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Know about employer share in EPF account



I want to know about what is the meaning of Employer share in EPF.


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Under EPF scheme, an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer. The employee gets a lump sum amount including self and employer’s contribution with interest on both, on retirement. 

As per the rules, in EPF, employee whose ‘pay’ is more than Rs. 15,000 per month at the time of joining, is not eligible and is called non-eligible employee. Employees drawing less than Rs 15000 per month have to mandatorily become members of the EPF. However, an employee who is drawing ‘pay’ above prescribed limit (at present Rs 15,000) can become a member with permission of Assistant PF Commissioner, if he and his employer agree. 

Contribution by employer and employee 
The contribution paid by the employer is 12% of basic wages plus dearness allowance plus retaining allowance. An equal contribution is payable by the employee also. In the case of establishments which employ less than 20 employees or meet certain other conditions, as per the EPFO rules, the contribution rate for both employee and the employer is limited to 10 percent. 

For most employees of the private sector, it’s the basic salary on which the contribution is calculated. For example, if the monthly basic salary is Rs 30,000, the employee contribution towards his or her EPF would be Rs 3,600 a month ( 12 percent of basic pay) while the equal amount is contributed by the employer each month. 

Diversion out of employer’s share 

It should, however, be noted that not all of the employer’s share moves into the EPF kitty. Out of employer’s contribution, 8.33% will be diverted to Employees’ Pension Scheme, but it is calculated on Rs 15,000. So, for every employee with basic pay equal to Rs 15,000 or more, the diversion is Rs 1,250 each month into EPS. If the basic pay is less than Rs 15000 then 8.33% of that full amount will go into EPS. The balance will be retained in the EPF scheme. On retirement, the employee will get his full share plus the balance of Employer’s share retained to his credit in EPF account. 

Higher voluntary contribution by employee or Voluntary Provident Fund 
The employee can voluntarily pay higher contribution above the statutory rate of 12 percent of basic pay. This is called contribution towards Voluntary Provident Fund (VPF) which is accounted for separately. This VPF also earns tax-free interest. However, the employer does not have to match such voluntary contribution. 

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Prasad Dusane

Hey ashakantasharma, Great Stuff! 

Provident Fund (PF) is an investment fund which is contributed to by employers, employees, and in some situations, by the state as well.

A lump sum is provided to each employee on retirement out of this fund. A provident fund account is created of every individual.

They are then allocated a Unique Account Number (UAN) by the Employee Provident Fund Organization (EPFO).


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Prasad GLN

The rule is that Employer has to deduct prescribed PF percentage from salaries, and deposit equivalent contribution to the employees' PF Account. In the statement they have to show employer and employee share separately with interest accrued.

Permanent/temporary withdrawals are limited only on contribution of employee alone and not on joint contribution.

Where as the employees can authorize employer to deduct more than the statutory prescribed percentage, employer limits to his contribution only equivalent to statutory stipulation alone.

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