Only a portion of employer’s contribution goes to EPF


Under the Employee Provident Fund (EPF) scheme, employees and employers both contribute equally. However, only a portion of the employers’ contribution goes towards the investment fund.

According to regulations, employees and employer contribute 12% of the basic monthly salary to the EPF. Women can choose to contribute only 8% of the basic monthly salary for the first three years. For sick companies or establishments with less than 20 employees, the rate can be 10%.

If your basic salary is 30,000 a month, you will contribute 3,600, and the employer will contribute the same amount. However, the employer’s contribution will not entirely go towards the investment fund. An employer must contribute up to 1,250 towards Employee Pension Scheme, depending on the basic pay.


The money contributed by an employer goes towards different schemes. Of the basic salary, about 3.67% goes towards EPF or for investments, and 8.33% goes towards Employee Pension Scheme (EPS). The rule applies if the employee is earning up to 15,000 basic salary. If your monthly salary is higher, it will be capped at 15,000 for calculating EPS contribution.

Let’s understand with an example. If your basic salary is 30,000, the employer’s contribution for EPS will be 1,250 a month. The remaining 2,350 will go towards EPF.

But if your basic salary is, say, 14,000, the EPS contribution from the employer will be 8.33%, which is 1,166.2.


The calculation of the pension you will receive is tricky. There’s a formula – pensionable salary X pensionable service/70. However, there are caps on the pensionable salary and pensionable service in this case. To simplify, under the EPS, the minimum pension amount is 1,000 per month, and the maximum amount is 7,500 a month.

There are some charges as well. You will need to pay 0.5% for Employee’s Deposit Link Insurance Scheme (EDLIS), 1.1% for EPF Administration charges and 0.01% administration charges for EDLIS.

(Do you have personal finance queries? Send them to [email protected] and get them answered by industry experts)


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