If you work in a company, you must have come across the term EPF. Various companies have a policy of the Employee Provident Fund, a popular savings scheme. However, most employees don’t know what is EPF and are unaware of its benefits. At the time of employee onboarding, the company’s HR gives an overview of the EPF and shares the guidelines regarding it. If you don’t know what is EPF scheme, it is time to delve into it, which is majorly misunderstood by the employees. In this blog, we will share every detail about the Employee provident fund and how you can calculate it by yourself.
Table of Contents
What Is An Employee Provident Fund(EPF)?
EPF is a retirement saving scheme that is available to all salaried people. It was introduced by the Employees’ Provident Fund Organisation under the supervision of the Government of India in 1952. The goal behind launching an EPF is to provide social security to the millions of people working in various organisations. Most people ask what is EPF and how it works.
So, under the EPF, an employer deducts a fixed amount (approx 10-12%) from the base salary every month and puts it along with their contribution to the Employee Provident Fund Account(EPFA). At the time of EPF account opening, every employee gets a unique EPF account number.
What Is An EPF Account Number?
An EPF account number, which is unique and consists of a 22-character alphanumeric identifier, is given at the time of account opening. It is the number used by employees to check the status of their EPF account balance and withdraw the funds. An employer is responsible for timely contributions to the EPF account of employees using this number. You can check the EPF account on your salary slip, on the UAN Portal, and by visiting the EPFO office near your location.
Difference Between EPF And PPF
Are you confused between EPF and PPF? Both of these financial terms look similar but have differences between them. As we mentioned above, what is EPF? It’s time to get an overview of the Public Provident Fund(PPF).
In simple words, PPF is a government-backed savings scheme which allows individuals employed, self-employed, retired officials, and even employees to contribute an amount from Rs 500 to 1.5 lakh. This savings scheme has a fixed return, which is decided by the government each quarter. Both EPF and PPF are savings schemes that come under the government of India, with differences in individual contribution and return rate.
Benefits Of Employee Provident Fund(EPF)
An employee provident fund brings various benefits to the employee, which can be seen during retirement. It is a widely accepted retirement saving scheme by companies to secure employees’ future. In addition, EPF can be used during an emergency or when applying for a loan by following a specific process.
Unlike the Employee Stock Ownership Plan(ESOP), which is a gesture of appreciation and benefits to employees, EPF also contributes to employees and employers. Since you have a better understanding of what is EPF, let’s take a look at its various benefits:
- Financial backup during emergencies
- Supports in post-requirement lifestyle
- Builds your saving corpus
- Doesn’t require high investment
- Brings tax benefits
How Do You Calculate EPF Contributions From Your Employer?
Most of the employees are confused about the EPF contribution made by the employer. You might also ask: what is EPF in Salary, and how can I check it by myself? You need to understand that in the EPF scheme, you and your employer both make contributions. The contribution made in the EPF must be 10 or 12% of your basic salary. In the case of female employees, the percentage of EPF contribution is only 8% of the basic salary in the first three months.
The EPF contribution is divided into two parts:
Employee: Male employees must contribute 10-12% of their monthly basic salary. On the other hand, female employees need to contribute 8% of their basic salary for the first three months. After that, it becomes 10 to 12% of the basic salary.
Employer: Your employer must also contribute an equal amount of 10-12% of your basic salary.
Steps To Calculate EPF Contribution By Yourself
You can easily calculate the EPF contribution made by your employer by following the simple steps. Since you know what is EPS contribution, it will be easier to understand this process. Let’s understand it with an example:
- Imagine you have a basic salary of Rs 25,000 per month, and your contribution towards EPF is 12% of your basic salary, which amounts to Rs 3000 per month.
- Your employer should also contribute 12% of your basic salary. The minimum contribution made by the employer is Rs 1500 to each employee.
- An EPF can be calculated based on basic salary+Dearness Allowance(DA). Typical EPF contribution is 12% in most organisations. It means both employees and employers need to contribute equal amounts.
These are steps you can use to calculate the EPF contribution made by your employee. If you have any issues calculating it, you can reach out to your HR or use an online EPF calculator in which you need to fill in your basic salary and other metrics.
EPF- Savings Towards Your Bright Future
EPF is the most popular retirement saving scheme widely used in the corporate world. It is the responsibility of each employee and employer to know and follow the guidelines of the EPF shared by the EPFO. We hope you found this blog helpful in calculating EPF and knowing the benefits. If you read about finance, we suggest you explore our other blogs.