If you work in India or run a business with employees, you have probably noticed PF, ESI, or LWF deductions in salary slips. Many people see these deductions every month but do not know what they mean, why they are deducted, or what benefits they actually give.

This confusion becomes bigger when someone changes jobs, joins their first company, or starts managing payroll. Some people even assume PF and ESI are the same thing, while others think LWF is optional everywhere.

In reality, LWF, EPF, and ESI are three different government linked schemes. Each one has a separate purpose, separate eligibility rules, and separate benefit structure. This article will explain LWF vs PF vs ESI in the simplest possible language. You will learn what each scheme means, who needs to pay it, how much gets deducted, and what the employee gets in return.

What is LWF in Salary

LWF means Labour Welfare Fund. It is a state level statutory contribution collected for worker welfare.

Why Labour Welfare Fund exists

The purpose of LWF is to support welfare activities like

• education programs for workers
• medical assistance
• recreational facilities
• improved working and living conditions
• support during emergencies

Who controls LWF

LWF is controlled by state governments, not by the central government. This is why LWF rules change from state to state.

LWF deduction amount

• usually a small fixed amount
• employee and employer both contribute
• deducted monthly or half yearly or yearly depending on the state

Who comes under LWF

LWF generally applies to salaried employees working in states where LWF is active. Some states set salary limits or exclude certain roles.

Actionable takeaway
If you are an employer, confirm your LWF applicability state wise. Do not copy LWF rules from another state payroll.

What is EPF or PF

EPF means Employees Provident Fund. People commonly call it PF.

It is a retirement saving scheme where money is deducted from salary and deposited into the employee’s PF account.

Who manages EPF

EPF is managed by EPFO which is Employees Provident Fund Organisation under the Government of India.

Why PF is deducted from salary

PF creates long term savings. It helps employees build a strong fund for

• retirement
• emergencies
• major life goals like house purchase
• financial support during job loss situations

PF contribution amount

PF is calculated mainly on basic salary and DA.

• employee contributes 12 percent
• employer contributes 12 percent
• employer share is split between EPF and EPS (pension part)

PF eligibility in India

PF is usually mandatory for

• companies having 20 or more employees
• employees earning under the wage limit at the time of joining

Once you start PF, it generally continues even if salary increases.

Actionable takeaway
Employees should check their PF passbook monthly to ensure timely deposits by the company.

What is ESI in Salary Slip

ESI means Employees State Insurance.

It is a government health and social security scheme mainly meant for employees in lower and mid salary ranges.

Who manages ESI

ESI is managed by ESIC which is Employees State Insurance Corporation.

Why ESI is deducted

ESI provides protection in situations like

• sickness
• maternity
• disability
• workplace injury
• death related compensation support

ESI contribution amount

• employee contributes a small percentage of wages
• employer contributes a larger percentage of wages
• ESI applies only till the wage limit

ESI eligibility rules

ESI generally applies to

• establishments with 10 or more employees (some states follow 20)
• employees earning within the wage threshold

Actionable takeaway
If you are eligible under ESI, register your family details. Many employees miss this step and lose benefits.

LWF vs PF vs ESI Key Difference

This section explains the core difference between LWF, EPF and ESI in the clearest way.

Main purpose difference

• LWF is for welfare support programs
• PF is for retirement savings
• ESI is for medical and social security support

Who makes the rules

• LWF rules depend on state government
• PF rules apply nationally through EPFO
• ESI rules apply nationally through ESIC

Contribution style

• LWF is usually fixed amount
• PF is percentage of salary
• ESI is percentage based but only for eligible wage group

Benefits type

• LWF gives indirect welfare benefits
• PF gives long term savings and withdrawal options
• ESI gives healthcare and cash support during health related issues

Actionable takeaway
If your salary slip has PF, ESI, and LWF all together, it is normal. They are different schemes and can apply simultaneously.

LWF PF and ESI in Salary Slip

Here is how it usually looks in a salary slip

• PF is usually the biggest deduction after TDS
• ESI appears only if salary is under eligibility limit
• LWF is very small and may not appear monthly in some states

Some companies deduct LWF only twice a year or once a year depending on state law.

Actionable takeaway
Employees should always ask HR or accounts to explain each statutory deduction clearly.

Most Common Confusions About LWF PF and ESI

Confusion 1 PF and ESI are same

No. PF is savings for future. ESI is medical protection.

Confusion 2 LWF is optional everywhere

No. LWF depends on state. If your state has LWF law, it becomes mandatory.

Confusion 3 If PF is deducted, ESI will not be deducted

Wrong. Both can be deducted if employee qualifies for both.

Actionable takeaway
Employers should not mix compliance. LWF, PF, and ESI are separate registrations and filings.

FAQs on Difference Between LWF PF and ESI

Is PF compulsory for all employees

PF is compulsory for eligible organizations and employees under EPFO rules.

Can I opt out of ESI

If you are eligible and covered, generally you cannot opt out.

Is LWF refunded like PF

No. LWF is not refundable. PF can be withdrawn under specific conditions.

Does ESI give benefits to family members

Yes. ESI gives medical benefits to eligible dependents.

Is PF better than ESI

They are different. PF helps for future savings. ESI supports during medical and health issues.

What is the difference between PF and ESI

PF is for retirement savings. ESI is for medical support and sickness benefits.

What is LWF deduction in salary

LWF is a small state level deduction used for labour welfare and worker support programs.

Can PF and ESI be deducted together

Yes. If your salary falls under ESI limit and the company is covered under PF rules, both can be deducted.

Conclusion

The difference between LWF, PF, and ESI is simple when you break it down. LWF is a state welfare fund, PF is a retirement savings scheme under EPFO, and ESI is a medical and social security scheme under ESIC.

Employees should understand these deductions because they directly affect take home salary and future benefits. Employers should follow correct compliance because incorrect deductions or missed filings can lead to penalties. If you want, I can also create a short cheat sheet style table for quick understanding and a state wise LWF applicability list for India.