What Are the New PF and ESI Rules in 2026?

S.O. 3582(E) sets provident fund at twelve per cent of wages, payable by the employer and matched by the employee. Section 16(1)(a) of the Code on Social Security, 2020, one of the four Labour Codes, sets ten per cent, and its first proviso lets the Central Government notify establishments for which the words "ten per cent." are read as "twelve per cent." at both the places where they occur. S.O. 3582(E) is that notification, and it specifies "twelve percent as the contribution to be paid by the employer and the employees". The employee's rate follows in any event from clause (a) itself, which makes the employee's contribution equal to the employer's. S.O. 3582(E) was made on 1 July 2026 and is deemed in force from 21 November 2025, so it applies to every month since the Code commenced. Part of the employer's twelve per cent is paid into the Pension Fund under section 16(1)(b)(i), and S.O. 3580(E) fixes that part at eight and one-third per cent of wages. The employer also pays deposit-linked insurance, shown as EDLI in payroll systems, at 0.50 per cent of wages under S.O. 3581(E); the employee pays nothing towards it. The three provident-fund contributions are paid under three schemes, all notified on 29 June 2026: the Employees' Provident Funds Scheme, 2026, the Employees' Pension Scheme, 2026 and the Employees' Deposit-Linked Insurance Scheme, 2026. ESI falls under Chapter IV of the Code, and its rates are set by rules rather than by a notification. Rule 19 of the Social Security (Central) Rules, 2026 sets 3.25 per cent from the employer and 0.75 per cent from the employee, both paid to the Employees' State Insurance Corporation.

The pension and deposit-linked insurance rates apply from 29 June 2026, because S.O. 3580(E) and S.O. 3581(E), although made on 1 July 2026 like S.O. 3582(E), are each expressed to take effect from the commencement of its own 2026 scheme. An employer working out what it owed for a past month uses the date of effect, not the date the notification was made.

Because section 16(1)(b)(i) provides for the Pension Fund to be paid "such sums from the employer's contribution under clause (a)", the eight and one-third per cent is part of the employer's twelve per cent and not in addition to it. The employer's provident-fund cost is twelve per cent, split between the Provident Fund and the Pension Fund, plus 0.50 per cent for deposit-linked insurance. Paragraph 21 of the EPF Scheme prohibits recovering the employer's share from the member, and section 124 of the Code on Social Security prohibits reducing wages or employment benefits merely to meet contribution costs. The employee's own provident-fund deduction is separate, and an increase in it can reduce the employee's take-home pay. Section 16(1)(a) lets an employee contribute more than the rate if he wishes, and the employer "shall not be under an obligation to pay any contribution over and above his contribution payable under this section".

Paragraph 2 of S.O. 3582(E) provides that the first proviso "shall not apply" to any establishment for which a resolution plan or repayment plan has been approved under the Insolvency and Bankruptcy Code, 2016, and to any establishment in the jute industry, the beedi industry, the brick industry, the coir industry other than the spinning sector, or a guar gum factory. For those establishments the statutory ten per cent in section 16(1)(a) governs, on both sides. Paragraph 18(2) of the Employees' Provident Funds Scheme, 2026 sets twelve per cent, with a proviso making it ten "in respect of the class of establishments notified by the Central Government in this regard". S.O. 3582(E) was made under the section 16(1)(a) proviso and does not say it notifies a class for the purposes of paragraph 18(2), so the ten per cent for those establishments applies under section 16(1)(a) itself.

For members who exercised the joint option under paragraph 11 of the Employees' Pension Scheme, 1995 and are found eligible, S.O. 2061(E) of 3 May 2023 sets the employer's Pension Fund contribution at nine and forty-ninth per cent, that is 9.49 per cent. S.O. 2061(E) was issued after the Supreme Court's decision of 4 November 2022 in Employees' Provident Fund Organisation v. Sunil Kumar B. Its higher rate applies only to the part above ₹15,000 a month, and it is deemed in force from 1 September 2014. S.O. 3580(E) is expressed to be without prejudice to S.O. 2061(E), so S.O. 2061(E) is still in force. The second proviso to paragraph 4(2) of the Employees' Pension Scheme, 2026 re-enacts the 9.49 per cent rate from the same date and applies it to wages rather than to basic wages, dearness allowance and retaining allowance, so cite the Scheme paragraph with the notification. The ₹15,000 threshold in that second proviso is a fixed amount in the Scheme, separate from the notified wage ceiling, and S.O. 5109(E) does not amend it; for eligible higher-pension joint-option members, retain ₹15,000 as the threshold rather than replacing it with ₹25,000.

