Head of Marketing at TankhaPay, an Indian HR and payroll company. These are my personal notes.
EPF applies to most establishments with 20 or more employees. The employee and the employer each contribute 12% of PF wages. Of the employer's share, 8.33% goes to the pension scheme (EPS), and that part is calculated on a wage capped at the ceiling, currently Rs 15,000 a month. The rest goes to the employee's PF account. Someone who earns above the ceiling when they first join, and was never a PF member before, can be treated as an excluded employee. Anyone who is already a member stays covered even after their pay goes above the ceiling. Many employers also cap their own contribution at the ceiling, but the employee can choose to contribute on the full wage. Since the labour codes came into force (21 Nov 2025), "wages" means basic + DA + retaining allowance. If excluded allowances add up to more than half of total pay, the excess is added back.
ESI covers employees in covered establishments (generally 10 or more employees) whose gross wages are at or below Rs 21,000 a month, or Rs 25,000 for persons with disability. The current rates are 0.75% from the employee and 3.25% from the employer. Contributions run in two six-month periods: April to September and October to March. The detail that catches people: if someone gets a raise mid-period and crosses the threshold, they stay covered and keep contributing until that period ends. Coverage stops from the next period, not from the month of the raise. Check the current notified limits before you rely on these numbers, because they do get revised.
Professional tax is levied by the states, not the centre. The Constitution caps it at Rs 2,500 per person per year. Each state that levies it sets its own salary slabs, deduction months and filing due dates, and some states don't levy it at all. For payroll, what matters is the state where the employee works, not where the company is registered. That means a team spread across states may need a separate registration and return in each one. In some states the employer also pays PT for the business itself, on top of deducting it from salaries. When someone moves states, update their PT state in the same payroll run.
Gratuity is generally payable when someone leaves after at least five years of continuous service. The five-year condition doesn't apply on death or disablement. Under the Code on Social Security, fixed-term employees qualify pro rata after one year. The usual formula is 15 days' wages for every completed year of service, where a part-year of more than six months counts as a full year. A day's wage is the last drawn monthly wage divided by 26, so a year works out to wage x 15/26. The tax-free limit is separate from the statutory calculation, so check both. Provisioning for it monthly is much easier than finding the money all at once.
general information from my own notes, not legal or tax advice. rules and limits change, so check the current notifications.