Employer pays 12% EPF plus 0.5% EDLI and 0.5% admin, and 3.25% ESIC up to Rs. 21,000 gross. 2026 rates, ceilings and worked examples.
EPF employer contribution is 12% of PF wages. Of this, 8.33% goes to the pension scheme, capped at ₹1,250 a month, with the balance going to the provident fund account.
Employers also pay 0.5% EDLI insurance, capped at ₹75 per employee, plus 0.5% administrative charges, subject to a ₹500 minimum per establishment per month. In practice, total EPF cost is roughly 13% of PF wages.
ESIC employer contribution is 3.25% of gross wages for employees earning ₹21,000 a month or less, or ₹25,000 for employees with disabilities. The employee contributes 0.75%.
The EPF wage ceiling remains ₹15,000 a month. A proposed increase to ₹25,000 has been reported as cleared by the Finance Ministry but has not been notified, so payroll calculations have not changed yet.
The EPF Scheme, 2026 replaced the 1952 Scheme with effect from 29 June 2026. Contribution rates remained unchanged, although the wage base changed because of the labour codes' definition of wages.
In 2026 an Indian employer contributes 12% of PF wages to EPF and 3.25% of gross wages to ESIC. The EPF 12% is split into 8.33% for the Employees’ Pension Scheme, capped at Rs. 1,250 a month, and the remainder to the provident fund account. Two further employer-only charges sit outside the 12%: EDLI life cover at 0.5% of wages, capped at Rs. 75 per employee, and administrative charges at 0.5% of wages, subject to a floor of Rs. 500 per establishment per month. ESIC applies only where an employee’s gross monthly wages are Rs. 21,000 or less. Neither rate changed in 2026.
The rates are stable. What moved in 2026 is everything around them: the governing statute, the definition of the wage the percentages are applied to, and the compliance forms. If you are budgeting Indian headcount, read this alongside the wider breakdown of employer costs in India and the fully loaded employee cost model, because EPF and ESIC are only two lines in a longer list.
| Contribution | Employer pays | Employee pays | Applied to | Ceiling |
|---|---|---|---|---|
| EPF (provident fund) | 3.67% of PF wages (balance of the 12%) | 12% of PF wages | Basic + DA + retaining allowance, as redefined by the labour codes | Rs. 15,000 per month |
| EPS (pension) | 8.33% of PF wages | Nil | Same PF wage base | Rs. 1,250 per month |
| EDLI (life insurance) | 0.5% of PF wages | Nil | Same PF wage base | Rs. 75 per employee per month |
| EPF admin charges | 0.5% of PF wages | Nil | Same PF wage base | Minimum Rs. 500 per establishment per month |
| ESIC | 3.25% of gross wages | 0.75% of gross wages | Gross monthly wages |
Rs. 21,000 gross (Rs. 25,000 for employees with disabilities) |
The EPF Scheme, 1952 was superseded by the Employees’ Provident Funds Scheme, 2026, notified on 29 June 2026 under the Code on Social Security, 2020 and published in the Official Gazette on 1 July 2026 as G.S.R. 525(E). The Employees’ Pension Scheme, 2026 and the Employees’ Deposit-Linked Insurance Scheme, 2026 were notified alongside it. Contribution rates were carried over unchanged. What changed for employers is the wage base, the treatment of above-ceiling contributions, the contract labour liability chain and the return formats. You can read the gazette record of the EPF Scheme, 2026 and a practitioner summary in the EY alert on the new scheme and amnesty provisions.
No. It remains 12% from the employer and 12% from the employee, with a reduced 10% rate for the narrow set of establishments the Central Government has specifically notified. The Ministry of Labour and Employment re-notified the contribution rates under the 2026 schemes at exactly the pre-existing levels: 12% for EPF, 8.33% for EPS and 0.5% for EDLI. Any payroll vendor telling you the rate moved is wrong.
Not yet, and nothing in your payroll should change until it is. The statutory ceiling is still Rs. 15,000 a month, unmoved since 1 September 2014. Press reports from early August 2026 said the Finance Ministry had cleared a revision to Rs. 25,000, with EPFO having asked for Rs. 30,000. Union Cabinet approval is pending and no gazette notification has issued. Several reports float 1 April 2027 as a likely effective date, but that is journalistic expectation rather than policy.
