India's Provident Fund and ESI Contribution Updates for 2026: An Employer Guide

India's social security rules changed more in 2026 than in any year in the past decade. In November 2025, the replaced nine older laws, including the EPF and ESI Acts. In July 2026, a new EPF Scheme replaced the one in place since 1952. In September 2026, the PF wage ceiling went up for the first time in 12 years.

If you employ people in India, these changes affect three things: who you must enrol, how much you contribute for each employee, and how your payroll calculates "wages". This guide covers the current rates and limits, what changed in 2026, a worked cost example, and the deadlines and penalties to watch. It is current as of October 2026.

The Legal Framework Has Changed

The Code on Social Security, 2020 came into force on 21 November 2025. It consolidates the old EPF Act, ESI Act, and seven other laws. Three of its changes matter most for payroll:

• A single definition of wages. Under Section 2(88), "wages" means basic pay, dearness allowance, and retaining allowance. If excluded allowances such as HRA, conveyance, and special allowance make up more than 50% of total pay, the excess is added back into wages. Payroll can no longer keep basic pay artificially low to reduce PF contributions.
• Nationwide ESI coverage. ESI is no longer limited to areas the government has specifically notified.
• Social security for gig and platform workers, funded partly by contributions from aggregators.

EPF Contribution Rates in 2026

The employee's full 12% goes into their EPF account. The employer's 12% is split, with 8.33% going to the pension scheme, capped at the wage ceiling, and the rest to EPF. The central government also pays 1.16% toward EPS, but that stays capped at ₹174 a month (1.16% of ₹15,000) despite the higher ceiling.

Employers in establishments with 20 or more employees must register with EPFO. Smaller employers can join voluntarily.

The September 2026 Wage Ceiling Increase

From 17 September 2026, the ceiling for mandatory EPF, EPS, and EDLI coverage went up from ₹15,000 to ₹25,000 a month.

What it means in practice:

• New joiners earning EPF wages up to ₹25,000 must be enrolled in EPF, EPS, and EDLI. Before, only those earning up to ₹15,000 had to be.
• Coverage is based on EPF wages, not gross salary or CTC. An employee with a gross salary of ₹50,000 but EPF wages of ₹25,000 must be enrolled.
• Contributions for existing members go up. For anyone with EPF wages between ₹15,000 and ₹25,000, contributions are now calculated on their actual wages, not on ₹15,000.
• Employees above ₹25,000 who aren't yet members can be covered voluntarily, with the employer's agreement. Existing members earning above the ceiling stay members.
• September 2026 is split. Wages for 1 to 16 September are capped at ₹15,000, and wages for 17 to 30 September at ₹25,000. Both periods go in a single September return (ECR). EPFO's guidance gave 15 October 2026 as the due date, but some reports mention an extension. Check the EPFO portal for the current deadline.
• Members who had EPF only must now join EPS from 17 September 2026, as long as they meet the scheme's conditions.

Employers don't need an application from newly covered employees. Enrolling them is the employer's legal responsibility.

Worked Example: What the Change Costs

Here is the monthly cost for an employee with EPF wages of ₹25,000:

This assumes the employer previously contributed on the ₹15,000 cap. For this employee, the employer pays about ₹1,300 more a month, and the employee's take-home pay falls by ₹1,200. If you have 30 employees in this band, that's close to ₹39,000 a month in extra employer cost.

Eligible employers may be able to offset part of the cost of new hires through the Pradhan Mantri Viksit Bharat Rozgar Yojana (PM-VBRY). It pays employers up to ₹3,000 a month for each additional employee, subject to eligibility and retention conditions.

Plan how you'll explain the lower take-home pay to employees. Your options include restructuring pay within the same CTC or increasing gross salary, so decide before payroll runs.

The New EPF Scheme, 2026

The Employees' Provident Funds Scheme, 2026, issued under the Code on Social Security, came into force on 1 July 2026 and replaced the 1952 scheme. Most of the structure is the same, including the 12% + 12% contributions. The main changes are:

• Exempted PF trusts: Exemptions are now granted for an initial three years and have to be renewed. Trusts face board governance duties, annual audits, electronic records, and stricter investment rules. Existing exempted establishments must apply within the set timelines to keep their exemption.
• Contract labour: The principal employer stays responsible for PF compliance for contractors' workers, even when the contractor handles the filings. Check that your contractors are registered and paying.
• International workers: The rules are largely the same. Foreign nationals working in India for an Indian establishment are generally covered from their first day, with contributions on their full salary and no wage ceiling. Employees from countries with a social security agreement with India can be exempt if they hold a certificate of coverage.
• Damages for late payment have been revised, with a more structured recovery process.

