Employee’s Provident Fund (EPF)
Employee’s Provident Fund (EPF)
Employees Provident Fund (EPF) is a scheme controlled by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. It is regulated under the umbrella of Employees’ Provident Fund Organization (EPFO). PF registration is applicable for all establishment which employs 20 or more persons, subject to certain circumstances and exemptions even if they engage less than 20 employees. 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 total amount including self and employer’s contribution with interest, on retirement or resignation.
Eligiblity for PF
It is obligatory that employees’ drawing less than Rs 15,000 per month, to become members of the EPF. As per the guidelines in EPF, employee, whose ‘basic pay’ is more than Rs. 15,000 per month, at the time of joining, is not required to make PF contributions. Nevertheless, an employee who is drawing a pay of more than Rs 15,000 can still become a member and make PF contributions, with the consent of the Employer and Assistant PF Commissioner.
Amount of PF Contribution
The PF contribution paid by the employer is 12% of (basic salary + dearness allowance + retaining allowance). An equal contribution is payable by the employee. In case of establishments which engage less than 20 employees or meet certain other conditions, as per the EPFO rules, the contribution rate for both employee and the employer is restricted to 10%. For most employees working in the private sector, it’s the basic salary on which the contribution is calculated.
Employees Pension Scheme
Out of employers’ contribution, 8.33% will be routed to Employees’ Pension Scheme, which is calculated at Rs 15,000. The amount routed to EPS would be Rs. 1250 for employees whose basic pay amounts to Rs 15,000 or more. However, if the basic pay is less than Rs 15000, then 8.33% of such amount would be routed to EPS, the balance will be retained in the EPF scheme. On superannuation, the employee would receive the full share plus the balance of employer’s share reserved for his credit in EPF account.
Breakup of PF Contribution
We arrive at the rate of 12% based on the following sub-division:
3.67% of contribution towards Employees’ Provident Fund
1.1% of contribution towards EPF Administration Charges
0.5% of contribution towards Employees’ Deposit Linked Insurance
0.01% of contribution towards EDLI Administration Charges
8.33% of contribution towards Employees’ Pension Scheme
Contribution is rounded to the nearest rupee for each employee, for the employee share, pension contribution and EDLI contribution.
The Employer Share is the difference between employee Share (payable as per statute) and Pension Contribution.
Monthly payable amount liable to EPF Administrative charges is rounded to the nearest rupee and a minimum of Rs. 500/- is payable.
If the establishment has no member in the month, the minimum administrative charge will be Rs. 75/-
Monthly payable amount under EDLI Administrative charges is rounded to the nearest rupee and a minimum Rs 200/-is payable.
If the establishment has no member in the month, the minimum administrative charge will be Rs. 25/-
In case, establishment is exempted from PF Scheme, Inspection charges @0.18%, minimum Rs. 5/- is payable in place of Admin charges.
In case the Establishment is exempted under EDLI Scheme, Inspection charges @ 0.005%, minimum Re 1/- is payable in place of Admin charges.
Benefits of EPF registration:
Risk coverage: The most fundamental benefit of the Provident Fund is to cover the risks employees and their dependents that may arise due to retirement, an illness or their demise.
Uniform account: One of the most important aspects of the Provident Fund account that it’s steady and transferable. It can be carried forward to any other place of employment.
Employee Deposit Linked Insurance Scheme: This scheme is for all the PF account holders. According to it, 0.5% of the salary is deducted from the life insurance premium.
Long-term goals: There are many long-term goals such as Marriage or higher education that require the urgent availability of funds. The accumulated PF amount often comes handy during such occasions.
Emergency needs: There are certain unanticipated occasions like marriage or other family occasions, any mishappening or illness that require urgent finance. The PF amount can be of great help.
Covers pension: Apart from the employee’s 12% contribution towards EPF, an equal amount is contributed by the employer, which includes 8.33% towards Employee Pension Scheme (EPS).
DOCUMENTS REQUIRED FOR PF REGISTRATION
- Registration Certificate : GST Certificate, Shop and Establishment, Certificate of Incorporation
- Address proof : Electricity Bill, Rent agreement, Telephone Bill, Water bill.
- PAN card Of business entity and all partners/directors.
- Cancelled cheque : Cancelled cheque is required for authentication of bank details.
- Digital Signature of anyone Director : DSC will be affixed on the application form.
- Additional Document In case of Company – COI/MOA, In case of partnership firm – Partnership deed.
Following details are required to get PF registration
PF Number Format :
PF number looks like this: MH/BAN/0001011/000/0000110. Components in the PF number format:-
MH: These are 1st 2 characters representing Regional Office code (e.g. MH for Maharashtra)
BAN: Next 3 characters denote code of Regional Office / Sub-regional Office [e.g. BAN for Bandra (Mumbai-I) EPF office]
0001011: Next 7 digits depict EPF employer registration code
000: Successive 3 digits tell the extension assigned to the employer (if it’s 000 then extension is blank).
0000110: Final 7 digits denote exact EPF account number of the employee
PF registration for Employer is compulsory if:-
UAN NUMBER REGISTRATION
Universal Account Number (UAN) refers to the unique 12 digit number allotted to the employee. UAN Number records employee PF deposited amount and other relevant information which shall continue throughout the employment period and after retirement also. The same can be obtained only through employer EPF registration code.
The Employer can generate the employee’s UAN. In the event of change of employment, the previous PF UAN number registration shall be linked to the next employer. Employee needs not to get a fresh EPF UAN registration.
The employer before paying the employees salary must deduct the employee’s contribution from his wages. Then the employee portion and employer portion are payable to the EPFO, within 15 days of the close of every month.
Each & Every establishment having employer EPF registration needs to file regular monthly returns on 25th of every month and one annual return before the 25th of April every year.
If an employer fails to get EPF employer registration, or indulges in false representation of facts to avoid PF payment, he shall be liable for a penalty of INR 5,000/-.
PENALTY FOR DELAY IN PF PAYMENT BY EMPLOYER:
|S.No||Period of Delay||Rate of Penalty(p.a.)|
|1.||Upto 2 months||5%|
|2.||2 – 4 months||10%|
|3.||4 – 6 months||15%|
|4.||Beyond 6 months||25%|
Note: In order to provide ease of compliance of the labour laws, the ministry of labour and employment launched a web portal called the “Shram Shuvidha”. The portal has also been enabled to provide EPF and ESI return filing services. You can use the same steps to register from the Shram Suvidha portal as well.