You Just Hit 20 Employees. Here's What Just Became Mandatory

Crossing 20 employees flips on mandatory retirement-savings and bonus obligations that don't exist for smaller businesses - and if you use contract labour, a third law joins the list too.

Key facts at a glance

• EPF registration is mandatory once an establishment employs 20 or more people.
• The EPF wage ceiling is Rs 15,000/month, with 12% employee and 12% employer contributions.
• The EPF Scheme 2026 took effect 29 June 2026, aligning EPF with the Code on Social Security, 2020 - contribution rates and the wage ceiling are unchanged.
• The Payment of Bonus Act applies to establishments with 20 or more employees.
• The Contract Labour (Regulation and Abolition) Act applies once 20 or more workmen are engaged through contractors.
• EPF compliance is moving toward heavier electronic filing under the new scheme.

EPF registration is no longer optional

The Employees' Provident Fund scheme becomes compulsory the day your headcount reaches 20, and this rule hasn't moved with the EPF Scheme 2026 update that took effect on 29 June 2026. That update was about aligning EPF administration with the Code on Social Security, 2020, and pushing more of the process into electronic filing - not about changing who has to register.

Practically, this means you now need to register with EPFO, obtain an establishment code, and start monthly contributions for eligible employees. The wage ceiling for mandatory coverage stays at Rs 15,000 a month, and both employer and employee contribute 12% of covered wages.

Bonus becomes a legal obligation, not a goodwill gesture

Once you cross 20 employees, the Payment of Bonus Act, 1965 applies to your establishment. Eligible employees - generally those earning within the statutory wage limit - must be paid an annual bonus within the percentage band set by the Act, based on profitability and other statutory factors, subject to a minimum bonus even in a loss-making year in most cases.

This is a real cash-flow planning item, not a discretionary perk, once the threshold is crossed.

If you use contract labour, a third Act now applies

The Contract Labour (Regulation and Abolition) Act, 1970 applies once a principal employer or contractor engages 20 or more workmen on any day in the preceding 12 months. If you route staffing through a manpower agency or use outsourced workers for housekeeping, security, or similar functions, you may now need to register as a principal employer and ensure your contractors hold valid licences.

This one is easy to miss because the headcount that matters here is the contract workforce, which many businesses don't track alongside their direct payroll.

What changes, at a glance

What to do this week

Confirm your total headcount count includes everyone eligible under EPF's counting rules, register with EPFO if you haven't already, and set up monthly contribution filing. Separately, check whether your bonus policy meets the statutory minimum, and if you use contract staff, verify whether the Contract Labour Act now applies to your operations.

Sources

• EPFO - epfindia.gov.in
• Ministry of Labour and Employment - labour.gov.in
• Respective state labour department portals

If you're not sure where your business stands on this, ComplianceCheck's statutory compliance assessment gives you a clear picture in a few minutes.

This guide is general information, not legal advice. Requirements vary by state, sector and headcount - confirm specifics with a compliance professional or the relevant authority.