Find out what happens to employer’s contribution towards your PF account

By: |
October 01, 2021 3:37 PM

Both EPF and EPS are under the purview of the Employees’ Provident Fund Organisation (EPFO).

EPS, EPF, Contribution, employer, employee, returns, PF passbook, scheme certificateEPF is only one part of the employee’s overall retirement corpus while EPS is the other part.

Provident fund (PF) contribution represents passive savings for a salaried employee. For most employees, 12 per cent of the basic salary goes into the PF account each month. An equal percentage is also contributed by the employer. However, in most cases, not the entire 24 per cent of PF contributions lands up in the employees’ provident fund account (EPF) each month. If you look at your PF statement or the PF passbook, you will find separate entries for employees and employer’s contribution towards the PF account. In addition, there is another column that shows contribution towards employees pension scheme (EPS). Both EPF and EPS are under the purview of the Employees’ Provident Fund Organisation (EPFO).

EPF is only one part of the employee’s overall retirement corpus while EPS is the other part.

The employee need not contribute towards EPS but out of the employer’s contribution, a certain percentage is diverted towards EPS. With basic salary (for pension purposes) capped at Rs 15,000, 8.33 per cent of the salary is diverted or put into EPS. This means, irrespective of a higher basic salary (above Rs 15,000), each month Rs 1250 of employer’s contribution is put into EPS.

The amount of monthly pension depends on the number of years of service and a fixed formula. On retirement, after a minimum period of ten years of service, the minimum pension per month is fixed at Rs 1,000 while the maximum monthly pension amount is Rs 7,500. To ensure that one gets the credit for the number of years worked, make sure to opt for ‘scheme certificate’ which helps EPFO keep a record of your service period.

The working of EPS is not similar to EPF and neither does EPS contributions earn any interest.  Whatever goes into the EPS, the entire corpus stays with the government and the employee starts getting pension after retirement. When an employee changes jobs, EPF gets transferred with the new employer, although the UAN remains the same. But after the job change, EPS contribution stays with EPFO. The employee has the option to either withdraw EPS funds or carry forward to the next job. This however, depends on the length of service and age of the employee.

If an employee has not completed ten years of continuous service, he can either withdraw the EPS amount, or take the ‘scheme certificate’. On joining the new employer, submit the scheme certificate to EPFO through the new employer. Once ten years are completed, the withdrawal benefit stops and one can only take the scheme certificate from EPFO by filing the same Form 10C.

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