Provident fund, and the ceiling decision you must not revisit
Twelve percent from each side, split between PF and pension — where the policy on wages above the ceiling has to be set once and left alone.
What it is
A retirement saving: employee and employer each contribute 12% of PF wages.
The split
The employer share divides between PF and the pension scheme, subject to the wage ceiling.
The trap
Changing the above-ceiling policy mid-year. It creates arrears nobody can explain afterwards.
Provident Fund is a retirement saving where employee and employer each contribute 12% of PF wages. The employer share splits between PF and the pension scheme, subject to the wage ceiling. Establishments with 20 or more employees must generally register.
How it works in practice
On ₹15,000 PF wages, the employee contributes ₹1,800 and the employer ₹1,800, of which ₹1,250 goes to pension and the balance to PF, plus admin charges.
What to watch for
The ceiling and whether you apply PF above it is a company policy decision — apply it consistently, because switching mid-year creates arrears nobody can explain.
How Klok handles it
Klok computes the split, the pension cap and admin charges on every run, and produces the ECR file for filing.
Provident Fund (EPF) FAQs
Must we register?
Establishments meeting the employee-count threshold are generally required to. Voluntary coverage below it is possible, and once you are covered you remain covered even if headcount later falls.
Do we have to contribute on wages above the ceiling?
Contribution is mandatory up to the statutory wage ceiling. Above it, contributing is a policy choice — a legitimate one, but it must be applied consistently across comparable employees.
Which components count as PF wages?
Basic and dearness allowance at minimum, and following the Supreme Court's reasoning, allowances that are universally paid and not genuinely variable are difficult to exclude. Splitting pay into allowances to reduce PF wages is exactly what that reasoning addressed.
An employee wants to opt out of PF. Can they?
Only in narrow circumstances, and generally not once they have been a member. The widespread belief that a written request is enough to exclude someone is wrong, and the liability for getting it wrong sits with the employer, not the employee.
We hired someone who already has a UAN. Do we generate a new one?
No — and generating a second one is a genuine problem to unwind. Collect the existing UAN at joining and link the new employment to it. Thirty seconds at onboarding prevents a duplicate that takes weeks to merge.
Is PF calculated on gross salary?
No. It is calculated on PF wages, which is a defined subset — most commonly basic plus dearness allowance and retaining allowance. Running it on gross overstates both the deduction and the employer cost substantially.
What happens if we deposit late?
Interest and damages attach from the due date, and the employee-deducted portion carries a heavier consequence than the employer share because it is money already withheld from wages. Late deposit is treated far more seriously than a late return.
An employee is above the wage ceiling. Must we still contribute?
For an existing member, yes — the ceiling limits the mandatory base, it does not end membership. Whether a new joiner above the ceiling must be enrolled is a separate question and depends on their prior membership history.
Stop calculating this by hand
Klok computes it from your own attendance and salary data, every month, with the working shown.