The file appears to have moved because in January 2026 the Supreme Court directed the Centre and EPFO to decide on revising the ceiling within four months, hearing a petition that argued a threshold frozen since 2014 bears no relationship to inflation or to minimum wages. Plan for the change, but do not book it. A jump to Rs. 25,000 would lift the EPS cap from Rs. 1,250 to about Rs. 2,083, the EDLI charge from Rs. 75 to Rs. 125, and the mandatory employer EPF outlay from Rs. 1,800 to Rs. 3,000 per covered employee per month.
This is the change that actually costs employers money. The four labour codes came into force on 21 November 2025 and brought in a single definition of wages that applies across provident fund, gratuity, bonus and ESI. Under it, if the excluded allowances exceed 50% of total remuneration, the excess is added back and treated as wages. Contributions under the EPF Scheme, 2026 are computed on wages as defined by the Code, not on basic wages as defined by the old 1952 Act. The Ministry of Labour and Employment has issued FAQs clarifying the 50% wage floor rule and how it feeds provident fund computation.
The practical effect: an allowance-heavy structure with basic at 25% to 30% of CTC no longer holds. Where the ceiling does not bite, the PF base rises and so does the employer’s 12%. Where an employee sits below the Rs. 15,000 ceiling on the old basic but above it on the recomputed wage, contributions are capped at Rs. 15,000, so the increase is contained. Model the two cases separately before you rewrite salary structures. Our guide to India’s labour laws covers the wider code architecture, and the payroll compliance guide for India covers the month-by-month execution.
Of the employer’s 12%, 8.33% goes to the Employees’ Pension Scheme and the balance goes to the employee’s provident fund account. The EPS share is always calculated on the statutory wage ceiling, so it is capped at Rs. 1,250 a month (8.33% of Rs. 15,000). Where wages equal the ceiling, the balance is Rs. 550, which is where the commonly quoted 3.67% figure comes from. The employee’s own 12% goes entirely to the provident fund account. This is why an employee’s passbook never shows the full 24%.
Because pensionable pay is restricted to the wage ceiling. Even if an employer contributes on Rs. 50,000 of wages, only Rs. 1,250 is diverted to the pension fund; everything above that lands in the provident fund account instead. The consequence for payroll teams is that the 8.33% / 3.67% split is only accurate at exactly Rs. 15,000. Above the ceiling the split shifts. On Rs. 50,000 of wages the employer’s Rs. 6,000 divides into Rs. 1,250 to EPS and Rs. 4,750 to EPF, which is 9.5%, not 3.67%. Payroll software that hardcodes 3.67% will misallocate.
One more rule catches new joiners. An employee who was not an existing EPF or EPS member and joins on or after 1 September 2014 with wages above Rs. 15,000 does not enter EPS at all. The entire employer 12% goes to the provident fund account.
Both are employer-only costs that sit outside the 12% and never appear in the employee’s passbook. EDLI is a group life cover funded at 0.5% of wages, capped at Rs. 75 per employee per month. It pays the nominee 35 times average monthly wages plus 50% of the average provident fund balance, subject to a floor of Rs. 2.5 lakh and a ceiling of Rs. 7 lakh. The Employees’ Deposit-Linked Insurance Scheme, 2026 kept both the floor and the ceiling intact.
Administrative charges run at 0.5% of PF wages with a minimum of Rs. 500 per establishment per month, dropping to Rs. 75 in a month with no contributing member. Note one trap in the EPF Scheme, 2026: where an employer makes matching contributions on wages above the ceiling, administrative charges apply to that higher wage base too. Voluntary generosity above the ceiling is not cost-neutral.
