What counts as a micro enterprise under MSME rules?
A micro enterprise is the smallest of the three MSME bands. As of 1 April 2025, it means an investment in plant, machinery or equipment of up to Rs 2.5 crore and annual turnover of up to Rs 10 crore. There is no floor and no employee count attached, so a two person consultancy and a twenty five person workshop can both sit here, depending purely on those two figures.
Many founders in India start out as a micro enterprise without really thinking about the classification. It tends to matter when you register on Udyam or start dealing with questions about payments, loans, or your first hire. These are the issues that usually come up first at this size.
Why Offrd is built for a business at exactly this size
A micro enterprise usually looks like this: low document volume, tight cash, and usually not enough people yet to trigger EPF or ESI. That is also why much HR software is a poor fit here. A a monthly subscription assumes a volume of hiring and payroll activity a two or three person team simply does not have. Offrd is priced around that usage, at Rs 99 a document or Rs 50 per active employee a month, with 50 free credits and no card on signup.
You do not need to buy a full platform before you need one. You can pay for the documents you actually use. An offer letter costs 10 credits. A payslip costs 2, and the first one for every new employee is free regardless of credits. For a founder with a small team, you can start when you actually need it.
The early HR problems you run into
Your first hire has no proper offer letter
A lot of founders write the first one in Word, often using a template someone sent them. Offrd generates one in minutes, in a format a joiner or a bank actually recognises, for 10 credits out of the 50 free ones.
You do not know if PF or ESI apply to you yet
Offrd checks your headcount when you run payroll, so you do not have to guess whether the 20 or 10 employee line has been crossed.
You do not want to pay for software before you need it
Offrd's pay per document pricing means cost tracks real usage. A quiet month costs nothing. There is no flat fee ticking over in the background.
Onboarding still feels improvised
Offrd verifies PAN and Aadhaar and issues a real onboarding record, so a two person company runs its first hire like a properly set up one, not a favour done in a hurry.
The first payslip has to be right, not just fast
Offrd's first payslip for every new hire is free, and it is calculated with whatever PF, ESI or state PT genuinely applies, never skipped just because the team is small.
A worked example: three people, one client, and a payslip due
Take a three person design studio. Two laptops, a subscription to some design software, and one large retainer client paying Rs 6 lakh a month, putting annual turnover at roughly Rs 72 lakh. Investment in equipment sits well under Rs 5 lakh, comfortably inside the micro band.
The founder issues the first two offer letters through Offrd, 20 credits total, and runs the first payslip for each hire free. From month three onward, with three people on steady payroll, the studio spends about 6 credits a month, two payslips at a time from a team that started with 50 free credits and no card. At that rate, the free balance would cover roughly eight months of regular payroll before you need to pay.
If the retainer client starts paying 60 or 90 days late instead of the 30 in the contract, that is a separate issue Udyam registration helps with, not something Offrd's software touches directly, covered further down this page.
Where the Rs 2.5 crore and Rs 10 crore figures come from
India uses one composite test since 2020 for every MSME. You have to sit inside both the investment limit and the turnover limit to hold a band, so crossing either one alone pushes you up a tier.
| Category | Investment limit | Annual turnover limit |
|---|---|---|
| Micro | Up to Rs 2.5 crore | Up to Rs 10 crore |
| Small | Up to Rs 25 crore | Up to Rs 100 crore |
| Medium | Up to Rs 125 crore | Up to Rs 500 crore |
Figures per the Reserve Bank of India and the Ministry of Micro, Small and Medium Enterprises. Registration runs through the free, self declared Udyam portal using PAN and GSTIN, or the bank operated Udyam Assist Platform if you have neither yet. Full detail on the MSME classification overview.
Does micro status mean employees do not need PF or ESI?
No. A lot of founders assume the smallest MSME band means lighter payroll rules. It does not. Investment and turnover decide your Udyam band. Provident fund and state insurance decide themselves, on headcount alone, 20 employees for EPF and generally 10 for ESI in most states. Below those numbers, most micro enterprises genuinely are exempt, which is likely why the assumption spreads, but it is a coincidence of size, not a rule tied to the certificate.
Offrd runs that check on its own every time a payslip is generated, so the answer to "do we owe PF this month" never depends on someone remembering to look it up.
The one protection micro status buys you that Offrd does not
The 45 day rule
Once you are Udyam registered as micro, a buyer must pay you within the period agreed in writing, capped at 45 days from acceptance, under the MSMED Act. Miss that window and the buyer owes compound interest at three times the Reserve Bank's notified bank rate, whatever the purchase order says.
This is separate from software, but it is useful to know. It is a right that comes from registering on Udyam, not from any tool you use to run payroll, and it disappears once an enterprise grows into the medium band.
Growing past micro? See how the reasoning changes for a small enterprise and a medium enterprise.
Common questions on the micro enterprise band
What is the investment and turnover limit for a micro enterprise?
Up to Rs 2.5 crore invested and up to Rs 10 crore turned over a year, effective from 1 April 2025. You need to sit inside both.
Can a business with almost no revenue yet register as micro?
Yes, there is no floor. A pre revenue business with modest equipment easily qualifies, and registering early means the payment protection applies from day one.
Do I need a GST number to register as a micro enterprise?
Usually yes, along with PAN, for standard Udyam registration. Units that genuinely lack either can use the Udyam Assist Platform instead.
Does micro status mean I do not have to worry about EPF?
No. EPF applies once headcount reaches 20, regardless of Udyam band. Most micro enterprises are exempt simply because they have not reached that headcount yet.
What happens if a client delays payment past 45 days?
Registered micro and small suppliers can claim compound interest at three times the Reserve Bank's notified bank rate on the overdue amount.
Is there a minimum staff size to count as a micro enterprise?
No. Classification runs purely on investment and turnover, so even a solo founder qualifies once those figures are in range.
Do I need to renew or update my Udyam registration every year?
No renewal is required. The system is meant to update itself from the income tax and GST returns you already file, though it is worth checking the certificate periodically to confirm your band still matches your actual figures.
Is Offrd worth using for a two or three person company?
Usually yes, since pricing is per document rather than a flat subscription. A team that size typically issues one or two offer letters and a handful of payslips, which the 50 free credits and the free first payslip per employee cover without anything due.
Does Offrd charge anything before I make my first hire?
No. There is nothing to pay until you actually generate a document, and the first 50 credits are free with no card required to sign up.
Sources and official references
- Reserve Bank of India, MSME classification and Udyam Registration FAQ: rbi.org.in
- Press Information Bureau, investment and turnover limits raised 2.5x and 2x for all MSME categories: pib.gov.in
- Employees' Provident Fund Organisation, confirming the 20 employee threshold for EPF Act applicability: epfindia.gov.in
- Government of West Bengal, text of the Micro, Small and Medium Enterprises Development Act, 2006, Chapter V on delayed payments to micro and small suppliers: wb.gov.in
Rules and thresholds change with new notifications. Confirm your own classification on the Udyam portal and take a professional view from your chartered accountant before relying on any figure here. Spot something out of date? Tell us at service@offrd.co.
Run your first hires properly, from day one
Offer letters, onboarding, payroll with EPF, ESI and state PT built in, and attendance, in one place. Start with 50 free credits, no card.