Hello, in this post, we will discuss the guide to EPF rules for employer. We will cover the following:
- Employees provident fund act 1952 – An Introduction
- Recent changes to EPF
- Deduction of EPF
- EPF rules for employer
- Regular EPF-related tasks for employers
Employees Provident Fund Act, 1952
Employees Provident Fund was established in the year of 1952. Hence the Act is named as Employees Provident Fund and Miscellaneous Provisions Act, 1952. This act extends to the whole of India except Jammu and Kashmir. Basically, the Provident Fund is a welfare scheme for the benefits of the employees. Both employer and employee contribute their share of the amount but the whole of the amount is deposited by the employer. The employer deducts the employee share from the salary of the employee. So, the accumulated amount can be withdrawn if certain conditions are met.
Recent changes to EPF
- The claim settlement period for PF withdrawal is now just 10 days
- Aadhar Card is compulsory for pensioners and subscribers.
- EPF contribution rate for the newly recruited female employees has been reduced from 12% to 8%. This will be available to the new female employees for the first 3 years of employment.
- Employers must consider special allowances paid to the employees as a part of the “Basic Wage” for deduction towards provident fund.
- EPFO subscribers can now withdraw 75% of their PF after 1 month of unemployment. Also, the remaining 25% of the amount can be withdrawn after 2 months of unemployment.
- Women employees resigning to get married can withdraw their 100% without waiting for two months.
- TDS will attract at the time of payment if the PF accumulated balance is more than Rs. 30,000.
- The facility of offline withdrawal has been completely withdrawn.
EPF Deduction
- Contribution by an employer-The contribution made by the employer is 12% of the basic salary of the employee. However, this 12% is further subdivided into:
- Employee Pension Scheme (EPS)– 8.33%
- Employee’s Provident Fund (EPF)– 3.67%
- Contribution by anemployee– Contribution towards EPF is deducted from the employee’s salary. This is 12% of the basic salary of the employee.
We all know that, ifBasic+DA is less than Rs.15,000, then both the employer and employee contribution will be the same. If the amount exceeds Rs.15,000 then you have an option to either contribute based on the original amount or restrict the calculations to Rs. 15,000.
Employee deposit linked insurance Scheme (EDLI) – Under this scheme, the employer has to make a contribution of 0.5% of the total wages upto a maximum amount of Rs. 15,000 every month. The maximum benefits availed is upto Rs. 7,00,000 under this scheme. Employees will not contribute to this scheme from their salary.
EDLI scheme is available for all private-sector PF account holders who join the EPF and EPS.
EDLI provides the benefits in case of an unfortunate death/funeral of an insured person. The nominee can claim for an amount by attaching the Form 5(IF) along with the attested copy of the death certificate. But, Form 5(IF) will be filled up separately. And if there is no nominee registered under this scheme, the amount will be given to the heir apparent. And the limit of benefits is decided by the last drawn salary of the employee. The amount to be payoff will calculate –
[Last 12 Month of Average Salary of the Employee (covered at Rs.15,000/- P.M) x 30] + Bonus Amount (Rs.2,50,000).
EPF rules for employer
We know that the contributions from employees as well as employers get added to the EPF. The latest changes made in the EPF rules are the following –
Revise of minimum salary limit – The employee with a monthly salary less than or equal to 15000 will have to contribute mandatory towards EPF.
Change in the pension amount – The minimum monthly pension amount was set at Rs. 1000 for the widow of a member of the Employees’ Provident Fund. For children and orphans, it is set at Rs. 250 and 750 per month respectively. The pension amount will be calculated as per the average salary of the last 60 months.
Insurance Coverage – The coverage amount has now been increased to Rs. 7,00,000 per member.
Employer Contribution towards EPS – The employer’s contribution towards EPS is increased to Rs. 1,250 per month irrespective of the salary even if it is below or above Rs. 15,000 per month.
Change in employee limit – Even though an organization has only 10 employees they are eligible for EPF contribution.
Withdrawal of EPF – Withdrawals are made from EPF account for financing an insurance policy, buying or building a house and other situations mentioned in the EPFO website.
EPF-related tasks for employers
- PF Registration
- Correction of Personal Details
- Generate UAN
- Upload KYC
- PF Payment
- PF Returns
- Inform UAN number and EPF ID
The employer who is a part of the EPF scheme has to do some regular tasks. They have to pay to EPFO for the administrative expenses. With the arrival of UAN and online portals, these tasks have become a lot easier.
An employer can also create trust to manage the EPF contribution. For this reason, an employer is not required to remit EPF contribution as it goes to the private trust. Instead, the trust should provide an equal or higher return than the EPFO.