Roughly 13% of PF wages, not 12%. The 12% headline understates the cost by the 0.5% EDLI charge and the 0.5% administrative charge. At the Rs. 15,000 ceiling that is Rs. 1,800 plus Rs. 75 plus Rs. 75, or Rs. 1,950 per employee per month, which is Rs. 23,400 a year. Add ESIC where the employee is covered and the statutory floor rises further. Budget models that stop at 12% understate India employer cost by about 8%.
| Scenario | PF wages | Employer EPF + EPS | EDLI | Admin (0.5%) | Employer monthly total |
|---|---|---|---|---|---|
| Contribution restricted to the ceiling | Rs. 15,000 | Rs. 1,800 | Rs. 75 | Rs. 75 | Rs. 1,950 |
| Wages below ceiling | Rs. 12,000 | Rs. 1,440 | Rs. 60 | Rs. 60 | Rs. 1,560 |
| Employer matches on full wages | Rs. 50,000 | Rs. 6,000 | Rs. 75 | Rs. 250 | Rs. 6,325 |
| Wages above ceiling, capped at Rs. 15,000 | Rs. 50,000 (capped) | Rs. 1,800 | Rs. 75 | Rs. 75 | Rs. 1,950 |
The gap between rows three and four is the single largest discretionary lever in Indian payroll: Rs. 52,500 a year per employee. Whether you cap at the ceiling or contribute on full wages is a policy decision, not a legal one, and the EPF Scheme, 2026 makes that explicit by classifying above-ceiling contributions as voluntary and expressly allowing either side to reduce or discontinue them. Feed the number you choose into your India employee cost calculator before you sign off on a hiring plan.
EPF coverage is mandatory for every employee whose wages are Rs. 15,000 a month or less in an establishment covered by Chapter III of the Code on Social Security, 2020, which broadly means 20 or more employees. An employee whose wages exceeded the ceiling at the moment they first became eligible for membership is an excluded employee and can stay out. The EPF Scheme, 2026 preserved this exclusion framework unchanged, and it also preserved continuity, so anyone who was a member under the 1952 Scheme remains a member now.
Only if they are already members. Once someone is in the scheme they stay in, even when their wages climb well past the ceiling; the employer may then restrict its contribution to 12% of Rs. 15,000. A genuinely new hire with no prior EPF account and wages above the ceiling can be kept out as an excluded employee. In practice most employers enrol everyone anyway, because the administrative cost of running two populations exceeds the saving and because candidates expect it.
Yes. The EPF Scheme, 2026 retains mandatory coverage for international workers employed in covered establishments, and existing international workers carry over as members. Withdrawals are generally permitted only on retirement after age 58, except where a Social Security Agreement applies. Read on a plain reading of the 2026 Scheme, the wage ceiling that applies to domestic workers now appears to apply to international workers as well, which would be a departure from the old position. Treat that as unsettled until EPFO clarifies. If you are moving people into India, pair this with our guide to work permits in India.
The principal employer, unless the contractor is independently registered. This is one of the sharper changes in the EPF Scheme, 2026, which introduces an express definition of principal employer covering anyone who engages employees through a contractor, including the owner, occupier or manager of a factory and any person with ultimate control over the establishment. Even where the contractor does pay, ultimate responsibility stays with the principal employer. New filings follow: Form X to declare all contractors and Form XII for monthly abstracts of aggregate contract labour contributions.
If you use contractors to avoid statutory cost, that arbitrage is closing. The distinction that still holds is genuine independent contracting, and the tests for it are covered in our employee versus contractor hiring guide and in the comparison of an employer of record versus a staffing agency.
The ESIC employer contribution is 3.25% of gross wages, with the employee paying 0.75%, for a combined 4%. These rates have been in force since 1 July 2019 and did not change in 2026. ESIC applies to establishments with 10 or more employees, 20 in some states, and covers every employee whose gross monthly wages are Rs. 21,000 or less. That ceiling was last set in January 2017. At the Rs. 21,000 threshold the employer pays Rs. 683 a month and the employee Rs. 158, rounded to the nearest rupee.
Both shares are deposited by the employer by the 15th of the following month through the ESIC employer portal. Industry bodies have pushed for a ceiling of Rs. 25,000 or Rs. 30,000, and the Code on Social Security gives the Central Government power to revise it without a fresh amendment, but no revision notification has issued.
