The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is the bedrock of Indian retirement-savings law. For a foreign company hiring even one Indian employee on its own Indian subsidiary, PF applies once the establishment crosses 20 employees — and crosses with full retrospective effect. Voluntary coverage below that threshold is common because Indian engineers expect PF in any credible offer.
When PF applies to your subsidiary
- Mandatory: 20 or more employees, including any contract / outsourced labour working on your premises.
- Voluntary: any number of employees, by registering on the EPFO Unified Portal and opting in. Most foreign-owned subsidiaries do this from day 1.
- International Workers: special rules — see below.
The numbers — employee, employer and the 2026 ceiling
Both employee and employer contribute 12% of the wage base (Basic + DA). Until late 2025 the wage ceiling for the employer's 12% liability was ₹15,000/month — meaning above that, the employer could cap its contribution. The 2026 EPFO amendments raised that ceiling. Employees fully above the old ceiling whose employer was contributing on the capped amount now see a step-up.
| Component | Employee share | Employer share |
|---|---|---|
| Employee Provident Fund (EPF) | 12% of Basic | 3.67% of Basic |
| Employees' Pension Scheme (EPS) | — | 8.33% of Basic (up to the EPS wage ceiling) |
| EDLI (insurance) | — | 0.50% of Basic |
| EPF admin charges | — | 0.50% of Basic |
| Total | 12% | 13% (rounded) |
Your dedicated consultant maps the new ceiling to your salary structures
FastLegal's dedicated consultant pulls every employee's existing salary structure, computes the impact of the 2026 ceiling change on employer cost, flags which employees need CTC re-discussions, and updates payroll for the next cycle. You get a clean variance report — not a notification you have to interpret.
Monthly ECR — what filing looks like
Each month, the employer prepares an Electronic Challan-cum-Return (ECR) on the EPFO Unified Portal, listing every active employee, their UAN, wages, contribution amounts and any KYC changes. The corresponding challan is generated for payment, and the contribution must be remitted by the 15th of the following month. Late payment attracts interest plus damages.
- ECR file is generated by your payroll system and uploaded to the EPFO portal.
- Challan is generated; payment is made via the integrated bank gateway.
- Confirmation receipt is downloaded — keep this permanently.
- Each employee's PF passbook updates automatically within 7-14 days.
International Workers — the special regime
If your subsidiary has employees who are Indian citizens working in India but the parent is foreign, normal PF applies. The complication arises when foreign nationals are seconded to India by the parent — they become 'International Workers' under EPFO terminology, and special rules kick in.
- No wage ceiling — PF contributions are computed on full salary, both employee and employer share.
- Even if the seconded employee has equivalent retirement coverage in their home country, they must contribute to Indian PF unless their home country has signed a Social Security Agreement (SSA) with India.
- India has SSAs with around 22 countries — Germany, France, Netherlands, Switzerland, Belgium, South Korea, Canada, Australia, among others. The US does NOT have an SSA with India.
- An employee from an SSA-country can obtain a Certificate of Coverage from their home country's social security authority — that exempts them from Indian PF.
For US seconded staff, plan for the full Indian PF contribution on full salary — no ceiling, no exemption, no offset against US Social Security. This often shifts the economics of US-to-India secondments significantly.
Withdrawal and transfer when an employee exits
When an employee leaves your subsidiary, three things can happen to their PF balance:
- If they join another Indian employer, the new employer files the joining ECR with their existing UAN. The PF balance auto-transfers in the next cycle (Aadhaar-verified UAN makes this nearly instant under the 2026 framework).
- If they leave India permanently (e.g. relocating abroad for the parent), they can withdraw the full accumulated balance after a 2-month cool-off. Form 19 (PF) and Form 10C (pension) filed on the portal.
- If they stay unemployed in India, they can withdraw 75% of the balance after 1 month of unemployment, and the rest after 2 months.
Frequently asked questions
Can we skip PF if all employees consent in writing?+
No. PF is a statutory contribution; employee waiver isn't legally effective. The contribution is the employer's obligation regardless of employee preference.
What if our employee was earning above the old ceiling and the employer was capping contributions?+
The 2026 amendments raised the ceiling. Continuing to cap at the old number would underpay PF and trigger interest + damages on EPFO inspection. Either step up to the new ceiling or to full Basic — many employers go to full Basic to simplify.
Do we need to file PF for our seconded US executives in India?+
Yes, if they're on Indian payroll — and there's no wage ceiling for International Workers from non-SSA countries (which the US is). Their PF accrues on full salary.
What's the penalty for late PF deposit?+
Interest under section 7Q (currently 12% per annum on the outstanding amount) plus damages under section 14B (5% to 25% depending on delay duration). Inspectors levy both.
Stop reading circulars. Start running clean payroll.
Every FastLegal plan ships with a dedicated payroll consultant — a real human who runs your PF, ESI, PT, TDS and Form 16 issuance, configured to your salary structure, your state, and your hiring plan. You sign off. We do the rest.