Understanding Employer's PF Contribution: Is There More Than the 12%?

Hi all,

I would like to know if there is any bifurcation in PF contribution that is done by the employer, besides 12% of basic.

With regards,
Swarali

Dear Swarli,

Greetings.

You have raised a good question.

The employer's share is bifurcated into two portions: Pension scheme contribution and employees' share, as follows:

Pension fund scheme contribution: 8.33%
Employees' contribution: 3.67%

Hence, an employee receives 15.67% of the total 24% PF contribution (both employer and employee) for which annual slips will be provided every year with interest at 9.5% per annum.

When an employee resigns, this 15.67% can be collected from the EPF office.

For the pension fund, he has two options:

Option A: Scheme certificate, where an employee can accumulate scheme certificates from two or three employers totaling to ten years, making him eligible for a Pension after retirement at 58 years.

Option B: Employee can get the accumulation of the pension fund, which is calculated based on the salary and the number of years of service. This amount will be disbursed by way of another cheque, which is almost the same as the amount one deposited in the PF account.

If you need any clarifications, I am here to help.

Cheers,

Trisha
HR Professional

Hi Trshaji,

You really cleared my doubt to a great extent. But is this PF contribution the only part of the pension amount paid to the employees? I was considering it as a totally different benefit from PF. Request you to clarify.

With regards,
Swarali

Hi,

I suppose it is 8.5% interest that is paid at the time of withdrawal from the PF account.

Prabhakar Rao Head - HR

Dear Swarali,

Greetings.

The pension amount is kept separate in the Pension fund (recovered from employer contribution at 8.33%), and an equal amount of contribution will be paid by the Government for the fund. In the event of an employee's death or retirement, pension payments will be made from the fund to their nominee's bank account for as long as they exist.

I hope I have cleared your doubts.

Cheers,
Trisha
HR Professional

Hi Trisha,

In case the pension fund is accumulated for more than 10 years, we are not allowed to withdraw that amount of 8.33%. In my case, it happened. If required to withdraw, you have to prove that you are unemployed, have started a business, or attach the Visa copy if going abroad. You have to submit any of these along with Form 10-C for withdrawal of the pension amount.

Regards,
Prabhakar Rao

Dear Rao,

Greetings.

I fully agree with your views. This is the reason why PF authorities will not settle anyone's account before 60 days of their relieving. Likewise, pension people will ask for a certificate/declaration that the applicant is not employed in any of the companies where PF is applicable or doing his own business to take care of his life.

Cheers,
Trisha
HR Professional

Hi Trisha,

Good afternoon.

I suppose after 30 days from the date of leaving, you can apply for withdrawal and not 60 days.

Regards,
Prabhakar Rao.M

Great views aleardy exchanged.

I would only like to add that EPS(Pension Fund) cannot be withdrawn. It can be commuted to 1/3 of the amount and the rest will be paid as monthly pension.

Providend fund can be withdrawn if the employee remains unemployed for 3 consecutive months.

Below i am listing few cases where PF can be withdrawn:

Member is entitled to withdraw full amount of PF:

(A)

On attaining the age of 55 years at the time of termination of service.

On retirement on account of permanent and total disablement due to bodily or mental infirmity.

On migration from India for permanent settlement abroad or for taking employment abroad

In case of mass or individual retrenchment

(B) A member can withdraw up to 90% of the amount of Provident Fund at credit after attaining the age of 54 years or within one year before actual retirement on superannuating whichever is later.

Partial Withdrawal/Advances

A member of Provident Fund is allowed non-refundable advance for the following contingencies:

For acquiring dwelling site or house

Advances in special cases such as lockout in factory/establishment for a period more than two months

Where a member has challenged the retrenchment/dismissal by the employer in a court of law

For treatment of illness

For marriages or post matriculation education of the children

Under abnormal conditions such as damage to movable or immovable property by calamity of exceptional nature

Financing of member's Life Insurance Policy

Regards,

Nilendra

Dear Swarali,

For your information, please find attached herewith a contribution under the EPF & MP Act, 1952 by an employee and employer.

Regards,
Ashutosh Chaturvedi

Dear Trisha,

I would appreciate it if you could provide me with more details about PF and its actual administration, or if you could direct me to a source from where I can gather the desired information related to PF.

Regards,
Meghamadhulika

Dear Madhulika,

Greetings!

There is a PF website available at the following link: www.epfindia.nic.in.

Hope this website serves you well.

Cheers,
Trisha
HR Professional

Dear Swarali,

The 8.33% in the pension fund is subject to a ceiling of Rs. 541/-. In other words, the maximum pay ceiling is Rs. 6,500/-. However, you can contribute over and above 8.33% for a higher rate of pension. The rate of interest on the PF is decided by the Board of Trustees of the Provident Fund. In the case of an exempted establishment, they can offer a higher rate of interest.