Anyone earning Rs. 21,000 or less in gross monthly wages at a covered establishment, including temporary staff, contract workers, probationers and salaried directors within the limit. For employees with disabilities as defined under the Rights of Persons with Disabilities Act, 2016, the ceiling is Rs. 25,000 a month, and a reduced employer contribution incentive applies. Employees above the applicable ceiling fall outside ESI and rely instead on the Employees’ Compensation Act, 1923 and on whatever private medical cover the employer provides. That gap is a real one in Indian employee benefits administration, because a Rs. 22,000 employee has neither ESI nor, usually, a group medical policy.
Coverage continues to the end of the running contribution period. ESIC works on two fixed six-month contribution periods, April to September and October to March. If an employee is covered at the start of a period and gets a raise above Rs. 21,000 in month three, contributions continue on the higher wages until the period ends, and coverage stops from the start of the next period. Employers who cut off deductions the moment the raise lands create a short-payment default. This is one of the most common and most avoidable ESIC findings in an audit.
Gross, not basic, and not CTC. This is the single most frequent confusion between the two schemes: EPF runs on the PF wage definition (broadly basic plus dearness allowance, as recomputed by the labour codes 50% rule), while ESI runs on gross wages actually paid. The employer’s own PF and ESI contributions are not part of gross wages for the ESI ceiling test. Getting this backwards either over-deducts from staff or under-remits to ESIC, and both are corrected at the employer’s cost.
EPF is a retirement savings and pension scheme; ESIC is a contributory health insurance and cash benefit scheme. They use different wage bases, different ceilings, different thresholds and different regulators, and an employee can easily be covered by one and not the other. A person on Rs. 30,000 gross with Rs. 15,000 basic is in EPF and out of ESI. A person on Rs. 18,000 gross is in both.
| Feature | EPF (with EPS and EDLI) | ESIC |
|---|---|---|
| Governing law | Code on Social Security, 2020; EPF Scheme, 2026 | ESI Act, 1948, read with the Code on Social Security, 2020 |
| Regulator | EPFO, Ministry of Labour and Employment | ESIC, Ministry of Labour and Employment |
| Employer share | 12% plus 0.5% EDLI plus 0.5% admin charges | 3.25% |
| Employee share | 12% | 0.75% |
| Wage base | Wages as defined by the Code (broadly basic + DA, subject to the 50% rule) | Gross monthly wages |
| Coverage ceiling | Rs. 15,000 per month (mandatory); above that it is voluntary | Rs. 21,000 gross per month (Rs. 25,000 for employees with disabilities) |
| Establishment threshold | 20 or more employees | 10 or more employees (20 in some states) |
| Benefit to the employee | Retirement corpus, pension, Rs. 7 lakh life cover | Medical care, sickness, maternity, disablement and dependant benefits |
| Payment deadline | 15th of the following month | 15th of the following month |
| Contribution periods | Monthly | Apr to Sep and Oct to Mar |
Take gross wages for the ESI test and PF wages for the EPF test, then apply the ceilings separately. Below are three structures at three salary levels, computed on the 2026 rules. The employer statutory cost column is the number to carry into a hiring budget, and it excludes gratuity, bonus, professional tax and any private insurance.
| Line item |
Junior: gross Rs. 18,000, PF wages Rs. 12,000 |
Mid: gross Rs. 35,000, PF wages Rs. 17,500 |
Senior: gross Rs. 1,00,000, PF wages Rs. 50,000 |
|---|---|---|---|
| Employee EPF (12%) | Rs. 1,440 | Rs. 1,800 (capped) | Rs. 1,800 (capped) |
| Employer EPS (8.33%) | Rs. 1,000 | Rs. 1,250 | Rs. 1,250 |
| Employer EPF (balance) | Rs. 440 | Rs. 550 | Rs. 550 |
| EDLI (0.5%) | Rs. 60 | Rs. 75 | Rs. 75 |
| Admin charges (0.5%) | Rs. 60 | Rs. 75 | Rs. 75 |
| Employee ESI (0.75%) | Rs. 135 | Not covered | Not covered |
| Employer ESI (3.25%) | Rs. 585 | Not covered | Not covered |
| Employer statutory cost per month | Rs. 2,145 | Rs. 1,950 | Rs. 1,950 |
| As a share of gross | 11.9% | 5.6% | 2.0% |
Two things jump out. First, statutory cost as a share of pay falls sharply as salaries rise, because both ceilings are absolute rupee amounts rather than percentages. Second, the junior employee is by far the most expensive to employ in relative terms, which is exactly the effect a frozen Rs. 15,000 ceiling produces. If the ceiling moves to Rs. 25,000, the mid and senior rows roughly double. For how these numbers sit against actual market pay, see average salary in India by job role, average salary in India by city and average salary in India by industry.
