Understanding EPS Eligibility: How Is It Calculated on a Rs. 30,000 Salary?

Suppose one employee's Gross salary is Rs. 30,000/- out of which Basic salary is Rs. 20,000/-. His EPF wages are Rs. 20,000. Now, is this employee eligible for EPS?

1) If yes, then on how much salary will EPS be calculated?
2) If no, then will the entire contribution of 24% (from the employee and employer) go to the provident fund account of the employee?

EPF Membership and Contribution Requirements

EPF is a labor welfare scheme, and if the establishment is covered under EPFO, then they must offer EPF membership. The employer has to provide Form 11 (revised) to the employee and ask them to fill it out and attach the KYC documents. If the employee has an active EPF account or UAN from past employment, they have no option to decline membership but must join the EPFO.

EPS Contribution and Eligibility

If the member has contributed to EPS at any time in their past service, then their EPS should be deducted on ₹15,000 at 8.33%, i.e., ₹1,250, and the balance of ₹2,400 (12% of ₹20,000), i.e., ₹1,150, should go to account 1, i.e., EPF. There is no restriction on depositing EPS for a new employee above ₹15,000. However, they must meet the requirement of 9+ years for pension eligibility and not withdraw the EPS account within 10 years.

Options for New Employees Without Prior UAN or EPF Membership

If the employee plans to withdraw the EPS before 10 years (for new employees only, who don't have any UAN or EPF membership in the past), the employer must make ECR as EPS salary "0," and the entire amount of ₹2,400 + ₹2,400 = ₹4,800 would go to account 1 of the fund. Employees who have an EPS account from any past employment must continue the EPS contribution, regardless of the present salary structure exceeding the limit.

Thank you, sir, for your reply and clearing my doubt. If a new employee (who was not an EPF member earlier) wants to withdraw his pension after 10 years, in that case, how much amount should we take into consideration for EPS calculation - Basic salary Rs. 20,000/- or statutory wage ceiling Rs. 15,000/- or can any one be taken into consideration?

Pension is calculated using the formula:

\[ \text{Pension} = \frac{\text{Pensionable Salary} \times \text{Pensionable Service}}{70} \]

Where pensionable salary is the average salary of 60 months from 30.08.2014, and earlier it was the average of 12 months. The contribution to EPS is based on the maximum of the wage ceiling fixed under the EPF Act 1952. It is observed that the RPFO authorities have been adjusting the EPS contribution based on 8.33% of the salary reckoned on the basis of the prescribed salary ceiling under the Act (Rs 6,500 up to 30.08.14 and Rs. 15,000 thereafter), even though the EPS'95 has a provision for reckoning on an actual salary basis but it has not been implemented. Therefore, even in cases where the PF contribution was made based on the actual salary, the RPFOs have been adjusting EPS contributions only based on the salary ceiling. You may verify the position in your case.

The pensionable salary ceiling is currently 15000/-. After 10 years of service, it would only become payable after the age of 58. I hope the employee will have more years of pensionable service added to his/her EPS account for a full service of 33 years (+2 years bonus years added by EPF). The pension amounts to 50% of the present salary (based on a 60-month average), which is 7500 (50% of 15000). The pension scheme gets modified from time to time at regular intervals.

Dear Geeta Shailesh Pandey,

Please note that as an HR professional, you are at liberty to inform your management to pay the statutory dues on time and be compliant always. Maybe you need to fight for this in a smart way with your management.

I did not understand the risk factor you are mentioning. Is it about hazardous operations or the risk factor of asking you the question on PF and ESIC?

Respected U S Sharma Sir,

Can we take Rs 15,000/- into consideration for the calculation of EPF contribution instead of the basic wage Rs. 20,000/-? As the statutory wage ceiling for EPF is 15,000/-, please guide me.

Dear Abishek,

Yes, it is permissible to limit PF contribution to the wage ceiling limit set in the PF & MP Act, 1952, presently being Rs. 15,000/-.

Statutory ceiling is the employer's policy. If they have maintained the ceiling of $15,000 for all employees, then yes, the ceiling will be applicable to this member as well.