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EMPLOYERS PROVIDENT FUND (EPF)

EMPLOYER COVERAGE Establishments employing 20 or more persons and engaged in any of the 180 industries / Classes of Businesses specified. Co-operative Societies, employing 50 or more persons & working without the aid of power. Establishments not coverable statutorily can come under the coverage of the Act statutorily. An establishment continues to be covered under the Act, irrespective of the fall in the employment strength.

Since the Act applies on its own force to the establishments, the employers are required to file the particulars in the specified format for registration and allotment of business number. FINANCIAL OBLIGATIONS: Contributions: Statutory rate of contribution is 12% of emoluments (basic wages, dearness allowance, cash value of food concession and retaining allowances if any,) in the case of 175 establishments. Rate of contribution shall be 10% in the case of the following: Brick, beedi, jute, guar gum factories, coir industry other than spinning sector. Establishments declared as sick undertakings by BIFR. A matching contribution is to be collected from the emoluments of the employees. Out of 12% (or 10% as the case may be) of the employers share of contribution, 8.33% is to be remitted towards pension fund. Employer is also required to pay a contribution of 0.5% of the emoluments towards EDLIS1976. Administrative Charges: An employer is required to pay administrative charges at 1.10% of emoluments towards provident fund charges and 0.01% towards EDLI Scheme 1976. No separate administrative charges for pension scheme Inspection Charges: In respect of exempted establishment under P.F. Scheme employer is liable to pay only inspection charges at the rate of 0.18% of emoluments. In the case of establishment exempted from EDLI Scheme, the employer is required to pay only inspection charges at the rate of 0.005% of emoluments. Interest Liability: For belated remittances of contributions, administrative / inspection charges interest at the rate of 12% on such remittances for the period of delay is to be remitted. Damages:For all the belated remittances of contribution and administration/inspection charges damages

Anil Kumar Arora | Notes

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EMPLOYERS PROVIDENT FUND (EPF)


are also payable as penalty ranging from 17% to 37% p.a. depending upon delay. DUTIES OF EMPLOYER Enrol all categories of employees including the employees engaged by or through contractors and also piece rated, hourly rated employees. Remit the contributions and administrative charges before the 15th of the following month. File the initial returns of form 9, form 3(p.s.), form 5a. File the monthly returns in Form 12A, Form 5, Form 10 and Challans for remitting the dues. Maintain the contribution card in respect of each employee in Form 3A and submit the annual returns in Form 3A and 6A after reconciliation with Challans and form 12A. The employer has to ensure that statutory dues in respect of contractors employees are remitted and returns filed. Employer should attest the form No.2 and the claims forms submitted by the member/ legal heirs/ nominees. Make available all relevant records for inspection of visiting officials with due authorisation. Exemptions under the Schemes PROVIDENT FUND An individual member getting Provident Fund benefits on par with or better than statutory provisions can apply for exemption in Form 1 under para 27. Employers can apply for exemption in respect of a class of employees getting similar or better benefits than the statutory P.F. Scheme under P. 27A subject to the conditions governing grant of exemption. The employer can seek exemption from P.F. Scheme for the entire establishment if the majority of the employees also consent for exemption, subject to certain conditions governing grant of exemption and certain formalities. PENSION SCHEME Employer can avail exemption for the establishment as a whole, with the consent of majority of employees, if an alternative pension scheme is formulated by the establishment with benefits either on par with or superior to the EPS 95 and subject to certification of the viability and long sustenance of the scheme by an independent qualified actuary and satisfying the other conditions prescribed governing the grant of exemptions. There is no provision for exemption of individuals or for class of employees. EDLI SCHEME The establishment can get exemption from the EDLI Scheme, if the employees therein are entitled for a benefit in the nature of insurance whether linked to their P.F. deposit or not and without paying any contributions. Its very clear that 12% is deducted on allowances other than exempted ones like

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EMPLOYERS PROVIDENT FUND (EPF)


Conveyance Rs 800/m , Child allowance Rs 200/m for two children, Medical allowance Rs 15,000/ per annum & LTA. The PF contribution is 12% of Basic salary from both employee and employer. For the calculation the maximum limit of Basic is Rs 6500/-. It means even if the employee's basic salary is above Rs 6500/- the employer is liable to contribute only on Rs 6500/-, that is Rs 780. However if an employee so desires he may voluntarily contribute more than 12%. Apart from it an employer also has to pay some administration charges. I explain you the various accounts of PF challan. Account No. A/c No 1: PF contribution Account A/c No 2: PF Admin account A/c No 10: EPS account A/c No 21: EDLIS account A/c No 22: EDLIS admin account Employee Employer 12 3.67 1.10 8.33 0.50 0.01 12 13.61

PF admin charge = Employer has to pay 1.1 % of basic EDLIS: Employer has to pay 0.5% of basic EDLIS admin charge :Employer has to pay 0.01% of basic Total additional percentage employer has to pay: 1.61% of basic So employer has actually to pay 13.61 % of Basic and employee has to pay only 12% of basic. Employees complete 12% goes to PF account while employer contributions' 8.33% goes to Pension fund and 3.67% goes to PF fund. EPF, EPS & EDLIS are calculated on Basic salary, dearness allowances, cash value of food concession and retaining allowances if any. Retaining allowances means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.

