Quick answer: PF is mandatory in establishments with 20 or more employees for every employee whose PF wages are ₹25,000 a month or less (from 17 September 2026) and for anyone already a member; employees who joined above the ceiling and were never members can opt out. ESI is mandatory in covered establishments (generally 10 or more employees) for employees earning ₹21,000 a month or less, with no opt-out. The type of company does not matter; headcount, wages and coverage do.
"Can I skip PF?" is one of the most common questions HR hears from new joiners, and "do we have to register?" one of the most common from founders. The answers depend on three things: whether the establishment is covered, the employee's wages, and whether the employee was ever a PF member before. This guide explains when PF and ESI are mandatory under the Code on Social Security, who can opt out of PF, when salary can be paid without PF, and what employers must check. For the full rules on contributions, see our guides to PF in payroll and ESI in payroll.
PF and ESI at a glance
| PF (EPF) | ESI | |
|---|---|---|
| Establishment coverage | 20 or more employees; voluntary below that | Generally 10 or more employees in notified areas; voluntary below; any size for notified hazardous processes |
| Employee wage limit | Mandatory up to ₹25,000 PF wages a month (from 17 September 2026) | Covered up to ₹21,000 wages a month (₹25,000 for persons with disability) |
| Above the limit | Can be an excluded employee if never a member; existing members continue | Not covered, except to the end of a contribution period already started |
| Can the employee opt out? | Only if excluded | No |
| Employee rate | 12% of PF wages | 0.75% of wages |
| Employer rate | 12% (EPS + EPF) plus EDLI and charges | 3.25% of wages |
Sources: EPFO, ESIC and our PF wage ceiling guide.
When is PF mandatory for an employer?
The PF scheme applies to establishments employing 20 or more persons. Once an establishment is covered, it stays covered even if the headcount later falls below 20. Establishments with fewer than 20 employees can join voluntarily if the employer and the majority of employees agree. Coverage depends on headcount, not on whether the business is a private limited company, LLP, partnership or proprietorship.
Is PF mandatory for every employee?
In a covered establishment:
- PF wages up to ₹25,000 a month: membership is mandatory. Since 17 September 2026 this includes employees earning between ₹15,000 and ₹25,000 who were earlier treated as excluded.
- Already a PF member: PF must continue, whatever the current salary, including when the employee changes jobs. The new employer must continue contributions using the same UAN.
- PF wages above ₹25,000 at joining and never a member before: the employee can be treated as an excluded employee and need not join. With the employer's agreement, the employee can still join voluntarily.
"PF wages" means wages as defined under the Labour Codes, not CTC or gross salary. An employee with a gross salary of ₹30,000 may still have PF wages below ₹25,000 if part of the pay is HRA or other excluded allowances within the 50% limit; see our guide to payroll vs salary vs wages.
Can I get salary without PF?
Only if one of these applies:
- The employer's establishment is not covered by PF (fewer than 20 employees and no voluntary coverage).
- You are an excluded employee: PF wages above ₹25,000 when you joined and you were never a PF member before.
- You are an apprentice engaged under the Apprentices Act, who is outside the scheme.
Employers cannot drop PF for an eligible employee because the employee asks, or restructure pay simply to avoid PF; an agreement to waive PF does not override the law. Existing members who move to a higher salary still contribute, although contributions are limited to the ceiling by default unless employer and employee jointly opt to contribute on higher wages.
The joining declaration
Every new joiner fills a PF declaration at joining (commonly called Form 11 under the old scheme), stating whether they were earlier a PF or pension member and their UAN. This tells the employer whether PF is mandatory for that employee and whether an existing account must be continued. Our guide to adding a new employee to payroll covers the joining documents.
International workers
Foreign nationals working for a covered Indian establishment are generally "international workers" and must be enrolled in PF regardless of salary, unless they come from a country with a social security agreement with India and hold a certificate of coverage from their home country.
Can an employee stop PF later?
No. Once an employee is a PF member, contributions continue for as long as they are employed in a covered establishment, even if their salary rises well above ₹25,000. What can change is the amount: where the scheme allows, the employer may contribute on PF wages up to the ceiling rather than on full wages, and any extra contribution by the employee above 12% is voluntary provident fund (VPF), which the employee can start or stop. Withdrawing the PF balance is possible only in the situations the scheme allows, such as unemployment or specific needs; see our PF guide.
