As per the statutory regulations in India companies with 20 or more employees need to get registered under Employee Provident Fund Scheme. There is a deduction from employee's salary and also an equivalent contribution from employer's side which is then deposited with the government under various accounts.

This article describes in detail the various options of managing PF and associated deductions in EazeHR's payroll module. Sections covered in this article are
1. Breakup of PF / EPS and EDLI deduction heads
2. Calculation of PF / EPF / EDLI deductions - both Employee and Employer contributions
3. PF deduction due to salary arrears
4. Participation in Akhand Bharat Rojgar Yojna (ABRY)

1. PF Deduction Breakup

Heads and rates of deductions are  -

Contribution Accounts

Admin Accounts

	EPF	EPS	EDLI	EPF	EDLI
Employee	12%	0	0	0	0
Employer	3.67%	8.33%	0.5%	0.5%	0

EPF - Employee Pension Fund
EPS - Employee Pension Scheme
EDLI - Employee Deposit Linked Insurance

1. Contributions are made at a statutory limit of Rs 15,000. If an employee's wages are more than 15,000 then he can decide to get the deduction done at 15,000 or at a higher limit. Company also has the option of contributing at 15,000 or higher limits. If employee contribution is at higher than 15,000 then the EPF Admin charges are payable at the higher rate
   
2. If the wages for an employee are less than 15,000 then the contributions are done at the lesser limit
   
3. Pension contributions are paid only till the age of 58, once the employee crosses 58 years all the employer's contribution goes towards EPF
   
4. If an employee who is not an existing EPF / EPS member joins on or after 01-Sept-2014 with wages above 15,000 then employer's share of pension contribution is added to EPF
   
5. A member joining after the age of 50, if not a pensioner does not have choice of not getting the Pension Contribution on grounds that he will not complete 10 years of eligible service. The social security cover is applicable till he/she is a member
   
6. EPS contribution is restricted to 8.33% of 15,000 which makes it a maximum of Rs 1250 per month. If arrears are given for a month then EPS will be deducted on those arrears only to the total EPS deduction limit of Rs 1250 for the month
   
7. For International Worker, higher wage ceiling of 15,000/- is not applicable from 11-Sep-
   2010

Note - In case an existing EPS member (as on 01-Sep-2014) whose Pension contribution was paid erstwhile EPS wage ceiling of 6500/- contribution to contribution above Rs 15000/- wage ceiling from 01-09-2014 he will have to give a fresh consent and an amount of 1.16% on wages above 15000/- will have to be contributed by him in pension Fund (A/C No 10) through the employer

1. Employer's EDLI contribution is to be paid on up to maximum wage ceiling of 15000/- even if PF is paid on higher wages
   
2. EDLI contribution to be paid even if member has crossed 58 years age and pension contribution is not payable. This is to be paid as long as the member is in service and PF is being paid.
   

2. Calculation of PF Deduction for Employee and Employer
There are four different parameters which are used to determine the actual PF deduction.
2.1. Employer's deduction - There are two ways in which employer's EPF deduction can be based
i) Same as Employee – in this case the employer's deduction is based on the employee's deduction
ii) Statutory Limit – in this the deduction is limited to 15,000 or actual if it is less than 15,000

 2.2. Employee's deduction - There are two options
i) Custom - specific heads can be selected from the set of heads selected for the company
ii) Statutory Limit - in this the deduction is limited to 15,000 or actual if it is less than 15,000

2.3. Deduct PF on arrears - this will determine to deduct PF on arrear payments or not, you can control this through a parameter in setup. For more details on the calculations refer examples given below

2.4. Basis of deduction - the basis for calculating wages is decided based on the heads selected in Deduction and Encashment table - "refer article" for more details

During monthly payroll processing the deduction under various heads are done, the basis of deduction is as given below
- A/c 1 : EPF Employer Share : this is deducted on the basis of Wages EPF Employer
- A/c 1 : EPF Employee Share : this is deducted on the basis of Wages EPF Employee but in the monthly ECR file Wages EPF Employer are reported. In case of PF deduction on arrears if Wages EPF Employee > Wages EPF Employer then PF is deducted as per rules and in the ECR Arrear file Wages EPF Employee is reported
- A/c 2 : EPF Admin Charges : this is done on the basis of Wages EPF Employee
- A/c 10 : EPS Employer Share : this is deducted on the basis of Wages EPS
- A/c 21 : EDLI Charges : this is deducted on the basis of Wages EDLI

3. PF deduction due to arrears
There are three types of arrears which have an impact on the PF deduction -

1. Arrear due to salary changes - if salary is increased from a back date then arrear is paid and PF is deducted on the arrear but if salary is decreased from a back date then there is no PF deduction since the arrears are negative.
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Example 1 - Arrears due to salary increment from back date and contribution capped at 1800
April, May Wages = 14000 in each month
PF on April, May wages = 1680 in each month
Increment of 2000 processed in June with effective date of 1-April

PF on June wages = 16000 x .12 = 1920 but applying maximum limit of 15,000 it becomes 1800
PF on April, May arrears = 2000 x .12 = 240

