each day of delay in payment of contribution
• Penalty on late payment as mentioned:
  • Delay up to 2 months: 5% interest p.a.
  • Delay of 2-4 months: 10% interest p.a.
  • Delay of 4-6 months: 15% interest p.a.
  • Delay of more than 6 months: 25% interest p.a. not exceeding 100% at a time

For ESIC:

• Penalty of 12% per year interest for each day of delay in payment of contribution

Restrictions under IT Act: If the violation of non-payment of EPF/ESIC contribution comes under the offense under Income Tax Act, the concerned unit may by disallowed from any more deposit in PF/ESI Account and thus cannot get the deduction benefits of the corresponding schemes.

Benefits of Annual PF and ESIC Compliances for Eligible Businesses

• Gathers employees’ loyalty and satisfaction
• Creates reputation and good Cost to Company
• Gets competitive advantage
• Supports better employment
• Guarantees stable company financial condition
• Secures employees’ social and personal lifestyle