Confused About EPF Admin Charges? How Should They Be Calculated on Salaries?

Dear Professionals,

I am facing an issue while calculating the salary component. For an employee with a basic salary of ₹72,000 per month, no other allowance or DA is given. The employer's PF contribution is ₹1,800, EDLI charges are ₹75, and EPF admin charges are ₹75. This brings the total CTC to ₹8,87,400 per annum. We use some payroll software. Here EPF employer contribution, EDLI Admin charges are all auto-calculated. I cannot edit it. It's calculating correctly for EPF contribution ₹1,800 and also EDLI ₹75, but for Admin charges, it's calculating on basic pay.

During a previous discussion with the payroll software team, I was informed that EPF admin charges are calculated based on the basic salary and not restricted to EPF wages of ₹15,000. However, after consulting with several CA professionals, they confirmed that the EPF admin charges depend on the employer's contribution. If the PF wage contribution is restricted to ₹15,000, the EPF admin charges should also be paid on this limit, not on the basic salary.

I have attached a document from the EPF website, which mentions that if the wage limit is increased, the employer must pay admin charges on the increased wage. However, this is not applicable in our case, as the contribution is restricted to ₹15,000. For reference, according to Para 26(6) of the EPF Scheme, a joint request from both the employer and employee is required to contribute on higher wages. In such cases, the employer must pay administrative charges on the higher wages (above ₹15,000).

I am also attaching a link to Saral PayPack, another accounting software, where example 2 clearly explains a case where the employer contributes based on the ceiling limit, and the employee on net pay. You can check it here: https://saralpaypack.com/blogs/pf-admin-charges/.

So, I need to know whether the employer can pay EPF admin charges of ₹75 (15k*0.5%) or the employer has to pay 0.5% on basic, i.e., ₹360 (72k*0.5%).

Understanding EPF and EDLI Administrative Charges

If the employee is paying his contribution calculated at 12% of Rs 72,000 (i.e., actual basic pay), then the administration charges should also be calculated based on that salary. The EPF qualifying salary is Rs 72,000; therefore, the admin charges should also be on Rs 72,000, i.e., Rs 360. Similarly, if both the employee and employer are contributing at 12% of Rs 15,000, then the admin charges will also be on Rs 15,000, i.e., Rs 75. The principle is straightforward: administrative charges are fees to manage the funds, and the higher the amount managed, the higher the charges should be. For example, if the funds contributed by the employee are Rs 8,640, the cost of administration should be Rs 360, correct?

Clarification on EDLI Charges

In the case of EDLI, however, the payment is at the rate of 0.5% on the salary subject to a maximum of Rs 15,000. There is no such condition attached to administration charges.