Provident Fund (PF)
A mandatory retirement savings scheme where both employer and employee contribute a share of wages every month into an EPFO-administered account.
What it is
The Employees' Provident Fund (EPF) is a retirement savings scheme administered by the Employees' Provident Fund Organisation (EPFO) under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Every month, a percentage of an employee's basic wages plus dearness allowance is set aside — matched by an employer contribution — into an account that earns annual interest and can be withdrawn, fully or partially, under specified conditions: most commonly at retirement, on resignation after a gap in employment, or for specific needs like a home purchase or a medical emergency.
Who it applies to
PF registration is mandatory for any establishment employing 20 or more people — a threshold that has been stable for decades and is safe to treat as a reliable reference point. Once an establishment is covered, it generally stays covered even if headcount later drops below 20. Employees drawing basic wages above a statutory wage ceiling (₹15,000/month, as last set in 2014) are not compulsorily covered, though many employers extend PF to all employees regardless, and employees can opt in voluntarily in some cases.
How the contribution works
Both employer and employee typically contribute 12% of basic wages plus DA each month. Of the employer's share, a portion is routed to the EPF account and the remainder funds the Employees' Pension Scheme (EPS) and EDLI (see that entry). These percentage splits have held stable for a long time, but EPFO does revise contribution rules and wage ceilings by notification from time to time — confirm current rates before relying on any fixed figure over the long term.
Why it matters for payroll
PF is deducted every pay cycle and deposited with EPFO by a fixed monthly deadline — the 15th of the following month, with no grace period. Missing this deadline attracts interest and damages on the outstanding amount, which makes PF one of the more time-sensitive statutory obligations in Indian payroll.