Payroll and HR glossary
PF
Employees' Provident Fund
Provident Fund (PF) is the retirement savings scheme run by EPFO, into which the employer and the employee each pay 12% of the employee's wages every month. It is compulsory for establishments with 20 or more employees, for staff earning up to the wage ceiling.
Why it matters to your business
PF is a legal duty once you have 20 employees, and a benefit your staff value. Late payment attracts interest and damages, and EPFO can recover dues directly from your bank account. Getting the wage base right also matters: since the labour codes changed the definition of wages, many salary structures that kept basic pay low now pay PF on a larger amount.
How it works
As of September 2026:
- Who is covered: establishments with 20 or more employees must register with EPFO; smaller ones may join voluntarily. Employees with wages up to the wage ceiling are covered compulsorily; the ceiling was ₹15,000 a month for many years and a higher one was announced in September 2026.
- Contributions: 12% from the employee, deducted from salary, and 12% from the employer, split between PF and the Employees’ Pension Scheme.
- Each employee is linked to EPFO through a UAN that stays with them for life.
- Payment: one ECR each month for all employees, by the 15th.
- Interest: EPFO credits interest every year; it was 8.25% for 2025-26.
EPFO’s instructions on the new ceiling, for existing members and for the pension share, were still being issued in September 2026, so check the latest circulars on epfindia.gov.in before running payroll.
An example
An employee’s basic pay and dearness allowance total ₹15,000 a month.
| Amount | |
|---|---|
| Employee’s share, 12% (deducted from salary) | ₹1,800 |
| Employer’s share to EPS, 8.33% | ₹1,250 |
| Employer’s share to PF, 3.67% | ₹550 |
| Total contribution for the employee | ₹3,600 |
Common mistakes
- Keeping basic pay low and allowances high, without applying the 50% rule to wages.
- Creating a new UAN for an employee who already has one.
- Paying after the 15th and ignoring the interest and damages that follow.
Questions about PF
What is the PF contribution rate?
12% of wages from the employee and 12% from the employer. Of the employer's 12%, 8.33% of wages up to the wage ceiling goes to the Employees' Pension Scheme and the rest to the employee's PF account. The employer also pays EDLI insurance and administration charges. A reduced 10% rate applies to a few notified categories of establishment.
What is the PF wage ceiling?
It was ₹15,000 a month for many years, and a higher ceiling has been announced in September 2026; check EPFO's current circulars for the figure in force and from when. Employees whose wages are within the ceiling must be covered. Those earning more when they first join can be left out if they were never PF members, and employers may contribute on wages above the ceiling if they choose.
What counts as wages for PF?
Since the labour codes took effect on 21-11-2025, wages mean basic pay, dearness allowance and retaining allowance. If the other allowances together exceed 50% of total pay, the excess is added to wages.
When is PF due?
By the 15th of the following month, through the electronic challan and return (ECR) on the EPFO employer portal.
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