Regards,
Ravi

As far as my knowledge is concerned regarding EPS, you cannot contribute more than 8.33% of 6500 even though PF is managed by a trust and it is deducted on actual Basic+DA. For EPS, salary is considered as if it's 6500 only if the salary is more than 6500 and if less than 6500, it's taken on actual.

Regards,
Nilendra

Hi there,

I believe a minimum of 7 years of contribution is required for withdrawal for the construction of a house, and 5 years for a daughter's marriage.

Take care,
Prabhakar Rao.M

Hi Prabhakar,

I think Trisha is right; the eligibility for submitting the form is 60 days after the date of leaving.

Jai
HR Professional

Hi,

As per the P.F. Act, the employer paid a total contribution of 13.61%. The employee's share of 12% is transferred to A/C No: 1. The employer's share is divided as follows: 3.67% to A/C No: 1 and 8.33% to A/C No: 10. Additionally, 0.50% for EDLI is transferred to A/C No: 21. For EDLI administrative charges, 0.01% is transferred to A/C No: 22. Administrative charges of 1.10% are transferred to A/C No: 2.

Chitti Babu

Dear Swarali,

Employer contribution is 8.33%, which amounts to 541/-. If the amount is greater than 541, the extra amount will automatically transfer to the 3.67% share.

Chitti Babu

Hi Prabhakar,

Trisha is rightly informed that one can apply for PF withdrawal after 60 days of the date of leaving. The current interest rate on the PF amount is 8.5%. I completely agree with Mr. Chitti.

Regards,
Sashmita

Hi, Trisha.

Good morning.

What about the contribution from the government? Similarly, can you recheck the rate of interest? Moreover, the interest rate is decided every year by the Board of Trustees based on the income generated from the investments, etc.

With regards,

Ashok Karath

Government doesn't contribute anything towards EPF apart from the interest given as per the prevailing rate of interest. Currently, the rate of interest is 8.5% per annum for the FY 2006-07.

Regards,
Nilendra

Hi there,

Employers' contribution - 4.75%
Employees' contribution - 1.75%
And it's applicable to a salary of 10,000/- *(It was earlier 7,500/- now amended)*. Need to confirm.

Regards,
Yogesh

Hi,

Can you explain the pension plan for employees? One of my new staff members has filled out his PF Form for the past 9 years with the previous employer. Are there any changes needed to continue his pension?

With Regards,
Sasi

Dear Yogesh,

What you have written is for ESI contribution and not PF contribution.

Dear Sasikumar,

Your question is not at all clear. Can you please explain it again?

Regards,
Nilendra[/img][/quote]

Sorry, it's 60 days only from the date of leaving (as per the act).

One thing I would like to say is that I myself submitted a lot of applications after one month from the date of leaving of the employees, and they received the amount.

Thanks,
Prabhakar Rao.M

Hi All,

Trisha is right. The minimum period required is 60 days from the date of leaving the service for claiming the PF withdrawal when the person is not employed anywhere except his own business. However, he can transfer the account after opening a new PF account with a new employer.

Thanks,
Aparajita
Executive HR

Hi Sawarli,

As per my knowledge, the employer contribution towards PF is 13.61% of the basic. The details are as follows:

A/c I - Total of employer and employee contribution (3.67% + 12%)
A/c II - 1.1% of wages
A/c X - 8.33% of wages
A/c XXI - 0.5% of wages
A/c XXII - 0.01% of wages

Thanks and Regards,
Vikas Kumar

Dear Ashutosh,

Greetings.

The approximate time to settle PF and pension amounts will not be more than 30 days, provided the employer remitted the contributions on time.

Cheers,
Trisha
HR Professional

hi

My Dear Trisha

Good le to spell regarding pf..and u know our pf interest is 8.5% not 9.5% for the year of 2006 to 2007 and 2007 to 2008..

EPF RATE OF INTEREST FOR THE YEAR 2006-07 --------------------------------------------------------------------------------



16:25 IST



The Government has accorded its approval to notify the EPF rate of interest for the year 2006-07 as 8.5%.

All the RPFCs have been instructed to immediately give effect to the above and issue annual statement of accounts for the year 2006 at the earliest possible time. The Chairman CBT, EPF and Minister of State( Independent Charge), Labour and Employment has directed that issue of annual accounts for the year 2006-07 is required to be done on war footing.

The EPF(Employees' Provident Fund) Scheme, 1952 requires that the interest shall be credited to the account of each member at such a rate as determined by the Central Government in consultation with the Central Board of Trustees(CBT).

