The EPF& MP (Miscellaneous provision) act was came in to existence from March 14th 1952.The act is applicable all over India except the state of Jammu and Kashmir. Presently the following three schemes are providing to employees under this act.
1. Employees’ provident fund scheme (EPF) 1952.
2. Employees’ pension scheme (EPS) 1995.
3. Employees deposit linked insurance scheme (EDLIS) 1976.
An establishment with 20 or more workers should register with Employees provident Fund organization which comes under any of the 180 industries mentioned. Here we mainly aimed for EPF rates and its calculation.
EPF, EPS, EDLIS rates in India
EPF, EPS and EDLIS are calculated on the aggregate of Basic salary, dearness allowances, cash value of food concession and retaining allowances, if any.
“Retaining allowances means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.”
Most of the organizations are following Basic+ DA Method. Below table tells you the rates of contribution of EPF, EPS, EDLI, Admin charges in India, except for sick industries.
Inspection charges payable by employer
Inspection charges must be paid by the employer in the following Cases:
1. Some establishment are exempted from EDLI contribution as they are providing the same nature of benefit without any contributions from employee, such establishments are liable to pay 0.005% on Basic salary
2. The establishments exempted under the scheme should pay 0.18% of Basic salary towards inspection charges.
EPF Ceiling Limit
EPF ceiling limit is fixed to 6500/-.The employer is liable to pay contribution only on 6500/- Whatever is the basic salary.
Calculation of Employees provident fund
Let us calculate the contribution of an employee who is getting a basic salary of Rs.3500/-
EPF Employees share = 3500 x 12% = 420
EPS Employer share = 3500 x 8.33% = 292
EPF employer share = 3500 x 3.67% = 128
EDLI charges = 3500 x 0.5% = 18
EPF Admin charges = 3500 x 1.1% = 39
EDLI Admin charges = 3500 x 0.01% = 0.35 (Round off to Rs 1/-)
Calculation of EPF for employees getting a basic salary over and above the ceiling limit Rs.6500/-
In such cases companies uses different method for calculation as per their pay roll policy.
Consider an employee getting a basic salary of Rs.7500/-
We can calculate it in different ways. The only thing we should take care is, EPS is calculated only up to Rs.6500/- that means the maximum amount is fixed to Rs 541.00. The three methods mentioned below are based on the above example.
Method-1
If the company consider total basic salary above the limit fixed Rs.6500/- for PF calculation.
EPF Employees share = 7500 x 12% = 900
EPS Employer share = 6500 x 8.33% = 541
EPF employer share = 7500 x 3.67% = 359 OR (7500 x 12% - 541)
EDLI charges = 7500 x 0.5% = 38
EPF Admin charges = 7500 x 1.1% = 83
EDLI Admin charges = 7500 x 0.01% = 0.75 (Round off to Rs 1/-)
We will discuss how Employer contribution of EPS and EPF is calculated. Employer is decided to contribute on total basic salary which is 12 % on Rs.7500.00 equal to Rs.900.00. EPS Share is fixed to Rs.541.00. Balance (900-541) goes to EPF account Rs.359.00.
Out of Rs 900.00, EPS share is RS 541/- which is fixed for a basic salary greater than 6500/-. The balance amount is 900-541 = 359.00 which will go to EPF account.
Method-2
Some companies follows the below method in which employee share is calculated on Rs.7500/- and employer share is calculated on up limit Rs 6500/-.
EPF Employees share = 7500 x 12% = 900
EPS Employer share = 6500 x 8.33% = 541
EPF employer share = 6500 x 3.67% = 239
EDLI charges = 6500 x 0.5% = 33
EPF Admin charges = 6500 x 1.1% = 72
EDLI Admin charges = 6500 x 0.01% = 0.65 (Round off to Rs 1/-)
Method-3
Some are calculating both employer and employee shares on Rs 6500/- in spite of higher basic salary.
EPF Employees share = 6500 x 12% = 780
EPS Employer share = 6500 x 8.33% = 541
EPF employer share = 6500 x 3.67% = 239
EDLI charges = 6500 x 0.5% = 33
EPF Admin charges = 6500 x 1.1% = 72
EDLI Admin charges = 6500 x 0.01% = 0.65 (Round off to Rs 1/-)
Remittance of contribution
It is the duty of employer to remit the contribution to the government account before 15th of the following month.
Employer's interest Liability
Employers are liable to pay @12% interest on late payment of EPF, EPS, EDLI, Administrative charges.
Damage liability
An employer is remitting EPF, EPS, EDLI, and Admin charges late shall be liable to pay damages as penalty ranging from 17% to 37% depending up on delay.
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