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EMPLOYERS PROVIDENT FUND (EPF)


Most of the organizations are following Basic+ DA Method. Below table tells you the rates of contribution of EPF, EPS, EDLI, Admin charges in India. Scheme Name Employee provident fund Employees Pension scheme Employees Deposit linked insurance EPF Administrative charges EDLIS Administrative charges Employee contribution 12% 0 0 0 0 Employer contribution 3.67% 8.33% 0.5% 1.1% 0.01% Paid to A/c No 1 10 21 2 22

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EMPLOYERS PROVIDENT FUND (EPF)


Sick industries like beedi, jute, guar gum factories, coir industry other than spinning sector Scheme Name Employee provident fund Employees Pension scheme Employees Deposit linked insurance EPF Administrative charges EDLIS Administrative charges Employee contribution 10% 0 0 0 0 Employer contribution 1.67% 8.33% 0.5% 1.1% 0.01% Paid to A/c No

10 21 2 22

Inspection charges payable by employer Inspection charges must be paid by the employer in the following Cases. 1. Some establishment are exempted from EDLI contribution as they are providing the same nature of benefit without any contributions from employee, such establishments are liable to pay 0.005% on Basic salary 2. The establishments exempted under the scheme should pay 0.18% of Basic salary towards inspection charges. EPF Ceiling Limit Epf ceiling limit is fixed to 6500/-.The employer is liable to pay contribution only on 6500/Whatever is the basic salary Calculation of Employees provident fund Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500/Contribution Towards EPF Employees share EPS Employer share EPF employer share EDLI charges EPF Admin charges EDLI Admin charges Calculation 3500 x 12% 3500 x 8.33% 3500 x 3.67% 3500 x 0.5% 3500 x 1.1% 3500 x 0.01% Amount 420 292 128 18 39 0.35 ( round up to Rs 1/-)

The above calculation is easy and there no complication. Calculation of EPF for employees getting a basic salary over and above the ceiling limit 6500/In such cases companies uses different method for calculation as per their pay roll policy. Consider an employee getting a basic salary of 7500/-

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EMPLOYERS PROVIDENT FUND (EPF)


We can calculate it in different ways. The only thing you should take care is, EPS is calculated only up to 6500/- that means the maximum amount is fixed to Rs 541.00. The three methods mentioned below are based on the above example.

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EMPLOYERS PROVIDENT FUND (EPF)


Method-1 If your company consider total basic salary above the limit fixed 6500.00 for PF calculation Contribution Towards EPF Employees share EPS Employer share EPF employer share EDLI charges EPF Admin charges EDLI Admin charges Calculation 7500 x 12% 6500 x 8.33% 7500 x 12% (-) 541 6500 x 0.5% 6500 x 1.1% 6500 x 0.01% Amount 900 541 359 32.5 71.5 0.65 ( Round up to Rs 1/-)

Here well explain how Employer contribution of EPS and EPF is calculated. Employer is decided to contribute on total basic salary which is 12 % on 7500.00 equal to 900.00 EPS Share is fixed to 541.00 Balance (900-541) goes to EPF account 359.00 Total share 900.00 Out of Rs 900.00 EPS share is RS 541/- which is fixed for a basic salary greater than 6500/-. The balance amount is 900-541 = 359.00 which willgo to EPF account. You may be thinking that, what about 3.67%?, Here you dont need to care about it. Method2 Some companies follows the below method in which employee share is calculated on 7500/and employer share is calculated on up limit Rs 6500/Contribution Towards EPF Employees share EPS Employer share EPF employer share EDLI charges EPF Admin charges EDLI Admin charges Method3 Some are calculating both employer and employee shares on 6500/- in spite of higher basic salary than 6500.00 Contribution Towards Calculation Amount EPF Employees share 6500 x 12% 780 EPS Employer share 6500 x 8.33% 541 EPF employer share 6500 x 3.67% 239 Calculation 7500 x 12% 6500 x 8.33% 6500 x 3.67% 6500 x 0.5% 6500 x 1.1% 6500 x 0.01% Amount 900 541 239 33 72 0.65 ( Round up to Rs 1/-)

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EMPLOYERS PROVIDENT FUND (EPF)


EDLI charges 6500 x 0.5% 33 EPF Admin charges 6500 x 1.1% 72 EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-) Remittance of contribution It is the duty of employer to remit the contribution deducted to the government before 15th of the following month. Employer interest Liability Employers are liable to pay @12% interest on late payment of EPF, EPS, EDLI, Administrative charges Damage liability An employer is remitting EPF, EPS, EDLI, and Admin charges late shall be liable to pay damages as penalty ranging from 17% to 37% depending up on delay. I dont think the above post is a complete one, if you have different opinion and experience we can discuss it in our comment section that will make this post a complete one. In the meantime you can subscribe our newsletter below to stay updated with us.

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