The CBT which met on the 23rd of July 2007 to consider the proposal for determination of rate of interest payable to the members for the year 2006-07 had recommended interest at 8.5%.



see this link

http://epfindia.com <link updated to site home>

Regards

Nagendra

Hyderabad

Employer's contribution to EPF is to be remitted as follows:

8.33% in Pension Fund in Account No. 10 and the remaining, i.e., 12-8.33=3.67%, in Account No. 01 along with the Employees' share of 12%. Besides this, the employer has to remit the following as well:

1.1% of the total Wage/salary to account No. 2 towards administrative charges.
0.5% towards Employees' Deposit Linked Insurance in A/C No. 21.
0.01% towards administrative charges of EDLI in A/C No. 22.

Regards,
Madhu.T.K

Hi Sashmita,

I already apologized for the same. It is after 60 days only one can apply for withdrawal of PF, and I already said that it is 8.5% interest on the amount deposited with the PF office.

Cheers 🙄
Prabhakar Rao.M

Dear Yograj,

I believe you have mistakenly mentioned contributions for ESI instead of EPF. Regarding PF, there is a 12% employee contribution and a 12% employer contribution. The pension fund should be a maximum of Rs. 541. The slab for the deduction of PF is Rs. 6,500, meaning that individuals with a basic salary below Rs. 6,500 must have PF deductions. It is anticipated that this slab may increase to Rs. 10,000, similar to the case of ESI.

Regards,
Govil Nanda 😊

Hi Madhu,

Can you please let me know about Acc/No: 1, Acc No: 21, Acc/No: 22? I mean to say, does each and every employer have to create all these accounts at the PF office? Can you clarify regarding this?

Regards,
Saritha

Hi Nilu,

Thank you for your reply.

In my company, we appointed a Network Administrator last month. Before joining here, he worked in Madurai for the past 9 years. At the time of leaving there, he surrendered his P.F. Now, he wishes to continue the same P.F. account.

I am a bit confused - is he eligible for pension for the surrendered account or not?

Dear Urvashiji,

Greetings.

Option B is nothing but a refund of your contribution to the Pension fund in the form of a cheque sent to your bank account. In option A, you can trace your contribution and cross-check with your annual slips in Form 23 provided by the EPF Office every year. However, in option B, the refund is based on the number of years of service and the last salary drawn, along with a factor determined by the Pension authorities. This amount will be almost the same as the amount deposited in the Pension account.

Cheers,
Trisha
HR Professional

Hi there,

As per the PF Act, PF is mandatory if the Basic+DA is less than or equal to Rs. 6,500 per month. Now, if in the next year, the employee's Basic+DA exceeds Rs. 6,500 per month, can he/she opt out of the PF account? Our PF consultant says once a PF account is opened, it cannot be stopped until the employee quits working, irrespective of whether it's mandatory or not.

Also, if the employer contributes to PF for employees whose Basic+DA is more than Rs. 6,500 per month, will that amount still be exempted from tax? Please clarify.

Account Nos 01, 10, 21, and 22 are maintained by the EPF Organization, to which the employer has to credit the amounts in total in respect of all employees. This has nothing to do with individual employees. However, you must prepare a separate statement showing each individual's salary, the employee's contribution to EPF, the employer's contribution (8.33%) to PF, and EPF (3.67%) for each employee. This will make the preparation of contribution cards and annual statements easier. The total amount will be deposited for one month.

Once an employee is covered under the scheme, they continue to be covered irrespective of their salary.

Currently, most firms do cover employees regardless of their starting salary, though only those whose salary at the time of entering is not more than 6500 are covered. In the case of ESI, however, if the salary exceeds 10000, the employee becomes uncovered from the next contribution period. For example, if the salary exceeds 10000 in May, the employee has to contribute the prescribed amount, i.e., 1.75%, and the employer too at 4.75%, but from the next contribution period starting in October, the employee becomes uncovered.

Regards,

Madhu.T.K

Account Nos 01, 10, 21, and 22 are maintained by EPF Organization to which the employer has to credit the amounts in TOTAL in respect of the entire employees. It has nothing to do with individual employees. However, you have to prepare a separate statement showing individual's salary, employee's contribution to EPF, employer's contribution (8.33%) to PF, and EPF (3.67%) in respect of individual employees so that the preparation of contribution card and annual statement will be easy. Deposit of the amount will be made in total for one month.

Once an employee is covered under the scheme, he continues to be covered irrespective of his salary.

Presently, most of the firms do cover employees irrespective of their starting salary, though only those whose salary AT THE TIME OF ENTERING is not more than 6500 are covered. In the case of ESI, however, when the salary exceeds 10000, he becomes out of coverage from the next contribution period. That is, if the salary exceeds 10000 in May, then till September, he has to contribute the prescribed contribution, i.e., 1.75%, and the employer too at 4.75%, but from the next contribution period onwards, i.e., from October, he becomes uncovered.