The provident-fund, pension and deposit-linked insurance figures are each at or below the statutory maximum, and none of them can be raised by a notification beyond it. The first proviso to section 16(1)(a) provides for twelve per cent by notification, section 16(1)(b)(i) says the pension share shall be "not exceeding eight and one-third per cent.", and section 16(1)(c) says deposit-linked insurance shall be "not being more than one per cent."

The proviso to section 16(1)(c) lets the Central Government require further sums, not exceeding one-fourth of the deposit-linked insurance contribution, for administering that scheme; no such determination has been made, so the Code itself fixes no figure for that cost. Paragraph 28(2) of the Employees' Provident Funds Scheme, 2026 requires the employer to pay an administrative charge as a percentage of wages, and paragraph 29(1) lets the Central Government fix that percentage. S.O. 2011(E) of 21 May 2018 fixed it at 0.50 per cent of the pay on which contributions are payable, subject to a minimum of ₹75 a month for a non-functional establishment with no contributory member and ₹500 a month for every other establishment. Section 164(2)(a) continues that notification under the corresponding Code provisions so far as it is not inconsistent with the Code and until it is superseded. No later Gazette instrument changes the 0.50 per cent rate. S.O. 5109(E) leaves the rate unchanged and raises the wage ceiling used in the calculation, so where the charge was computed on the old ₹15,000 ceiling, a full-month calculation on ₹25,000 adds ₹50 per affected member before the establishment minimum is applied.

An establishment exempted under section 143 pays inspection charges instead of the contribution it is exempted from, under S.O. 2701(E) of 29 May 2026, within fifteen days of the close of every month. An exempted establishment still pays the pension contribution, because paragraph 4(1) of the Employees' Pension Scheme, 2026 takes the 8.33 per cent from the employer's contribution under section 16(1)(a) or from the rules of an exempted establishment's own provident fund, and S.O. 3580(E) is made under section 16(1)(b)(ii), which is the exempted-establishment provision. Section 143(6) refers to an exemption "from operation of any or all the provisions of the Code or any of the scheme under Chapter III", and S.O. 2701(E)'s table names only the two Chapter III schemes. The provident-fund row of that table is 0.18 per cent of wages, corrected from 0.35 per cent by S.O. 4602(E) of 20 August 2026, subject to a minimum of ₹8,750. The deposit-linked insurance row is 0.005 per cent, subject to a minimum of ₹1,250. At 0.18 per cent the ₹8,750 minimum is the operative figure until the monthly wage bill exceeds about ₹48.60 lakh, and at 0.005 per cent the ₹1,250 minimum governs until the bill exceeds about ₹2.50 crore. S.O. 5109(E) does not change those rates or minimums, but raises the otherwise-contributable wage ceiling used in the charge base from ₹15,000 to ₹25,000. That table names the Employees' Provident Fund Scheme, 1952 and the Employees Deposit-Linked Insurance Scheme, 1976, and both were superseded by their 2026 replacements on 29 June 2026, a month after S.O. 2701(E) issued. No instrument expressly applies the table to the 2026 schemes, so the table applies to the exemption the section grants and to nothing beyond it.

₹25,000 from 17 September 2026. S.O. 5109(E) of 17 September 2026, issued under section 2(89), raises the monthly wage ceiling for Chapter III of the Code on Social Security to ₹25,000. It supersedes S.O. 2702(E) of 29 May 2026, which set ₹15,000, while saving things done or omitted before supersession. The notification takes effect on publication in the Official Gazette, on 17 September 2026. Paragraph 18(3) of the Employees' Provident Funds Scheme, 2026 already refers to the ceiling notified from time to time; a further amendment to that paragraph is not needed to apply the revised amount. At the ordinary 12% rate, a member contributing on the full ceiling contributes ₹3,000 a month and the employer matches it, against ₹1,800 each on the ₹15,000 ceiling. S.O. 5109(E) specifies no method for splitting the September 2026 contribution, so ₹3,000 and ₹1,800 are full-month figures. It does not change contribution rates or set a Chapter IV (ESI) ceiling.

Provident fund is mandatory for a covered establishment, not for every employer. Coverage is decided first, by headcount: count every person employed, including staff supplied by a contractor and everyone earning above ₹25,000 a month. Under the First Schedule to the Code, twenty or more employees makes the provident-fund chapter apply, and ten or more persons makes ESI apply. Membership is decided next, by testing each person separately against the wage ceiling, using wages as the Code defines them. The PF salary limit is that wage ceiling, which applies to membership and not to coverage, and it does not cap the rate.

