Provident Fund (EPF) applies to establishments with 20 or more employees. The employee contributes 12% of basic wages plus dearness allowance, and the employer contributes another 12%. Of the employer's 12%, 8.33% goes to the Employees' Pension Scheme (EPS), calculated on wages up to the ₹15,000 a month ceiling, and the remaining 3.67% goes to the EPF account. The employer also pays EDLI insurance and administrative charges on top, and deposits everything with EPFO every month.
Which employers must register for PF
The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 covers factories in the listed industries and other notified establishments that employ 20 or more persons. Contract and temporary workers engaged through a contractor are counted too.
- Once an establishment is covered, it stays covered even if the headcount later falls below 20.
- A smaller establishment can register voluntarily if the employer and the majority of employees agree.
- Registration is done online and gives the establishment a PF code. Each employee gets a Universal Account Number (UAN) that stays with them across jobs.
India's four Labour Codes, including the Code on Social Security, 2020, were brought into force in November 2025 and are being rolled out with rules and transition arrangements. PF and ESI continue to operate through EPFO and ESIC. Check the latest notifications before relying on any figure here.
Which employees must be enrolled
An employee whose PF wages are up to ₹15,000 a month when joining must be enrolled. This ₹15,000 is the statutory wage ceiling.
An employee who joins on PF wages above ₹15,000 and has never been a PF member before is an "excluded employee". Such a person can still be enrolled if the employee and employer both agree. An employee who is already a PF member from an earlier job continues as a member in the new job.
Contribution rates and where the money goes
PF is calculated on PF wages: basic wages, dearness allowance and retaining allowance, if any.
| Contribution | Rate | Goes to |
|---|---|---|
| Employee | 12% of PF wages | Employee's EPF account |
| Employer: pension part | 8.33% of PF wages, on wages up to ₹15,000 | Employees' Pension Scheme (EPS) |
| Employer: provident fund part | The balance of the employer's 12% (3.67% where wages are within the ceiling) | Employee's EPF account |
| Employer: EDLI and administrative charges | Small additional percentages, paid by the employer only | Insurance scheme (EDLI) and EPFO |
Because the pension part is calculated on a maximum of ₹15,000, it cannot exceed ₹1,250 a month (8.33% of ₹15,000). If PF is paid on a higher wage, the extra employer contribution goes to the EPF account.
EDLI and administrative charges are not deducted from the employee. Their rates and minimum amounts are notified by EPFO, so take the current figures from the EPFO website or your ECR challan.
Employees who became PF members for the first time on or after 1 September 2014 with wages above ₹15,000 are generally not enrolled in the pension scheme. For them the employer's whole 12% goes to the EPF account. Pension on higher wages has its own rules and court rulings, so take advice on those cases.
The ₹15,000 wage ceiling in practice
The law requires contributions only up to the ₹15,000 ceiling. For an employee with PF wages above ₹15,000, many employers limit both contributions to 12% of ₹15,000, which is ₹1,800 a month each. Others contribute on the full basic wage. Either is allowed, but the choice should be written in the appointment letter and applied consistently.
| Monthly PF wages | Employee 12% | Employer to EPS | Employer to EPF |
|---|---|---|---|
| ₹12,000 | ₹1,440 | ₹1,000 | ₹440 |
| ₹15,000 | ₹1,800 | ₹1,250 | ₹550 |
| ₹25,000, PF limited to the ceiling | ₹1,800 | ₹1,250 | ₹550 |
| ₹25,000, PF on full wages | ₹3,000 | ₹1,250 | ₹1,750 |
Amounts are rounded to the nearest rupee. An employee can also choose to contribute more than 12% as a voluntary contribution; the employer does not have to match it.
What counts as basic wages
PF is not payable on house rent allowance, overtime, bonus or commission. But an employer cannot avoid PF by keeping basic pay low and paying the rest as "special allowance". The Supreme Court held in 2019 that allowances paid to all employees as a fixed part of salary, and not linked to extra output or special conditions, are part of basic wages for PF.
If your salary structure has a small basic and large fixed allowances, review it with your consultant.
Monthly payment and filing
- Run payroll and work out PF wages for each member, after loss-of-pay days. See how per-day salary and LOP are calculated.
- Prepare the Electronic Challan cum Return (ECR) file listing each member's UAN, wages and contributions.
- Upload the ECR on the EPFO employer portal and pay the challan online.
- Do this by the 15th of the following month. Late payment attracts interest and damages under the Act.
New joiners must be added with their UAN and KYC details, and leavers marked with their date of exit, so that their accounts stay correct.
How FundRaksha HR handles PF
On the Pro and Enterprise plans, FundRaksha HR calculates PF at 12% of Basic with the ₹15,000 ceiling, splits the employer share, and produces the PF ECR file for upload to EPFO each month. Attendance and leave flow into salary automatically, so PF is worked out on the wages actually earned. See features and pricing.
Frequently asked questions
Is PF compulsory for a company with fewer than 20 employees?
No. PF is compulsory for covered establishments with 20 or more employees. A smaller establishment can register voluntarily, and one that was covered earlier remains covered even if its headcount falls below 20.
Is PF compulsory for an employee earning more than ₹15,000?
Not if the employee joins on PF wages above ₹15,000 and has never been a PF member. Such an employee can be enrolled by agreement. An existing PF member continues to be a member in the new job.
How is the employer's 12% PF contribution split?
8.33% of wages, on wages up to ₹15,000, goes to the Employees' Pension Scheme, and the balance goes to the employee's EPF account. Where wages are within the ceiling the balance is 3.67%.
What is the due date for PF payment?
The 15th of the month following the wage month. The ECR is filed and the challan paid online on the EPFO employer portal.
Can the employer deduct its own PF share from the employee's salary?
No. The employer's contribution and the EDLI and administrative charges are the employer's cost. Only the employee's own contribution can be deducted from wages.
This guide is general information for Indian employers, not legal or tax advice. Rates and rules change; confirm the current position with EPFO, ESIC, your state department or your consultant before acting.
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