EPF vs EPS vs EDLI: Earning Rs 10,000-Rs 35,000? Know your new PF share | Personal Finance

The EPFO wage ceiling has increased from Rs 15,000 to Rs 25,000 monthly from September 17, bringing employees earning between these levels into mandatory social security coverage, subject to the applicable EPF rules. The change shapes not just provident fund savings but also pension and insurance benefits under the EPFO framework. 

 

For employees, however, the question is how much will be deducted from salary, and how much will the employer contribute?

 

The answer depends on the employee’s PF wages, generally basic wages plus dearness allowance, and whether the employee is eligible for the Employees’ Pension Scheme (EPS).

 

What changes with the Rs 25,000 ceiling?

The government has raised the statutory wage ceiling for mandatory EPFO coverage for the first time since September 2014. Employees joining an establishment with wages between Rs 15,000 and Rs 25,000 a month will now fall within the mandatory coverage threshold, subject to the scheme’s provisions.

  

The government estimates that more than 51 lakh employees could come under EPFO coverage for the first time. The revised framework covers three key components: Employees’ Provident Fund (EPF), Employees’ Pension Scheme (EPS) and Employees’ Deposit Linked Insurance Scheme (EDLI). 

 

This means an employee earning Rs 20,000 in PF wages, for example, will have 12 per cent of those wages, or Rs 2,400, deducted towards EPF.

 

At Rs 25,000, the employee contribution would rise to Rs 3,000 a month.

 

How much will employee and employer contribute?

Under the standard contribution structure, the employee contributes 12 per cent of PF wages to EPF. The employer also contributes 12 per cent, but this is divided between EPF and EPS for eligible employees.

 

The broad calculation under the revised ceiling is:

 

  

The figures illustrate how the contribution changes as the PF wage rises. The employer’s EDLI contribution and EPF administrative charges are separate from the employee’s salary deduction.

What happens to someone earning Rs 35,000?

A salary above Rs 25,000 does not automatically mean that an employee can newly enter the mandatory EPFO system.

 

This distinction is important. The revised ceiling determines the wage limit for mandatory coverage and EPS eligibility for employees joining under the new rules. An employee whose relevant wage is above Rs 25,000 can therefore be treated differently depending on whether the person is already an EPFO member and the applicable statutory provisions.

 

For illustration, EPFO’s contribution calculations show that where PF wages are Rs 35,000 but the contribution is subject to the Rs 25,000 ceiling, the employee’s EPF contribution would be Rs 3,000. The employer’s 12 per cent contribution would go towards EPF rather than EPS where EPS membership is not available under the revised rules.

 

This is why employees should not simply multiply their total monthly salary by 12 per cent to estimate their PF deduction. PF is generally calculated on specified wages rather than the entire cost to the company or gross salary.

 

Does this mean take-home salary will fall?

For employees earning between Rs 15,000 and Rs 25,000 in PF wages who are brought under mandatory coverage, there will be an employee-side deduction where there was previously none because they were outside the mandatory threshold.

 

For example, a worker with PF wages of Rs 20,000 could see Rs 2,400 a month going towards EPF. That reduces immediate take-home pay, but the amount becomes retirement savings in the employee’s EPF account.

 

There is also an employer contribution, which does not simply get deducted from the employee’s stated salary. Part of it goes towards EPF and, for eligible employees, part towards EPS. EDLI provides insurance-linked protection.

 

What should employees check from October?

September 17 is the effective date of the revised ceiling, but October will be the first full month in which many employees are likely to see the change reflected in their payroll.

 

Employees in the Rs 15,000-Rs 25,000 PF-wage range should check their salary slips and EPFO passbook for:

 

employee EPF deduction;

 

Employer EPF contribution;

 

Employer EPS contribution, where applicable; and

 

EDLI contribution.

 

The EPFO has also published FAQs on its portal following the revision.

 

A higher mandatory deduction from current income for newly covered workers, but access to EPF savings, pension and insurance-linked social security that was earlier outside the mandatory coverage threshold.