The first proviso to section 2(26) confines "employee" to a person at or below the ceiling for Chapter IV, and for Chapter III other than the provident fund scheme. So the statutory definition of "employee" for the provident fund scheme is not limited by the ₹25,000 ceiling. The Employees' Provident Funds Scheme, 2026 applies the ceiling itself. Its paragraph 2(1)(f)(i) makes an employee other than an International Worker whose wage exceeds the ceiling an "excluded employee" at the point of entry, and its paragraph 18(3) caps the ordinary domestic contribution at the ceiling. Paragraph 9(4) creates an exception to both paragraphs in the ordinary domestic case, where contributing above the ceiling requires the employee and the employer to "jointly opt in writing". The International Worker provisions in paragraphs 9 and 18 must be checked separately. Recheck employees previously excluded only because their wages exceeded ₹15,000 but whose section 2(88) wages are now at or below ₹25,000, because paragraph 9(3) requires membership when an employee ceases to be excluded. EPS membership must also be checked under paragraph 7 of the Pension Scheme, including the employee's previous membership.

No wage ceiling has been notified for Chapter IV. Section 2(89) defines the wage ceiling as the amount the Central Government notifies "for the purposes of becoming a member under Chapter III and Chapter IV", and S.O. 5109(E) names Chapter III alone. The ₹21,000 figure comes from the Ministry's Additional FAQs of 16 March 2026, which say that "at present, Rs 21,000 per month wages notified for ESI coverage will be applicable". That is a Ministry statement, not a notification under this Code, and it predates both S.O. 5109(E) and the three 2026 schemes.

Ritu runs HR at a 140-person software firm in Pune: 122 people on her own payroll and 18 supplied by a facilities contractor. All 140 count, including anyone earning above the ceiling, whom the second proviso to section 2(26) includes in the coverage count. Chapter III and Chapter IV therefore both apply to her firm, and each of the 140 is then tested separately against the wage ceiling. A firm with 18 employees is below the threshold of twenty, so Chapter III does not apply to it, and Chapter IV, with its threshold of ten, does. Each Labour Code has its own definition of employee, and the wording differs between Codes; for PF and ESI the definition is section 2(26) of the Code on Social Security, which makes a person employed through a contractor an employee of the establishment. Record coverage and membership in separate columns of the headcount list.

Chapters III and IV apply to employees of a covered establishment, and gig workers and platform workers engaged without a traditional employment relationship are not employees, so neither chapter applies to them. The Code provides registration and schemes for gig and platform workers, funded partly by aggregator contributions rather than by the PF and ESI contribution rates.

Under section 2(88) of the Code on Social Security, 2020, allowances previously excluded from wages are added back once they exceed half of an employee's remuneration. The add-back increases the single wage base on which provident fund, pension, deposit-linked insurance and ESI are all calculated. The definition first includes all remuneration payable to a person in respect of his employment, and then includes basic pay, dearness allowance and retaining allowance by name. A component is included in the definition unless an exclusion applies; it need not match a named inclusion.

The comparison with one-half of remuneration, known as the 50 per cent wage rule, includes statutory bonus, the value of house accommodation and of the supply of light, water, medical attendance or any other amenity or service the appropriate Government excludes by order, the employer's own contribution to a pension or provident fund, conveyance allowance and travelling concession, sums paid to meet special expenses of the employment, house rent allowance, remuneration under an award or settlement, overtime allowance, and commission. It excludes gratuity, retrenchment compensation, other retirement benefits and any ex gratia payment made on the termination of employment. Add up the included items, compare the total with one-half of total remuneration, and whatever exceeds the half is added to wages. The proviso to section 2(88) reads "one-half, or such other per cent. as may be notified by the Central Government", and no other percentage has been notified, so one-half is the figure to use today.

The Explanation to section 2(88) applies where an employee is given remuneration in kind in lieu of the whole or part of the wages payable to him, and its value is added to wages only up to fifteen per cent of the total wages payable. Value above that is not wages. The Explanation does not cover a benefit given in addition to wages rather than in place of them.

From 17 September 2026, the ordinary PF, pension and deposit-linked insurance contributions are subject to the ₹25,000 wage ceiling. The Schemes made under section 15 cap the amount remitted: paragraph 18(3) of the Employees' Provident Funds Scheme, 2026 limits the employer's and the employee's contribution to the amount payable on the wage ceiling where a member's monthly wage exceeds it; paragraph 4(1) of the Employees' Pension Scheme, 2026 takes "eight and thirty-three hundredths per cent." of wages "up to wage ceiling notified by the Central Government", a figure slightly below the eight and one-third in S.O. 3580(E); and paragraph 5(1) of the Employees' Deposit-Linked Insurance Scheme, 2026 computes on section 2(88) wages "subject to the wage ceiling specified in clause (89)". Only ESI is uncapped, and no ceiling has been notified for it. The wage base still has to be recomputed, because the cap applies only where the base exceeds ₹25,000, and below that figure contribution is paid on every rupee of the add-back.

