Notable changes in EPFO contributions for financial year 2024

Notable changes in the Employees’ Provident Fund Organisation (EPFO) contributions for the financial year 2024: The Employees’ Provident Fund Organisation (EPFO) has introduced significant changes in contribution rules for the financial year 2024. These adjustments impact both employers and employees, aiming to streamline processes and enhance retirement benefits.

1. Automatic Transfer of PF Balance: The EPFO has implemented a new rule that enables the automatic transfer of the old PF balance to the new employer’s account, eliminating the need for manual transfer requests¹.
2. Revision of Minimum Salary Limit: The minimum salary limit for mandatory EPF contribution has been revised. Employees with a monthly salary less than or equal to ₹15,000 will have to contribute towards EPF.
3. Change in Pension Amount: The minimum monthly pension amount for the widow of a member of the Employees’ Provident Fund has been set at ₹1,000.

The employer’s contribution to the Employees’ Provident Fund Organisation (EPFO) is as follows:

• Employee’s Provident Fund (EPF): The employer contributes 3.67% of the employee’s EPF wages.
• Employee’s Pension Scheme (EPS): Out of the employer’s total contribution, 8.33% is directed towards the EPS.
• Employee’s Deposit Linked Insurance Scheme (EDLIS): The employer also contributes 0.50% towards EDLIS.

The total contribution by the employer is either 10% or 12% of the employee’s basic salary, depending on certain conditions such as the type of establishment and its size. For most establishments, the standard rate is 12%, which is split between the EPF and EPS as mentioned above.

The EPFO contribution based on minimum wages in India is structured as follows:

• Employee Contribution: The employee contributes 12% of their basic wages plus dearness allowance to the EPF.
• Employer Contribution: The employer also contributes 12% of the employee’s basic wages plus dearness allowance. However, this is divided into:
  • 3.67% to the EPF
  • 8.33% to the Employees’ Pension Scheme (EPS)
  • 0.50% to the Employee’s Deposit Linked Insurance Scheme (EDLIS)
  • 0.50% as EPF Administrative charges

The contributions are payable on a maximum wage ceiling of ₹15,000. If an employee earns more than this amount, the contribution is calculated on the ceiling amount. However, employees have the option to contribute at a higher rate, and in such cases, the employer is not obligated to match the higher contribution.

For establishments with less than 20 employees, the contribution rate for both employer and employee is reduced to 10%. This is also applicable to certain industries like jute, beedi, brick, coir, and guar gum factories.

These changes aim to simplify the process of managing PF across different employers and ensure a seamless continuation of retirement savings for employees. It’s important for both employees and employers to be aware of these updates to comply with the new regulations.