Understanding Employee and Employer Contributions to Provident Fund

Hi, I am Ammu. What is the meaning of employer and employee contribution? What is the difference between employer and employee contributions? Is employer contribution mandatory?

Hi Ammu,

The Employees' Provident Fund Organisation in India is one of the largest provident fund institutions in the world in terms of members and volume of financial transactions that it carries out. It has been set up for employee benefits as a saving fund. Both employees and employers contribute to the same fund at a rate of 12% of the Basic salary from both sides.

Out of the employer's 12% contribution, 8.33% goes to the pension fund, while the remaining 3.67% goes to the Provident fund. However, the total 12% contribution from employees goes to the same fund. An employee may claim this amount after separating from the company or choose to retain it for their next assignment.

Regards,
Amit Seth