The employer’s PF contribution is legitimately included in CTC, because CTC means total cost to the company, but it must never be deducted from the employee’s wages. Those are two different things and the distinction is where most disputes start. The employee’s own 12% is a deduction and shows on the payslip. The employer’s 12% is a cost the company bears and does not reduce gross pay, even though it appears inside the CTC number in an offer letter.
EPFO has been explicit on the related point that CTC cannot be the basis for computing PF. Contributions are payable on the statutory wage definition, not on the whole CTC figure. Where an employer recovers its own share from the employee by shrinking gross pay, that is a breach of the anti-recovery rule that has existed since the 1952 Scheme and carries forward under the 2026 Scheme. If you are reviewing offer letters, the test is simple: does gross salary before deductions fall when the employer contribution is added? If yes, the structure is wrong.
These are the PF questions most likely to come up when employees review their CTC, passbook or take-home pay.
“Why is employer PF in my CTC?”
Because CTC is cost, not pay. It is real money spent on you, just not paid to you in cash this month.
“Why does my passbook show less than 24%?”
Because 8.33% of the employer share goes to the pension fund, not the provident fund. You will see it as pension, not as a balance.
“Why did my in-hand fall after the labour codes?”
Because the 50% wage rule raised the PF base, so your own 12% is calculated on a larger number. The money is not lost. It moved from cash to corpus.
Both EPF and ESIC contributions are due by the 15th of the month following the wage month. Miss it and two separate charges land: interest at 12% a year under Section 7Q, and damages at 1% per month or part of a month on the arrears. The damages rate was standardised at 1% per month with effect from 14 June 2024, replacing the old 5% to 25% per annum slab structure. Paying the interest does not extinguish the damages; they are cumulative.
The 1% monthly rate looks generous against the old 25% slab, but the earlier 25% cap was removed at the same time. A 30 month default now attracts 30% in damages, more than was ever possible before. Chronic small delays are the real risk. A payment that lands three days late every month for a year generates a demand that has nothing to do with the size of your workforce and everything to do with process discipline.
More than most employers have absorbed. Alongside the monthly Electronic Challan cum Return, the 2026 Scheme prescribes a consolidated return in Form V within 15 days of the Scheme applying, listing every employee with Aadhaar, PAN, UAN, gross wages and EPF wages. Separate returns cover ownership (Form VI), branch details and the person responsible for each branch (Form VIII) and authorised signatories (Form IX), with a maximum of five authorised signatories drawn from among the establishment’s own employees. Contract labour adds Form X and Form XII on top.
Yes, and there is a window open now. Three special schemes were notified with the EPF Scheme, 2026:
If you inherited an Indian entity through an acquisition, or you have been running a private PF trust, this is the cheapest moment in a decade to clean up. Establishments with existing private PF trusts must apply for continuation of exemption within two years of the Code on Social Security (Central) Rules, 2026, which were notified on 8 May 2026. Exemption orders now run for an initial three years, and extension applications are due at least six months before expiry.
Not EPF or ESIC contributions, but a separate aggregator levy. The Code on Social Security, 2020 defines aggregator, gig worker and platform worker for the first time and requires aggregators to contribute between 1% and 2% of annual turnover towards a social security fund for these workers, subject to a cap of 5% of the amounts payable to those workers. That is a turnover-linked levy on the platform, not a wage-linked contribution on an employment relationship.
For most companies reading this the practical question is different: are the people you call contractors actually gig workers, contractors, or employees in substance? Misclassification is where EPF and ESIC exposure quietly accumulates, because a reclassification is retrospective and brings interest and damages with it. Our gig economy statistics roundup and the explainer on what a gig economy is set out where the lines currently fall.