The employer with the help of Form 11 will register a new employee into the EPF scheme. However, it is not submitted to the EPF office, but the employer keeps it with himself and uses it to fill up the online form.
Correction of Personal Details
The employer should verify the authenticity of the employee. Therefore, before linking UAN with Aadhaar, the errors in the personal details of members like wrong spelling should be fixed by the employer.
The employer generates the UAN for the new employee who does not have an existing UAN. To make a new UAN, the employer has to login UAN employer portal.
KYC is mandatory for the withdrawal of EPF. The EPFO needs the PAN, Bank account number and Aadhaar or other KYC details of each EPF member. Hence, It is the responsibility of the employer to furnish the KYC details of its employees. But older employees may not have these KYC details.
The employer needs to verify the details before giving approval for an EPF member of the company to upload his/her KYC details online.
An employer has to pay the EPF contribution to the EPFO every month. The employer has to pay the EPF contribution within 15 days of the next month. If the deadline is missed the company will be in the defaulter list and they have to pay a penalty for the default period.
An employee has to file a return of monthly payment by logging in to the UAN employer portal and filling the ECR. The employer gives details of the employees, their salary as well as contribution. Then EPFO updates the passbook of every employee. It is tallied with the aggregate of the EPF amount paid and the employer files an annual return.
Inform UAN number and EPF ID
The employer should inform about the UAN and EPF member ID to its employee. It is usually printed in the salary slip. The employer persuades its employees to activate their UAN in order to do EPF related tasks online.
Related:
- Documents required for PF and ESI registration
- Payment and filing due dates for PF, ESI, and TDS
- Steps for PF online payment on the EPFO portal
- PF admin charges – A quick guide
Here ends the post about the EPF rules for employer. Also, we like to hear from you in the comments section below.
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FAQs
Revise of minimum salary limit – The employee with a monthly salary less than or equal to 15000 will have to contribute mandatory towards EPF. Change in the pension amount – The minimum monthly pension amount was set at Rs. 1000 for the widow of a member of the Employees' Provident Fund.
What is employer and employee provident fund? ›
EPF (Employees' Provident Fund) is a retirement benefit scheme maintained by the Employees' Provident Fund Organization (EPFO). The employee and the employer contribute to the EPF scheme on monthly basis in equal proportions of 12% of the basic salary and dearness allowance.
Is employer contribution to PF mandatory? ›
Yes. According to the current EPF rules, an employer also has to contribute to his/her employee's account. An employer has to contribute 12 percent of salary of an employee. (Salary here is basic plus dearness allowance and retaining allowance.)
What is the difference between employee PF and employer PF? ›
The employee and the employer each contribute 12% of the employee's basic salary and Dearness Allowance (DA) towards the scheme. While the entire contribution of the employee goes towards EPF, only 3.67% of the employer's share goes towards EPF, while the remaining is contributed towards EPS.
Is PF mandatory for all employees in India? ›
EPF eligibility criteria
15,000 per month, it is mandatory for you to be opened an EPF account by your employer. Organizations with 20 or more employees are required by law to register for the EPF scheme, while those with fewer than 20 employees can also register voluntarily. If you are drawing a salary higher than Rs.
Is EPF compulsory for all employees? ›
Any organisation that has 20 or more employees is liable to maintain a provident fund account for its employees. There is no limit to the employees' contribution to PF, he can contribute up to 100% of his Basic + DA (PF Wages) towards PF, but it must be a minimum of 12 per cent of the same.
Is PF mandatory for salary above 21000? ›
Under the current rules, any company with more than 20 employees must register with the EPFO and the EPF scheme is compulsory for all employees earning less than ₹15,000. The increase in the limit to ₹21,000 will bring more workers under the retirement scheme.
What is the minimum number of employees for PF? ›
NEW ESTABLISHMENTS
Register establishment with EPFO on crossing the eligibility threshold – 20 or more employees of specified establishment types. Other establishments - not statutorily required to register - can register voluntarily.
Is PF mandatory for Pvt Ltd company? ›
If you are an employee with a basic + expensive allowance of less than 15,000 rupees per month, it is compulsory for you to open an EPF account by your employer.
Is PF mandatory for employees above 15000? ›
Those earning basic wages more than 15000 per month, EPF contribution is not mandatory. Also, the employer can choose to limit its contribution towards EPF to 12 per cent of Rs 15,000 (Rs 1,800) under Section 26A of EPF act for those employees earning more than Rs 15,000 per month as basic wages.
The EPF contribution is either 12% of Rs. 15,000 or 12% of (Basic Salary + Dearness Allowance, if applicable). The upper limit of EPF contribution every month is 12% of Rs. 15,000.