The 50% rule changes the PF base and not the PF rate, and an allowance attracts PF once the add-back includes it in wages. No provision of any Code makes 50% basic pay mandatory. Section 2(88) of the Code on Social Security governs the base for all four contributions, and section 2(y) of the Code on Wages governs pay-days, deductions and bonus, so payroll software that computes one figure and uses it for both will produce a wrong figure for one of them.

The Ministry illustrated the one-half comparison in FAQ 7 of its FAQs of 30 December 2025, and its Additional FAQs of 16 March 2026 place the working under the first proviso to section 2(y) of the Code on Wages rather than section 2(88). The comparison is drafted the same way in both provisions, so the Ministry's example sets out the form of the calculation and not the authority for it. For a person on ₹76,000 a month whose wages under the definition are ₹20,000, the excluded components come to ₹56,000, but only ₹40,000 of those are in the comparison, because gratuity and retirement benefits are excluded from it. Half of ₹76,000 is ₹38,000. The comparison figure exceeds the half by ₹2,000, so ₹2,000 is added back and wages become ₹22,000. Running the comparison on all ₹56,000 of excluded components would give ₹18,000 instead of ₹2,000.

Sana is a coordinator on Ritu's payroll. Her total monthly remuneration is ₹18,000, and her wages under the old reading were ₹8,000. Her payroll system computed an add-back of ₹600, so her wage base is now ₹8,600; nothing else about her salary changed, and her gross pay is unchanged. Counting only the contributions payable today, her take-home falls by ₹72 through the provident-fund deduction, and the employer's cost rises by ₹75 through provident fund and deposit-linked insurance. With the two ESI lines, which are not yet payable, the figures become ₹77 and ₹95. The add-back changes the split between the amount paid into her bank account and the amount remitted to EPFO. Under the new Labour Code, take-home pay falls for an employee whose wage base rises, by an amount that depends on the base and not on the salary; on Sana's ₹18,000 of remuneration and ₹8,600 base, the PF deducted is ₹1,032.

Sana's base of ₹8,600 is below the ₹25,000 ceiling, so the cap in paragraph 18(3) does not limit her contribution, and contribution is paid on every rupee of the add-back. Her ₹600 is the amount by which the excluded components that enter the comparison exceed half her remuneration: of the ₹10,000 by which her remuneration exceeds her wages, ₹9,600 is included in the comparison and ₹400 is excluded from it, so ₹9,600 less the ₹9,000 half gives ₹600.

Rule 19 rounds each ESI contribution to the next higher rupee, separately for each side, so 3.25 per cent of ₹8,600 is ₹279.50 and becomes ₹280, and 0.75 per cent is ₹64.50 and becomes ₹65. The provident-fund schemes round differently, so payroll software cannot use one rounding routine for both.

The third proviso to the Chapter IV row of the First Schedule makes contributions payable under section 29 only "on and from the date on which any benefits under Chapter IV relating to the Employees State Insurance Corporation are provided by the Corporation to the employees of the establishment", and it provides for that date to be notified by the Central Government. No such notification has issued, and the rule 19 percentages are the rates that will apply from the notified date. The current ESIC remittance is made under the instruments that section 164(2)(b) saves: the regulations and schemes under the Employees' State Insurance Act, 1948 until 20 November 2026, but the Employees' State Insurance (Central) Rules, 1950 were superseded by name on 8 May 2026. Treat the ESI lines in Sana's case as figures to prepare for.

An employer's existing EPFO and ESIC registration continues under the Code on Social Security, and no employer has to re-register for PF. Section 164(2)(a) continues anything done under a repealed enactment as if it had been done under the Code, and section 3(1)'s proviso says an establishment already registered under any other Central labour law "shall not be required to obtain registration again under this Code". The employer has a duty to update its particulars, and for an establishment in the Central sphere the period for doing so ends on 8 November 2026.

