Workforce
The 20-employee threshold under the Code on Social Security, which replaced the EPF Act, who counts as an employee, the wage ceiling, and the cost of depositing late.
Check your DPDP readiness — free More on the blogOne of the most dangerous milestones for a growing Indian company is crossing 20 employees. Below 20, employee provident fund contributions are elective; at 20, provident fund coverage applies automatically. Since 21 November 2025 that rule sits in the Code on Social Security, 2020, which replaced the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (the EPF Act) without moving the threshold. Many founders stumble because they count only "full-time core staff" on payroll. If an enforcement officer inspects the workplace, the definition of an employee is far broader than what HR assumes.
If the combined sum of these categories hits 20 on any single day of an accounting month, the establishment is covered from that day, and coverage continues even if the headcount later falls below 20.
Once registered, the monthly contribution schedule is calculated on the employee’s basic wage, dearness allowance (DA), and retaining allowance: Deducting the employee's 12% share from salary and not depositing it with the EPFO is treated as criminal breach of trust, not as a late payment.
Contributions are due by the 15th of the following month, through the Unified Portal. A late deposit carries two liabilities under the Code on Social Security, 2020: simple interest at 12% a year from the due date under section 127 (the rate the Centre notified on 29 May 2026, effective from 21 November 2025), and damages under section 128 of up to the amount of the arrears, levied in the manner the EPF Scheme specifies. They replaced sections 7Q and 14B of the EPF Act. Check your exact headcount triggers live across POSH, ESI, EPF, and Gratuity using our employee threshold checker. Standardise your workforce documentation with our employment agreement template, offer letter template, and employee handbook.
At 20 employees. The First Schedule to the Code on Social Security, 2020 applies the provident fund chapter to every establishment in which twenty or more employees are employed. The Code replaced the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 on 21 November 2025 and kept the same threshold.
All personnel employed directly or through a contractor: permanent employees, probationers, casual workers, contract staff, and part-time workers. Even if individual employees earn above the ₹15,000 monthly statutory ceiling, they count toward reaching the 20-person establishment threshold.
₹15,000 per month. For employees drawing basic wages plus dearness allowance up to ₹15,000, EPF contributions are mandatory. For employees earning above ₹15,000, coverage is voluntary at the joint option of employer and employee.
Simple interest at 12% a year from the due date under section 127 of the Code on Social Security, 2020 — the rate notified on 29 May 2026 with effect from 21 November 2025, the same rate section 7Q of the EPF Act charged — plus damages under section 128 of up to the amount of the arrears, levied in the manner the EPF Scheme specifies. Keeping back contributions deducted from employees' pay is treated as criminal breach of trust, not as a late payment.
Published 15 September 2026, updated 24 September 2026. Founder & CEO at VidhiSar. I have watched four companies pay for the same mistake, and it was never the mistake anyone expected. VidhiSar is software, not a law firm: every answer names the section it relies on so you can check it, and anything turning on your specific facts is worth putting to a professional. More about who builds this
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