Is employer contribution 13% in PF? ›
Provident Fund Contribution from both employee & employer
Contribution by an employer: The contribution made by the employer is 13% of the basic salary and PF applicable allowances of the employee. However this 13% is further subdivided into: 3.67% of contribution towards Employees' Provident Fund.
How much does the employer pay for PF? ›
Contribution by your employer
Your employer must contribute an amount equal to 10% or 12% of your basic salary towards EPF.
Who is not eligible for PF? ›
All employees drawing a salary are eligible for EPF. Moreover, it is compulsory for all employees earning less than ₹15,000 to register for the EPF. However, employees earning more than ₹15,000 can also voluntarily stay in the EPF scheme.
Which company is eligible for PF? ›
Any company that has 20 or more employees in total is required by law to deduct EPF. Subject to certain conditions even organisations with less than 20 employees are applicable.
Is PF mandatory for 10 employees? ›
Employee Provident Fund Rules 2020: The Central government has denied reports that claimed establishments having 10 or more employees may be covered under the Employees' Provident Funds and Miscellaneous Provisions (EPF and MP) Act. The current threshold for EPF Act applicability is 20 or more employees.
Is it mandatory to deduct PF from salary more than 50000? ›
If your starting salary is above 25000 Rs then it is not mandatory to deduct PF. But if you are already a member of EPF and your monthly salary increases to above 25000 Rs then you have to continue your PF contribution, but PF will be calculated on a limit 0f 15000 salary only.
What is the salary limit for PF 2022? ›
Salary Limit May Increase To Rs 21,000 For Retirement Benefits Under EPF (Employee Provident Fund)
What is new EPF rules? ›
PF accounts are mandatory for employees earning up to ₹ 15,000 per month in any firm with over 20 workers. The EPFO, earlier this month, decided to lower the interest rate to a four-decade low of 8.1% for 2021-22.
What is PF rule? ›
EPF accounts are mandatory for employees earning up to Rs 15,000 in a month in companies with over 20 workers, with 12% of the basic salary deducted as employee's contribution and another remitted by the employers. This step will impact the high-income earners and HNIs (High Net-worth Individuals).
Generally, companies in the private sector don't have a dearness allowance component so it's only the 'Basic Salary' that becomes the base for EPF calculation. The contribution by the employee is equally matched by the employer. So that's another 12%. Therefore, a total of 24% of your basic salary goes to the scheme.
What happens if employer does not pay PF amount? ›
If the delay if for less than two months, then the interest payable will be five per cent yearly above the amount payable for the number of days of delay in making payment. Similarly: If two months and above but less than four months = 10 per cent a year.
Is PF mandatory for salary above 35000? ›
Yes it is mandatory to deduct PF in the aforesaid case.
Is PF mandatory for salary above 40000? ›
PF is not exempt for those drawing salary beyond 15,000. They are exempt only if they join your organisation at a salary of above 15,000 and does not have any PF account at the time of joining, and also they opt for being exempt.
Is PF always 12 of basic salary? ›
Under the Employee Provident Fund (EPF) scheme, employees and employers both contribute equally. However, only a portion of the employers' contribution goes towards the investment fund. According to regulations, employees and employer contribute 12% of the basic monthly salary to the EPF.
Why employer PF is deducted from salary? ›
There have been scenarios where the employer withholds its contribution to an employee's PF with interest. The reason often cited is that the employee did not complete a tenure of five years with the said employer. The employees need not let go of the share withheld from them.
Can employer increase PF? ›
To open a VPF account, an employee has to approach his HR/Finance team and advise them to raise a request for an additional contribution in the VPF through a registration form. The existing EPF account will serve as the additional VPF account. Currently, the interest is accrued at 8.5% per annum under this scheme.
What is Employee Provident Fund? ›
Employee Provident Fund, or EPF, is the product. Provident fund is a government-managed retirement savings scheme for employees who can contribute a part of their pension fund every month. These monthly savings get accumulated every month, easily accessible as a lump sum amount at retirement or the end of employment.
What is difference between employee and employer? ›
The employer pays salary to an employee per their employment contract terms. An employer is also responsible for providing benefits to their workers. These may include insurance, gratuity and retirement benefits, depending on local laws or labour union contracts. An employee works for a company, organisation or person.
What is ESI in salary? ›
Employee State Insurance (ESI) scheme is a social security scheme that insures employees of establishments that qualify under the ESI Act. The ESI contribution in respect of an employee comprises both the employer's contribution and the employee's contribution.
It is expected that the earliest that any changes would become effective for a new withdrawal mechanism is 2022. However, the withdrawal process will not cover the Government Employees Pension Fund (GEPF), as it is not regulated under the Pension Fund Act, and hence no COVID-related withdrawals will be allowed.