For a mid-level employee whose PF contribution is restricted to the ceiling, statutory social security adds roughly 2% to 6% on top of gross pay. For a junior employee covered by both schemes it is closer to 12%. Add gratuity provisioning at about 4.81% of basic, statutory bonus where applicable, professional tax and any group medical policy, and total employer burden above gross salary typically lands between 15% and 20% for junior roles and 8% to 12% for senior ones. This remains one of the lowest statutory employer burdens among large economies, which is a large part of why India stays attractive as a hiring destination.
For the full picture rather than the social security slice, work through the cost of hiring employees in India, the payroll costs in India breakdown and our method for accurately calculating employee cost. If you are comparing India against other markets, minimum wage versus average salary in India and cost of living versus salary in India give the ground-level context that a percentage table cannot.
Through an employer of record, which becomes the legal employer of record in India and takes on EPF registration, ESIC registration, monthly remittance, the Form V and ECR filings and the principal employer obligations for any contract labour. The foreign company keeps day-to-day direction of the work and pays a per-employee fee. The alternative, incorporating a subsidiary, obtaining PF and ESI codes and running your own payroll, is defensible at scale but usually takes three to six months and carries fixed compliance overhead regardless of headcount.
Start with what an employer of record is and the difference between an EOR and a PEO in India. If you are already shortlisting, our comparison of the best EOR providers in India names prices, and the EOR vetting checklist covers the compliance questions worth asking, including whether the provider files ECR in its own PF code or a client’s. For a PEO model rather than an EOR, see the end-to-end PEO in India guide and how much a PEO costs.
12% of PF wages, split into 8.33% to the Employees’ Pension Scheme (capped at Rs. 1,250 a month) and the balance to the provident fund account. On top of that the employer pays 0.5% EDLI, capped at Rs. 75 per employee, and 0.5% administrative charges with a Rs. 500 monthly minimum per establishment. Total employer cost is about 13% of PF wages.
3.25% of gross wages for every employee earning Rs. 21,000 a month or less. The employee contributes 0.75%. These rates have applied since 1 July 2019 and did not change in 2026.
No. The statutory ceiling remains Rs. 15,000 a month. A revision to Rs. 25,000 has been reported as cleared by the Finance Ministry, but Cabinet approval is pending and no gazette notification has issued. Until one does, payroll should continue on Rs. 15,000.
On wages as defined by the Code on Social Security, 2020, which is broadly basic plus dearness allowance plus retaining allowance, with the 50% rule adding back any excluded allowances that exceed half of total remuneration. It is never calculated on CTC. EPFO has said so expressly.
No. The employer share is a cost borne by the employer. It may sit inside a CTC figure in an offer letter, but it cannot reduce the wages actually payable to the employee.
Rs. 1,800 from each side where contributions are restricted to the statutory ceiling, being 12% of Rs. 15,000. Higher contributions are permitted voluntarily, and under the EPF Scheme, 2026 either party may reduce or discontinue those voluntary contributions at any time.
Both are due by the 15th of the month following the wage month. Late payment attracts interest at 12% a year and damages at 1% per month on the arrears, and the two are cumulative.
Yes, until the end of the running contribution period. ESIC periods run April to September and October to March. Coverage ends from the start of the next period, not from the month of the raise.
Not if they were never an EPF member and their wages exceeded the ceiling when they first became eligible. They are an excluded employee. Anyone already a member stays a member regardless of later salary increases.
The principal employer, unless the contractor is independently registered, and even then ultimate responsibility remains with the principal employer. The EPF Scheme, 2026 added Form X and Form XII filings specifically for contract labour.
This article is general information, not legal or tax advice. Rates and ceilings change by notification. Verify against the EPFO and ESIC portals before you run payroll, or talk to the Peorient team if you want the numbers checked against your specific salary structures.
Written by
Senior US Employment and HR Tech Analyst · 12+ years experience
Sarah leads US employment and HR technology coverage for Peorient. Former in-house HR Director at a 400-person fintech across 22 states and senior HR-tech analyst at G2 Crowd, where she built the review methodology for the payroll and HRIS categories. SHRM-SCP, SPHR, CPP. MILR, Cornell ILR.
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