Regards,

Madhu.T.K

Hi Tarsia,

How are you doing?

I am very much confused with the withdrawal of the pension fund.

How many years of service do we need to withdraw our pension fund, and what is the effect of the last drawn salary?

Regards,
Akhil

Thank you very much for such knowledgeable information. Is it possible to get the pension even if we are changing different organizations, all including 10 years of contribution?

Regards,
Raghunath.

Dear Raghunath,

Greetings.

As I mentioned in my initial post in option A, when you work for an organization for 2 years, you will get a scheme certificate in lieu of your withdrawal. If you work for more organizations, you will certainly receive a scheme certificate for the service you rendered in that organization. Therefore, if you can collect 10 years of scheme certificates before your retirement age, you will receive a pension after your retirement.

Hope this is sufficient for your question.

Cheers,
Trisha
HR Professional

HR Fraternity,

It was a great session for me. I learned a lot from the discussion. Recently, I was asked to revise our compensation structure. All the inputs from this discussion helped me throughout. Thanks to all who contributed the info.

Regards,
Indulekha

Normally, it takes 30 days to submit withdrawal forms at the PF office, and PF officials will take one month to credit the concerned account.

Sathish

Hi,

There is a bifurcation of employers' 12% of contribution as follows:
- 8.33% is for the pension fund, which goes into account 10.
- 3.67% is for the Employees' PF, which goes into account 1 along with employees' 12% contribution.

Hope you understand.

Regards,
Ravi

Hi all,

Can anyone solve my problem? I was working with a firm where both my contribution and the employer's contribution of PF were deducted from my salary. After working for 7 months, I resigned from the company. Will I get back my PF? Please inform me about the forms I need to fill out and also provide me with a way or procedure to claim my funds if my employer does not sign the Employer signature column on the PF form.

Hi Thrisha,

Thanks for your valuable information.

Please, can you provide clarification on the issues below?

When I transfer PF amount from one state to another state, will the PF office charge any amount? My company opened an account in Hyd. After 14 months, I transferred to the Chennai office, and after 5 months, I transferred again to the Pune office. Now, when I want to withdraw the PF amount, they gave a very small amount. My contribution to the PF is Rs 52,000 (12%), my employer's contribution to the PF is Rs 16,325 (3.66%), and my employer's contribution to the Pension Fund is Rs 37,157 (8.33%). When I withdrew the PF, I received only Rs 62,573 (one cheque) and another Rs 6,539 directly credited to my account.

Now, my question is why did I receive a lesser amount? Are there any calculations involved? Can I request the PF office to provide a complete statement regarding my PF account? If yes, whom do I need to request? Will they send any statements to my address regarding complete information about PF amounts?

Please provide clarification on the above issues.

Thanks in advance.

Ravi

Hi,

BIFURCATION OF EMPLOYER & EMPLOYEE CONTRIBUTION UNDER PF ACT. ACC/NO PARTICULARS EMPLOYER'S CONT EMPLOYEE'S CONT TOTAL

1 PF 3.67% 12% 15.67% 10 EPS 8.33% - 8.33% 02 ADM CHARGES 1.10% - 1.10% 21 EDLI 0.50% - 0.50% 22 ADM CHA ON EDLI 0.01% - 0.01% ======= ======= ======== TOTAL RS 13.61% 12% 25.61% ======= ======== ========

THANKS, Maku

Dear all,

If the Basic + DA of the employee is more than 20,000/-, then is it the obligation of the employer to make the same payment as the employee is contributing, which is 12%?

Hi,

Can anybody give me clarity on the PF contribution by the employer? Is it true that both the employer's and the employee's contributions are deducted from the Basic salary? If so, that would significantly reduce the take-home salary of the employee. Could someone please explain this? I am looking forward to the information.

Thank you,
Vinutha

Hi,

Just wanted to know, does all organizations contribute towards the pension fund? I mean when there is a deduction of 12%, does it include 8.33% of the pension fund too or is it just PF?

Regards,
Nimisha

Hi Folks,

How can I transfer my old PF Pension Fund to my new employer's PF Account?

Regards,
Shrinivas

Hi all,

Suppose my deduction is 12% from the basic salary, which amounts to Rs-601. In this case, how much will the employer pay to my PF account in Rs?

Dear Kiranbhogade,

Your contribution is Rs. 601, which is 12% of the salary. Hence, your salary may be Rs. 5010. 8.33% of the salary, i.e. Rs. 417, will go to the EPS/Pension Fund, and the balance of Rs. 184 (601-417) will go to the PF account as the employer's contribution.

Abbas.P.S, ITI Ltd, PALAKKAD.