Understanding Employer's PF Contribution: Is It 12% or 1.61% of Salary?

Employer's PF Contribution Clarification

Please let me know the employer's PF contribution towards an employee's account. Also, let me know if it is towards gross salary or towards CTC.

In an interview, I was asked what the employer's contribution towards the employee's PF account is. I answered 12 percent. However, the interviewer said it is 1.61 percent. Is she correct?

Warm Regards,
S. Mukherjee.

Normally, PF is calculated on Basic and DA. Regarding employers' contribution towards EPF: 3.67% and FPF: 8.33% on Basic and DA.

Regards,
Aniruddha

Employer's Contribution to EPF Explained

The total employer share towards EPF is 12.61% of the Basic and DA. Here is the bifurcation for your understanding:

1. Out of the 12% contribution, 8.33% share goes to EPS (Pension Scheme) and 3.67% goes to EPF (Provident Fund).
2. 0.5% is allocated towards the EDLI (Employee Deposit Linked Insurance) Scheme.
3. Administrative charges include 1.10% towards EPF and 0.01% towards EDLIS.

Total: 12.61%

I hope this resolves your query.

Employer PF Contribution Details

Manasi is correct with reference to the breakup of the contribution. The total employer contribution is 13.61% (including administrative charges). The important point is the cap limit for the employer contribution can be Rs 6500, which is basic & DA. In cases where the basic or basic & DA is greater than Rs 6500, then the contribution can be Rs 780, which is 12% of the said figure.

Employee and Employer PF Contributions

1. Both the employee and employer will contribute 12% each of the Basic + DA, whichever is lesser, to Rs 6500 or more than Rs 6500. I repeat, 12% of the Basic + DA is to be contributed by both the employer and employee.

2. The employer will also contribute 1.61% (Total 13.61%) towards EDLI/Admin charges.

3. Out of the 12% contributed by the employer, 8.33% will go to the Pension Fund, and the remaining will go to the PF.

4. The 8.33% to the Pension Fund is limited to Rs 6500 (which is Rs 780); the rest will be credited to the PF.

5. In case of premature withdrawal of membership from the EPF & MP, the pension contribution till then will be added to the PF while withdrawing.

Regards,
Rajusiachen

Correction on Employer Contribution Percentage

In my earlier quote, I mentioned the employer contribution incorrectly as 12.61%. Please note that the correct percentage is 13.61%.

Thank you.

Hi All, lots of thanks for your reply and regards. It seems the person taking the interview, by correcting me as only 1.61%, was wrong from your discussion where I answered her 12%, although I was actually not right. Anyways, after rejecting me, I asked her for my feedback. She told me, "You have nil knowledge on the matters of PF, ESI, etc."

Now I want to forget that episode and move forward to a real knowledgeable employer.

Regards & Thanks, S. Mukherjee.

Is there any upper limit for employer contribution? Can an employer decide the upper limit of their contribution irrespective of the 12% of Basic, or is it mandatory for them to pay 12% of basic regardless of how large the basic amount is?

Regards,
Krish

Mr. Rajusiachen said that everything is right, but the below calculation is wrong. Why is it because 8.33% going to the Pension Fund is limited to Rs. 6500 (which is Rs. 541 only)? The rest amount will go to the PF contribution. Kindly update this.

The 8.33% to the Pension Fund is limited to Rs. 6500 (which is Rs. 780) - the rest will be credited to the PF.

Regards,
Rajavel
Chennai

Payment: Employees and Employers Contribution

- **A/c 1:** 12% (Employee) + 3.67% (Employer) = 15.67%
This stands for Provident Fund Contribution.

- **A/c 2:** 0% (Employee) + 1.10% (Employer) = 1.10%
This stands for Admin Charges.

- **A/c 10:** 0% (Employee) + 8.33% (Employer) = 8.33%
This stands for Pension Fund.

- **A/c 21:** 0% (Employee) + 0.5% (Employer) = 0.50%
This stands for EDLI.

- **A/c 22:** 0% (Employee) + 0.01% (Employer) = 0.01%
This stands for EDLI Admin Charges.

Total Contribution

- **Total Pay:** 12% (Employee) + 13.61% (Employer) = 25.61%

So, 12% has to be contributed from the employee's side, and the remaining 13.61% has to be from the employer's side. It has been observed in various companies that a 24% deduction is made from employee salaries, which is illegal. If caught by PF authorities due to complaints, you may face trouble. Another common practice is that PF percentages have to be deducted from Salary, which according to PF law includes Basic + DA.

Regards,
Suresh M.G

He is articulate because employees contribute 12%, and the employer contributes 3.67% and 8.33% to the pension fund. Therefore, the total contribution is 12% (3.67% + 8.33%).

Regards,
Hasamukh
Jyoti Power Corporation Ltd
Executive HR

PF Contribution Breakdown

A/c.1 A/c.2 A/c.10 A/c.21 A/c.22
- er: 3.67% - 8.33%
- ee: 12%
- admin charge: 1.10%
- panel charge: 0.01%

Total: 15.67% 1.10% 8.33% 0.5% 0.01% = 25.61%

Some companies deduct both the employer's contribution—which is illegal—and the employee's contribution from the salary of the employees at 12%. This leaves the employer to contribute just 1.61% towards EDLI and administrative charges. Probably Mr. Mukherjee attended an interview in one such company, and if so, the interviewer was right.

Regards,
Sanu Soman

The upper limit of PF contribution by an employer is 12% of Basic and DA. However, any employer cannot decide the upper limit of contributions irrespective of the 12% of Basic. Employers can only determine the deduction of PF contribution based on the total Basic + DA or the limit of ₹6,500.

Regards,
Rajeev