Contributions are filed against each employee's Universal Account Number, on the monthly Electronic Challan-cum-Return, and neither the number nor the return changed. Rule 3(6) of the OSH Central Rules gives an employer already registered under another Central labour law six months from 8 May 2026 to update its registration particulars in Form I, which ends on 8 November 2026 for an establishment in the Central sphere. Rule 5(3) of the Social Security Central Rules requires the same particulars to be updated on the Shram Suvidha Portal and fixes no period of its own; it takes the OSH period by reference. A State-sphere employer owes the duty and takes its period from its own State's rules. Andhra Pradesh, Arunachal Pradesh, Bihar, Gujarat and Rajasthan, and the Union territory of Ladakh, have final OSH rules for an employer to take the period from; elsewhere, no State or Union territory period has been fixed.

Section 16 and section 29(2) assign the contribution rates to the Central Government wherever the establishment is located, so there is no separate State contribution rate. Section 122(1) also assigns the Chapter III and Chapter IV Inspector-cum-Facilitator to the Central Government, whoever the employer's appropriate Government is for the rest of the Code, and the appropriate-Government test is settled Code by Code.

Rule 3 of the Social Security Central Rules lets the employer of an establishment to which Chapter III or Chapter IV was made applicable under section 1(5) or section 1(7) apply electronically to the Central Provident Fund Commissioner or the Director General to make those provisions inapplicable, on the condition that the employer and a majority of the establishment's employees agree in writing. The Commissioner decides within sixty days, and if he does not, permission is deemed granted from the day the sixty days end. The three provisos to rule 3 allow no application if the chapter has since become applicable under section 1(4), none within five years of coverage, and none entertained unless the employer has filed all returns, paid all dues under the Code, and filed a self-certificate saying so. A chapter can be made inapplicable only to an establishment that was covered voluntarily; an establishment covered compulsorily on the First Schedule cannot have the chapter made inapplicable, and under section 1(8) a chapter continues to apply even after the headcount falls.

The saving in section 164(2)(b) should not be relied on. It kept four named instruments and one class of instruments in force for a year from commencement, so far as they are not inconsistent with the Code: the Employees' Provident Funds Scheme, 1952, the Employees' Deposit Linked Insurance Scheme, 1976, the Employees' Pension Scheme, 1995, the Tribunal (Procedure) Rules, 1997, and the rules, regulations and schemes made under the Employees' State Insurance Act, 1948. Every named instrument in that list has since been superseded: the three schemes by their 2026 replacements on 29 June 2026, and the Tribunal Rules by the Central Rules of 8 May 2026. The ESI regulations and schemes remain in force under the saving until 20 November 2026. The Employees' State Insurance (Central) Rules, 1950 are not among them, because the Central Rules of 8 May 2026 superseded those by name. The saving for the pension scheme ended earlier still, because S.O. 2060(E) commenced it on 3 May 2023 rather than on the Code's commencement.

A late PF payment attracts simple interest under section 127, which makes an employer liable to pay it at the rate the Central Government notifies, from the day an amount became due under the Code to the day it is actually paid, and interest on PF arrears runs whether or not anyone assesses the employer. Contributions fall due within fifteen days of the close of every month under the schemes, and ESI contributions fall due on the last day of the wage period under section 29(4). Interest runs from that day automatically, and damages under section 128 are levied only after a hearing. S.O. 2698(E) of 29 May 2026 set that rate at twelve per cent a year, deemed effective from 21 November 2025, and it is not confined to Chapter III. Section 127 applies "except where expressly provided otherwise in this Code", so a provision that contains its own interest rule displaces it.

The proviso to section 125 bars initiating proceedings after five years from the date the dispute is alleged to have arisen or the amount is alleged to have become due. The five-year limit applies to starting proceedings, not to finishing them, and it does not waive unpaid dues. Retain the records needed for that assessment period.

Section 23 lets a person aggrieved appeal to the Tribunal against a determination of dues under section 125 or a levy of damages under section 128, and section 23(3) says no appeal by the employer against a determination will be entertained unless he has deposited twenty-five per cent of the amount determined. Both branches of section 23(1) say "relating to Chapter III". There is no section 23 appeal against a Chapter IV determination, and that dispute is taken to the Employees' Insurance Court instead.

S.O. 2697(E) of 29 May 2026 appointed five grades of EPFO officer, from the Central Provident Fund Commissioner to the Enforcement Officer, as Inspectors-cum-Facilitators for the whole of India, for the purposes of Chapter III alone. No fresh appointment has been made for Chapter IV. An ESI default can still be inspected, because section 164(2)(a) continues an appointment made under a repealed enactment, so the existing inspectorate holds office under the Code. Section 122(1) makes the section 122(6) powers exercisable in accordance with an inspection scheme, and that scheme has not been notified.