Statutory Payroll Compliance (PF, ESI, PT, TDS): After Approval: What Continues
Statutory Payroll Compliance (PF, ESI, PT, TDS) does not end at approval — a set of obligations continues afterwards. The questions below are the ones raised most often in practice; the full scope of the service is on the Statutory Payroll Compliance (PF, ESI, PT, TDS) page.
Why do PF and ESI use different wage bases if they are both meant to protect employees?
Before the labour codes, they did: EPF followed the EPF Scheme's wage definition (broadly basic salary plus Dearness Allowance), while ESI used a broader gross-wage base. That distinction has largely gone. The Code on Social Security 2020, which subsumed both the EPF Act 1952 and the ESI Act 1948 and whose provident fund and ESI provisions came into force on 21 November 2025, uses a single definition of 'wages' — basic pay, Dearness Allowance and retaining allowance, with listed exclusions such as HRA, conveyance allowance and overtime — together with a rule that if the excluded components exceed 50% of total remuneration, the excess is added back to wages. ESIC has directed that ESI contributions be computed on this Code definition from 21 November 2025; how the definition is being applied to PF contributions (including the PF wage-ceiling mechanics) should be confirmed against current EPFO circulars. A common compliance risk is a payroll team still running pre-Code wage logic for either regime, which can misstate contributions in either direction.
In practice: Wage-base errors can trigger ESI demand notices. For a new client, it is sensible to recompute prior-period contributions on the wage definition that applied in each period — the pre-Code definition before 21 November 2025 and the Code definition after it — before setting up the ongoing cycle.
What is the difference between employer contribution and employee deduction across these four regimes — does the employer bear any direct cost beyond payroll processing?
Yes, materially. The employer's EPF contribution and the employer's ESI contribution (3.25% of wages, in addition to the employee's 0.75%, for employees within the ESI wage ceiling) are paid by the company over and above the employee's net salary — a real cash cost to the business beyond what is deducted from the employee. Professional Tax is deducted from the employee's salary with no employer-side contribution (though the company itself may owe a separate entity-level PTEC in Maharashtra and Karnataka). TDS on salary is not a cost to the employer at all — it is withheld from the employee's own salary and remitted to the government on the employee's behalf; the employer bears no tax cost, only the compliance obligation to withhold and deposit correctly.
In practice: We model the full employer cost — not just the headline CTC — for clients designing salary structures, since the EPF and ESI employer contributions meaningfully affect the true cost per employee beyond the number quoted in an offer letter.
How much does statutory payroll compliance with PNPC cost?
PNPC charges a fixed monthly or annual retainer fee for the combined EPF, ESI, PT, and TDS compliance function, based primarily on headcount, the number of states in which you operate, and the complexity of your salary structures (multiple pay grades, expatriate employees, variable pay components). The exact fee is confirmed in writing before the engagement begins. We are not the cheapest option in the market — a payroll software subscription alone will always be less expensive on a pure cost basis. What the retainer buys is the professional review, cross-regime reconciliation, and representation that a software subscription does not provide, and that can cost far less than the interest, damages, and regularisation expense of an unmanaged compliance gap.
In practice: We provide a written scope and fee proposal, based on your actual headcount and state footprint, before any engagement begins. If a provider will not commit fees in writing upfront, that is worth noting when comparing options.
How does an inspection or audit typically unfold when it covers statutory payroll compliance broadly, rather than just one regime?
Individual inspections — an EPFO enforcement visit, an ESIC Social Insurance Officer inspection, a state PT department review, or a TDS default assessment by the Income Tax Department — are each conducted independently by their respective authority and are not coordinated with each other. However, the underlying evidence each authority examines is the same payroll register, the same salary structure, and the same employee data. An inconsistency an ESIC inspector identifies in the wage base, for example, is often exactly the kind of issue that would also affect the EPF or PT computation if examined. PNPC's integrated record-keeping across all four regimes means that when one authority raises a question, we can immediately assess and address the parallel exposure under the other three — rather than discovering it only when that authority's own inspection eventually occurs.
In practice: When one authority's inspection flags a wage-base problem, the same issue should be checked — and corrected where necessary — under the other regimes before their own review. That cross-regime check is far easier when one firm holds the complete picture.
Does PNPC also handle gratuity and other end-of-service benefits as part of statutory payroll compliance?
Gratuity — historically under the Payment of Gratuity Act 1972, now carried forward within the Code on Social Security 2020 (with the qualifying service period for fixed-term contract employees reduced to one year under the new labour codes) — is a related but distinct obligation. It is not part of the monthly PF/ESI/PT/TDS cycle, since it typically crystallises only on an employee's separation after five years of service (or earlier on death, disability, or for eligible fixed-term contract employees), and requires separate actuarial provisioning in the company's accounts rather than a monthly deduction.
In practice: We flag gratuity exposure to clients as headcount and tenure grow, even though it is not a monthly filing obligation like the other four — it is a balance-sheet provisioning matter that is easy to overlook until the first long-tenured employee actually exits.
Where this sits in the wider engagement
Statutory Payroll Compliance (PF, ESI, PT, TDS) rarely arrives on its own. The statutory basis and the current requirements are set out on the Statutory Payroll Compliance (PF, ESI, PT, TDS) service page, and the related services are grouped under Accounting Payroll.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On Statutory Payroll Compliance (PF, ESI, PT, TDS) we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.