Three Time-Limited Schemes: EEC, VISHWAS, and AMNESTY

The new scheme came with three one-time programmes to help employers fix past problems.

If you have employees who should have been enrolled but weren't, the EEC deadline of 31 October 2026 is the most urgent item on this list.

ESI Contribution Rates and Eligibility

ESI rates haven't changed since July 2019, and the ₹21,000 limit was last raised in 2017. The government can change the limit by notification, so keep an eye on ESIC announcements.

Two rules commonly cause mistakes:

• Coverage continues to the end of the period. If a covered employee gets a raise that takes them above ₹21,000 during a contribution period, you keep deducting ESI until that period ends.
• ESI uses gross wages, not the PF wage definition. Most allowances are included.

Example: For an employee with gross wages of ₹20,000, the employer pays ₹650 a month and the employee pays ₹150.

Deadlines and Penalties

Late PF payments attract interest at 12% a year plus damages, which depend on how late the payment is. Late ESI payments also attract 12% simple interest a year plus graded damages. Persistent non-payment can lead to recovery action and personal liability for directors and senior managers.

Compliance Checklist for Employers

• Update payroll to calculate EPF on wages up to ₹25,000 from 17 September 2026, and split the September 2026 return correctly.
• Enrol all employees with EPF wages up to ₹25,000, and move EPF-only members into EPS.
• Check your pay structure against the 50% wage rule in the Code on Social Security.
• Review past enrolment gaps and decide whether to use the Employees' Enrolment Campaign before 31 October 2026.
• If you run a PF trust, check its exemption status and the AMNESTY 2026 timelines.
• Confirm that contractors are registered with EPFO and ESIC and paying contributions for their workers.
• Check how international workers are treated and whether any hold a certificate of coverage.
• Track ESI coverage by contribution period, not month by month.
• Explain the change in take-home pay to affected employees before the next payroll.

How Slasify Keeps India Payroll Compliant

Changes like these are hard to keep up with if you don't have a payroll team in India. Slasify's Employer of Record and global payroll services handle them for you.

With Slasify, you can:

• Hire employees in India without a local entity through our Employer of Record (EOR) service.
• Run compliant global payroll in India and more than 150 other countries.
• Let us apply new rules like the ₹25,000 PF ceiling, the Code on Social Security wage definition, and the EPF Scheme 2026 changes on time.
• Have EPF, ESI, professional tax, and TDS calculated, deducted, and filed correctly every month.
• Pay in 130+ currencies from one platform.

Hiring in India?

India's social security rules are still changing. Slasify keeps your payroll up to date so you can focus on building your team. Talk to our team about hiring in India.

FAQs

1. What is the EPF wage ceiling in 2026?
₹25,000 a month from 17 September 2026, up from ₹15,000. Employees with EPF wages up to ₹25,000 must be enrolled in EPF, EPS, and EDLI.

2. What are the EPF contribution rates for 2026?
The employer and the employee each contribute 12% of EPF wages. The employer's share is split into 8.33% for EPS (on wages up to ₹25,000) and 3.67% for EPF. The employer also pays 0.5% for EDLI and 0.5% in admin charges.

3. Is EPF calculated on basic salary or gross salary?
Neither exactly. It's calculated on "wages" as defined by the Code on Social Security: basic pay, dearness allowance, and retaining allowance. If excluded allowances make up more than 50% of total pay, the excess is added back.

4. What is the ESI contribution rate in 2026?
4% of gross wages: 3.25% from the employer and 0.75% from the employee. It applies to employees earning up to ₹21,000 a month (₹25,000 for employees with disabilities).

5. What is the EPF Scheme, 2026?
The new provident fund scheme under the Code on Social Security, 2020. It replaced the EPF Scheme, 1952 on 1 July 2026. Contribution rates are the same, but the rules for exempted PF trusts, contract labour, and compliance are stricter.

6. What is the Employees' Enrolment Campaign 2026?
A one-time scheme for employers to enrol staff who joined between 1 April 2009 and 31 March 2026 but were never registered for EPF. Damages are limited to ₹100, and the employee's share is waived if it was never deducted. It closes on 31 October 2026.

7. Do foreign employees in India have to contribute to EPF?
Generally yes. International workers are covered from day one, with contributions on their full salary and no ceiling. Employees from countries with a social security agreement with India can be exempt if they hold a certificate of coverage.