When is ESI mandatory?
ESI applies to establishments with 10 or more employees in areas where ESI has been notified; smaller employers can join voluntarily, and establishments carrying on notified hazardous processes are covered regardless of size. In a covered establishment, every employee whose wages are ₹21,000 a month or less (₹25,000 for persons with disability) must be covered. There is no opt-out. Once an employee is covered, contributions continue until the end of the contribution period (April–September or October–March), even if the employee's wages cross the limit during it. Employees whose average daily wage is ₹176 or less pay no employee share, but the employer still pays its 3.25%. Our ESI guide explains coverage in detail.
ESI without PF
An employee can be covered by ESI but not PF when the establishment has between 10 and 19 employees: ESI applies, but PF does not unless the employer has joined voluntarily. In a covered establishment, an employee within the ESI limit will also be within the PF ceiling, so both apply.
Examples
| Situation | PF | ESI |
|---|---|---|
| Company with 45 employees; new joiner, gross ₹18,000, never a member | Mandatory | Mandatory |
| Same company; new joiner, PF wages ₹40,000, never a member | Optional (excluded employee) | Not covered |
| Same company; new joiner, PF wages ₹40,000, has an existing UAN with contributions | Mandatory | Not covered |
| Start-up with 12 employees in a notified area; employee earning ₹19,000 | Not applicable unless voluntary | Mandatory |
| Shop with 6 employees | Not applicable unless voluntary | Not applicable unless voluntary |
What employers should check
- Headcount each month, including contract workers where the law counts them, to know when PF or ESI registration becomes due.
- Joining declaration for every new employee, to identify existing members and excluded employees.
- PF wages calculated under the Labour Codes, not just basic pay, before deciding whether an employee is above the ceiling.
- ESI coverage flag that follows the contribution period rules.
- Records of opt-outs: keep the declaration and wage evidence for every excluded employee.
Use our PF calculator and ESI calculator to check contributions, and see payroll penalties for the cost of getting coverage wrong.
Check the numbers. Work out PF and ESI for any salary with the free PF calculator and ESI calculator.
Frequently asked questions
Is PF mandatory for all employees?
In an establishment covered by PF, membership is mandatory for every employee whose PF wages are 25,000 rupees a month or less, and for anyone who is already a PF member. Employees who joined with PF wages above 25,000 rupees and were never members can be treated as excluded employees and need not join, though they may join voluntarily with the employer's agreement.
Can I get salary without PF?
Only in limited cases: if your employer's establishment is not covered by PF, if you are an apprentice engaged under the Apprentices Act, or if you are an excluded employee because your PF wages were above 25,000 rupees when you joined and you were never a PF member before. If you are already a member, or your PF wages are within the ceiling in a covered establishment, PF cannot be dropped by agreement.
Is PF mandatory for salary below 20,000?
Yes, in an establishment covered by PF. PF wages of 20,000 rupees a month are below the 25,000 rupees ceiling that applies from 17 September 2026, so the employee must be enrolled. In an ESI-covered establishment, ESI also applies because the wages are within the 21,000 rupees ESI limit.
Is PF mandatory for salary below 25,000?
Yes, in an establishment covered by PF. From 17 September 2026 the PF wage ceiling is 25,000 rupees a month, so employees with PF wages up to that amount must be enrolled. Note that the test is PF wages as defined in the Labour Codes, not gross salary or CTC.
Is ESI mandatory?
ESI is mandatory for employees of covered establishments whose wages are 21,000 rupees a month or less (25,000 rupees for persons with disability). Covered employees cannot opt out, and once covered they stay covered until the end of the contribution period even if their pay rises.
Is PF and ESI mandatory for a private limited company?
It depends on headcount and coverage, not on the type of company. PF applies to establishments with 20 or more employees, and ESI generally to establishments with 10 or more employees in notified areas. A private limited company below these thresholds may register voluntarily.
Position as of 15 November 2026, after the PF wage ceiling was raised to ₹25,000 from 17 September 2026. Rules on excluded employees and international workers have conditions not covered here; check the current scheme provisions or EPFO guidance for individual cases. General information, not legal advice.