When an employee doesn't want to join PF or ESI

Why staff say no

PF (Provident Fund, also called EPF) gives your staff savings and a pension. ESI (Employees' State Insurance) gives your staff medical care, and pay when they can't work because of sickness, injury or maternity.

When staff say no to them, it is usually for a fair reason. For example:

• They want more take-home pay. Their PF and ESI shares come out of their pay each month. When money is tight, that feels like a loss.
• They don't know what they get. Nobody has explained PF or ESI to them in simple words.
• They worry about the steps. A new employee who has never been in PF gets their UAN (their PF account number) with a quick face scan on the UMANG app. Some staff are unsure about this. Working with us? We guide them.

These worries make sense. Listen to them, and answer them. But the answer can't be to leave them out.

Can they opt out?

No, if the rules cover them. For staff the rules cover, joining is not a choice for you or for them.

First, PF and ESI must cover your business. PF applies to a business with 20 or more staff, in any industry. ESI applies to a business with 10 or more staff, except seasonal factories. Once PF or ESI applies, it stays. Read Do you need to register for PF? and Do you need to register for ESI?

Then, for each employee:

• PF: staff whose PF wages are ₹25,000 a month or less must be in PF, if the rules cover them. PF wages are basic pay plus DA (dearness allowance), not the full salary.
• ESI: staff whose ESI wages are ₹21,000 a month or less (₹25,000 for a person with a disability) must be in ESI, if the rules cover them. ESI wages leave out some pay items, such as HRA (house rent allowance) and overtime.

PF wages must be at least half the total pay. If they come to less, the difference is added to PF wages. The same rule applies to ESI wages.

So you can't leave covered staff out, and they can't say no. Staff who are already in PF can't stop because they ask to. For how PF and ESI differ, read PF vs ESI: the differences for employers in one table.

Working with us? We'll check who must be in PF and ESI.

Above ₹25,000: the joint written choice

For PF, staff with PF wages above ₹25,000 are different:

• Already in PF: they stay in PF, even if their PF wages are above ₹25,000. They can't leave because their pay went up.
• New joiners above ₹25,000 who were never in PF: they can join PF if you and they both agree in writing.
• In PF at an old job? Call us to check before you decide.

Read more in PF wage limit is now ₹25,000: what employers must change.

How to explain the benefits

Start with what the money does. Tell them: "PF gives you savings and a pension. ESI gives you medical care and sick pay."

Be honest about take-home pay. PF and ESI take the employee's share from their pay:

• PF: the employee pays 12% of their PF wages. You pay 12%, split between their PF savings and the pension (EPS).
• ESI: most employees pay 0.75% of their ESI wages. You pay 3.25%. Staff on very low daily pay don't pay their share, but you still pay 3.25%.

Their take-home pay goes down by their PF share, and their ESI share if they are in ESI. But their PF share is their own savings, and ESI gives them medical care and sick pay.

A few tips:

• Talk before the first payslip. Staff take it better when they hear it from you first, not from a smaller payslip.
• Say it is the rule, not your choice. If the rules cover them, you must add them.
• Keep it short. Don't try to explain every rule. Share a guide they can read at home, in English or Kannada.

Want the business side? Read What does your business get from PF and ESI? It explains what you gain from PF and ESI.

Guides you can share with staff

These two guides are written for employees, in simple words. Every guide on our site is in English and Kannada.

• PF benefits for employees: what you get
• ESI benefits for employees: what you get

We hear about staff who don't want to join in many industries. See PF and ESI for your industry.

Rather not handle this alone? We file PF and ESI for you every month. We work by phone and email. We can visit you if needed, in Mangalore and Bangalore. You can talk to us in English or Kannada, and we can help you in Hindi too. Our founder worked at EPFO (the government PF office) for 35 years. He taught us the PF rules.

See our PF monthly filing and ESI monthly filing services.