AS | Ankit Sarawagi|Founder, CFOmatrix·August 2026·10 min read | Payroll & Labour Law |
The month you hire your twentieth person, a new statutory clock starts, and most founders only find out when a candidate asks, “will you deduct my PF?”
EPF registration is the payroll compliance startups meet first and understand least. This guide covers the whole thing in plain language: when EPF applies, how to register on the EPFO portal, how the 12 percent splits between provident fund and pension, and how to file the monthly ECR by the 15th without slipping into interest and damages.
- When it applies
- Mandatory at 20 or more employees. Voluntary registration is allowed below that.
- Contribution
- 12% employee + 12% employer on basic + DA, up to a ₹15,000 wage ceiling.
- Where to register
- EPFO Unified Portal, via the Shram Suvidha single window. Each employee gets a UAN.
- Filing & due date
- File the ECR and pay by the 15th of the following month.
- Penalty
- Late payment: 12% p.a. interest plus damages on the delayed amount.
1 Does EPF apply to you?
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, kicks in for any establishment that employs 20 or more people. That is the line that makes EPF registration mandatory.
- 20 or more employees: you must register within 30 days of crossing the threshold and start deducting and depositing PF.
- Fewer than 20: registration is optional. You can opt in voluntarily, and many startups do to offer PF as a benefit.
The count is broad: it includes full-time, part-time and most contract and casual staff who work for you, not only the people on your own payroll. And once you are covered, you stay covered. If your team later shrinks below 20, the registration and the duty to file continue.
Who must be covered inside the 20
Not every employee draws the same contribution. Coverage centres on a wage ceiling of ₹15,000 a month in basic plus dearness allowance (DA):
- An employee earning ₹15,000 or less (basic + DA) is mandatorily covered.
- An employee earning above ₹15,000 who has never been an EPF member can be treated as an “excluded employee” and left out, though most employers cover everyone.
- Once someone is an EPF member, they stay a member even if their wage later crosses ₹15,000.
Kaveri Labs has 18 people on payroll and hires 3 more in March: two engineers and one office assistant. Headcount is now 21. Kaveri must register for EPF within 30 days, obtain a code number, and cover every eligible employee from the month it crossed 20, not from some future date it chooses.
2 Registering on the EPFO portal
Registration is online and free. You do it through the Shram Suvidha single window, which routes you to the EPFO Unified Portal and issues your establishment code number.
3 The contribution maths, split correctly
This is the part everyone gets slightly wrong. Both sides contribute 12 percent of basic plus DA, but the two 12 percents do not go to the same place.
- Employee 12%: the entire amount goes into the EPF (provident fund) account.
- Employer 12%: splits into two. 8.33% goes to the pension fund (EPS), capped at a ₹15,000 wage, so a maximum of ₹1,250. The balance 3.67% goes to the EPF account.
On top of its 12 percent, the employer also pays two small charges that are never deducted from the employee:
| Component | Rate | Paid by |
|---|---|---|
| EPF (provident fund) | 12% of basic + DA | Employee |
| EPS (pension), part of employer 12% | 8.33%, capped at ₹1,250 | Employer |
| EPF, balance of employer 12% | 3.67% (or more above the cap) | Employer |
| EDLI (life insurance) | 0.5%, capped at ₹75 per employee | Employer |
| EPF admin charges | 0.5%, minimum ₹500 per establishment | Employer |
Brewly hires an employee, Meera, at basic + DA of ₹15,000 a month. The split for the month:
• Employee EPF: 12% of 15,000 = ₹1,800
• Employer EPS: 8.33% of 15,000 = ₹1,250
• Employer EPF: 3.67% of 15,000 = ₹550
• EDLI: 0.5% of 15,000 = ₹75
• Admin: 0.5% of 15,000 = ₹75 (subject to the ₹500 establishment minimum)
Total employer outgo for Meera = 1,250 + 550 + 75 + 75 = ₹1,950, plus Meera’s own ₹1,800 deducted from her salary.
Now a senior hire at Brewly, Rohan, on basic + DA of ₹30,000. Brewly chooses to contribute on actual wages, not restrict to the ceiling:
• Employee EPF: 12% of 30,000 = ₹3,600
• Employer EPS: capped at 8.33% of 15,000 = ₹1,250 (the pension side never crosses the ₹15,000 ceiling)
• Employer EPF: 3,600 minus 1,250 = ₹2,350
• EDLI: 0.5% of 15,000 (capped) = ₹75
Note how the pension amount is identical for Meera and Rohan: EPS is always frozen at ₹1,250. Every rupee of employer contribution above that lands in the provident fund, not the pension.
4 Filing the monthly ECR
Every month you file the Electronic Challan cum Return (ECR) on the EPFO portal. The ECR is both the return (who earned what, who contributed what) and the challan (the amount you pay). Filing and payment happen together.
Brewly runs its April payroll. The April EPF ECR must be filed and paid by 15 May. If Brewly pays on 20 May, it owes interest and damages on the whole amount for the delay, even a five-day slip is a chargeable default.
5 What late payment costs
Miss the 15th and two charges stack on top of the contribution you already owe:
- Interest at 12 percent per year on the delayed amount, for the period of delay.
- Damages, a penalty that rises with how long you are late, charged on the same amount.
Both are recoverable and, unlike a rounding error, they show up in due diligence as a pattern. Repeated PF delays read to an investor as a shaky finance function, which is a costlier signal than the rupees themselves.
6 The new Labour Codes and the 50 percent wage rule
The four Labour Codes came into force on 21 November 2025, with detailed rules still rolling out. The change that touches EPF most is the new definition of “wages”.
Under it, allowances that fall outside “wages” are capped, so that basic plus DA must be at least 50 percent of total pay. Many startups today keep basic low (say 30 to 40 percent) and load the rest into allowances, which shrinks the PF base. When the 50 percent rule applies in full, that structure no longer works.
7 Your EPF setup checklist
- Track headcount. At 20, register for EPF within 30 days through Shram Suvidha.
- Collect the documents: PAN, incorporation certificate, address proof, cancelled cheque, DSC.
- Onboard every eligible employee and seed their UAN KYC (Aadhaar, PAN, bank).
- Fix your salary structure so basic + DA is realistic, and budget employer PF at ~13 percent.
- File the ECR and pay the challan by the 15th of every following month, internal cut-off the 10th.
- Keep filing even in nil-movement months, and add the PF due date to your compliance calendar beside GST and TDS.
Not sure which payroll rules apply at your headcount?
Use our free Compliance Applicability Checker: enter your team size, state and set-up, and see exactly which labour and payroll filings you owe now (EPF, ESI, Professional Tax and more) and which switch on as you grow.
Check my compliances8 FAQs
When does EPF registration become mandatory for a startup?
How is the 12 percent EPF contribution split between EPF and pension?
What is the due date for filing the EPF ECR?
Do I have to cover employees who earn more than ₹15,000 a month?
What are EDLI and admin charges on top of the 12 percent?
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Which compliances apply to your company? (free tool) →
AS | Founder, CFOmatrix | Finance Strategy & Compliance CFOmatrix helps Indian startups build finance, tax and compliance functions that stand up to investor due diligence, from process and controls to the filings and the numbers behind them. |
Disclaimer: This article is general information as of August 2026 and is not legal or tax advice. EPF rates, ceilings, portal procedures and the Labour Codes can change. Confirm your specific obligations with a qualified professional before acting.