Employee Pension eligibility in EPF

Recently I came across this article on Employee Pension Scheme eligibility from the Economic Times, one of the points has got me worried and confused. Could someone please help in understanding this;

“The notification, effective from September 1, 2014, disallows the EPF scheme member from joining the pension scheme if monthly pay exceeds Rs 15,000 at the time of joining.”

Link below.

Does this mean if we hire a fresher at a monthly salary of Rs. 16,000. We cannot enrol them in EPF pension scheme?


https://economictimes.indiatimes.com/wealth/invest/who-can-join-employee-pension-scheme-and-who-cant/articleshow/76334990.cms
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Hi @Rohin

With the new salary limit of Rs 15,000 for calculating contributions, the total contributions – both by the employer and the employee will increase.

Employees with a monthly salary of up to Rs 15,000 who have not opted for voluntary membership earlier, will now be required to become members of all three schemes. Whether enrolled prior to or after September 1, both the employer’s and employee’s contributions will be on salary of Rs 15,000 unless an option is availed to contribute on a higher salary.

or Ex, a person who earns a monthly salary of Rs 12,000.

  • Earlier he was contributing 12% of 6500 i.e 780 towards PF, now he will have to shell out an 12 per cent of Rs 12,000 Rs 1,440 each month i.e extra Rs 660 every month
  • Similarly, even his employer’s contribution will increase to Rs 1,440 every month, which will be allocated as follows: Rs 1,000 (8.33% of Rs 12,000) towards pension Scheme and the balance Rs 440 towards PF . The employer would deposit an additional Rs 60 (0.5 per cent of Rs 12,000) towards insurance scheme.

And - Yes! employee joining after Sep 2014 are not eligible for Pension Scheme.

“For employees earning monthly salary exceeding Rs 15,000, the membership of Employee Pension Scheme is voluntary. For new members joining the scheme on or after 1 September 2014, the contribution is required to be made only under the PF and insurance scheme – as such employees are not eligible for membership under the pension scheme. Members limiting monthly contributions on the salary of Rs 6,500 earlier will now have to contribute on at least salary of Rs 15,000.”

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Please confirm, If an employee gross salary is 40k and the Basic pay is 20k, he became the pf member after sep 14,

And the employer deducting pf on fixed 15k means 1800/- pm for both.

Is he eligible for EPS in this case?

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Hi @mimran

For the given case there is no eligibility to open the EPS scheme since joined after Sep 2014.

And both employee and employer contribution goes into PF account.

Hi Rohin,

Everything is depend on Basic+DA. If i go as per your case then then assuming his Basic+DA less than 15000/- and a fresher then No he will not be a part of EPS.

If you hiring an experienced candidate and his Basic+DA is 18000/- then you to look for 2 things:

  1. Was he a member of PF: If yes then you have continue his EPS contribution too even though his Basic+DA is more than 15000/-.
  2. Has he closed his previous company PF Account: If yes, then you can treat this candidate as a fresh case and no need to contribute to EPS.

I hope this information will be helpful.

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Hi Mimran,

Everything is depend on Basic+DA. If I go as per your case Basic+DA is 20000/-.

If you hiring a candidate and his Basic+DA is 20000/- then you should look for 2 things:

  1. Was he a member of PF: If yes then you have continue his EPS contribution too even though his Basic+DA is more than 15000/-.
  2. Has he closed his previous company PF Account: If yes, then you can treat this candidate as a fresh case and no need to contribute to EPS.

I hope this information will be helpful.

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Hi Arpana,

Thanks for the KT,

Could you also please confirm

If we hire a fresher with the Basic of Rs. 20000/-

For pf we are considering basic of Rs.15000/- as capping instead of offered basic of Rs. 20000/-

Would he eligible for EPS member?

Regards,

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No, there will be np EPS deduction.

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Hi @Arpana,

you hiring an experienced candidate and his Basic+DA is 18000/- then you to look for 2 things:

1. Was he a member of PF: If yes then you have continue his EPS contribution too even though his Basic+DA is more than 15000/-.

In this case there could be one more criteria. What if you are hiring an experienced candidate who had joined his job after 2014, let’s say in 2015, and his basic was more than 15,000/- in that case he will be PF member but not for EPS, correct?

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HI Shefali,

If he joins in 2015 having Basic more than 15000/- then there will be no EPS deduction.

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Thanks @Arpana!

Regards,
Shefali

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