EPF or Provident Fund is a social security scheme of the government. It ensures a retirement saving for the employees who don’t have any pension scheme. This scheme runs through the employers. These employers can be a private company or any organisation. Besides this, the government has made certain rules of this scheme. The employer and employee both have to follow the PF rules. In this post, I would discuss the PF rules for the employer. These rules are updated till 2018.
PF Rules for the Employer
The EPF scheme is governed by the EPF Act- 1952. Thus, it is a law and an employee and employer have to abide by it.
A company or organisation has to participate in EPF scheme if the total number of the employee is 20 or more. Employers with less than 20 employees can also take part in this scheme. To participate in the scheme, it has to register with the EPFO. This process is free and online. An employer can visit the Shram Suvidha portal for EPF registration. The PAN is mandatory for the registration.
Mandatory EPF Membership
It is mandatory to enrol every employee into the EPF scheme unless the salary of the employee is more than ₹15,000/month. However, the scheme is open to all irrespective of the salary. Also once an employee has been the member of EPF scheme, it has to again enrol in new employment what if the salary is more than ₹15,000/month.
A new employee who has a salary of more than ₹15,000/month can opt out of the EPF scheme. The employer should not insist on that case. The participation in Employee Pension Scheme is also voluntary if the salary is more than the given limit.
The employer has to deduct the 12% EPF contribution from the employees’ salary before the disbursal. This deduction should be mentioned in the salary slip. Along with this amount, the employer has to also contribute the similar amount.
In practice, many companies deduct both the amount from the CTC salary of the employee. In other words, the CTC salary (Cost to Company) includes the EPF contribution by the employer as well.
EPF Contribution Rate for Employer and Employee
The government has fixed 12% of the basic salary as the contribution rate of the EPF scheme. The employee and employer both have to deposit 12% of the monthly basic salary. Thus, total 24% goes to the retirement saving.
You should know that Employee pension scheme is also funded from this contribution. Out of the 12% employer’s contribution, 8.33% goes towards the pension scheme. This amount is capped at Rs 1250. The remaining amount goes to the EPF scheme.
The employer has to also contribute to the EDLI scheme and administrative expenses. It is above and over of the 12% contribution.
What Forms the Salary
For the calculation of EPF scheme, the basic salary is considered. This also includes the DA (dearness allowance). All other allowances and perks are not considered for the calculation of EPF contribution. If an employee also gets a commission as a percentage of sales, this amount would be also added with basic salary for the PF calculation.
Regular Tasks of the Employers
An employer who becomes a part of the EPF scheme has to perform some regular tasks. Off course these tasks are a burden on small companies but it is mandatory by the law. Even companies have to pay to EPFO for the administrative expenses. However, because of the UAN and online portals, the EPF related task has come down.
On the other hand, an employer can also create its own trust to manage the EPF contribution. The EPFO gives this exemption after the verification. In this case, an employer is not required to remit EPF contribution. Rather the money would go to the private trust. However, the trust should give equal or higher return than the EPFO.
An employer has to remit the EPF contribution to the EPFO. The remittance should be done every month. The employer has to remit EPF contribution within 15 days of the next month. The EPF contribution from the salary of October month should be deposited to EPFO account up to 15th November. If you miss the deadline, the EPFO would put the company in the defaulter list. The employer would have to also pay penal interest for the default period.
EPF Remittance Return
An employee has to file a return of its monthly remittance. In this return, the employer has to give details of the employees, their salary and contribution. On the basis of this return, the EPFO updates the passbook of the very employee. This return is tallied with the aggregate remittance of the EPF amount. The employer has to also file an annual return.
The fill the monthly return the employer has to login to the UAN employer portal and fill the ECR. Read the instructions before filing the return.
PF member Registration
The employer has to also enrol every new employee into the EPF scheme. Form 11 is used for the registration. But, this form is not submitted to the EPF office. Rather, the employer has to keep with itself and use it to fill the online form.
Generation of UAN
The employer has to also generate the UAN for a new employee who has not an existing UAN. This task is done online and hasslefree. To generate a new UAN the employer has to login UAN employer portal.
An Approved KYC is mandatory for the EPF withdrawal. The EPFO requires the PAN, Bank account number and Aadhaar or other KYC details of each EPF member. Hence, It is the responsibility of the employer to furnish the KYC details of its employees. Many older employees may not have given the KYC details……Read more>>