But since 1800 limit is applicable in April and May also the additional PF for April and May arrear = 120 (1800-1680) for each month

Therefore PF which will be deducted in June payroll would be = 1800 + 120 + 120 = 2040

Deduction of PF on arrear by "Arrear Month" or by "Arrear Payout Month" - The PF which is deducted for April and May in this example can be handled in two ways
1. By Arrear Month - in this case the ECR Arrear file will show separate entries for April and May
2. By Arrear Payout Month - in this case the ECR Arrear file will show one consolidated entry and it will be mapped to June (Arrear Payout Month)
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2. Arrears due to change in basis of PF deduction - if additional heads are included in the PF basis and salary is updated from a back date then EazeHR will calculate the arrear on the increase in PF basis. If heads are removed from the PF basis and salary updated from a back date then PF basis might be reduced in which case no arrears are deducted.

The net deduction of PF on arrears will depend upon combination of both the inputs, salary update and change of basis.
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Example 2 - Arrears due to change in basis of PF deduction
Earlier PF Basis = Basic (12,000)
Revised PF Basis = Basic + Special Pay (20,000)
Employee's deduction is based on Custom (Basic + Special Pay)
Employer's deduction is based on Same as Employee

Payroll processed till September
Salary updated from April

Increase in PF Wages due to change in PF Basis = 8000 per month from April - September
Decrease in PF Wages due to changes in Basic, Special Pay = 1000 per month from April - September

Arrear PF Wages = 7000 x 6 = 42000
PF on Arrears = 42000 x 12% (this is indicative figure the actual figure will depend upon the EPS value
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The arrear PF would be reported separately from regular PF through Arrear ECR file.

3. Arrears due to reversal of LWP - If Leave Without Pay deduction done in a previous month is reversed in a subsequent month then the amount deducted is paid as arrear in salary. System will treat it as income in the month in which the LWP reversal is paid and the calculation of PF will be done accordingly.
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Example 3 - Arrears due to reversal of LWP
Wages = 15000
Deduction of PF = as per Limit
In the month of June there are two days of LWP due to which
June Wages = 14000
PF on June wages = 1680
The LWP is reversed in July payroll
July Wages = 15000+1000=16000 but for the purpose of deduction of PF the limit of 15000 will apply
PF on July Wages = 1800
Please note that reversal of June LWP is not added to June Wages to arrive at PF on arrears. This is done since the reversal is treated as July income for the purpose of tax calculation also.
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4. PF deduction for companies / employees participating in ABRY
Akhand Bharat Rojgar Yojna (ABRY) is a scheme launched in 2020 to incentivize companies for creation of new employment post COVID 19 pandemic.

1. This scheme being implemented through the Employees Provident Fund Organization (EPFO), reduces the financial burden of the employers of various sectors/industries and encourages them to hire more workers.

2. Under ABRY, Government of India is crediting for a period of two years both the employees’ share (12% of wages) and employers share’ (12% of wages) of contribution payable or only the employees’ share, depending on employment strength of the EPFO registered establishments. Under ABRY benefits are provided to every establishment registered with EPFO and their new employees (earning wage less that Rs. 15,000/- per month) if the establishments take new employees on or after 1.10.2020 and upto 30th June, 2021 or those who lost jobs between 01.03.2020 to 30.09.2020.;

3. The scope of the scheme i.e. last date for registration of new employees under the scheme has been extended from 30th June 2021 to 31st march 2022 with the approval of CCEA in its meeting held on 30.06.2021. Approximately 71.8 Lakh employees are likely to get benefited during the scheme period. The beneficiaries registered upto 31st March, 2022 will continue to receive the benefits for 2 years from the date of registration under the scheme.

To enable your company's participation in ABRY and to ensure that the Employee's deduction is not being deducted from their salary for participating employees you will need to enable the ABRY parameter in Payroll Setup and also from the Payroll Details page of respective employees.

When an employee is participating in this scheme then the Employee's contribution to EPF will be shown in a separate column "PF (Employees Contribution - ABRY) and this amount will not be deducted from his Gross Salary. There will be no change in the ECR. The contribution made by Government to employee's PF account as employee's contribution will not be included in savings under Chapter VIA - Section 80C.

During each payroll the setting of ABRY is saved for the employee and when salary increment is processed from a back date then the Employee's PF contribution on arrear will be shown as ABRY only if in that month's payroll the employee was mapped to ABRY.

5. Reduction in the Statutory Limit due to LWP
If the Employee contribution and / or Employer contribution deduction are to be done as per Statutory Limit the deduction pandemic and if there is a reduction in Wages to a value less than 15,000 due to LWP then the Statutory Limit is also proportionately reduced and the deduction is done at the revised Statutory Limit.
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Example
Basic = 12,000, Special Pay = 4,000 and HRA = 3,000
Wages = 19,000
While running payroll for July 2022 LWP is deducted : 4 days for July and 6 days for June
And Basic / Special Pay / HRA all are selected against LWP in Deduction and Encashment table
Revised Wages = 21 x 19000 / 31 = 12,870
Revised Statutory Limit = 21 x 15000 / 31 = 10,161
PF will be deducted on 10,161
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