This article describes in detail the various options of managing PF and associated deductions in EazeWork HRMS'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  -

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

 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

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.

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.

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

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.

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.

4. Reduction in the Statutory Limit due to LWP

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