Hey buddies, haven't you wondered or confused regarding EPF & EPS, I'm sure you are so if your a fresher or at initial stages of your employment so lets dive into the content
EPF Schemes: Plans for your Financial Future with your Employer
“what is EPF wages?”
The Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS) are two programs put in place by the Indian government as a way of looking out for the interests of employees in the country. Simply put, these schemes are designed to help people plan and save money for their retirement. EPF schemes are also not optional: the government mandates that any company with over 20 employees put some money aside to take care of their employees’ future financial interests.
EPF wages means, in other words, a guaranteed store of cash and source of income after your retirement. Let’s dive into these programs in a little more detail now.
EPF:
The Employees’ Provident Fund (EPF) is way for you and your employer to come together to save and plan for your retirement. Sounds thoughtful, right? You should direct your thanks to the Employees’ Provident Fund Organization (EPFO), which ensures that both employers and employees set aside 12% of the employees’ salary every month to go in their EPF and other related schemes. When you retire, you get to withdraw all that sweet sweet cash from your EPF account.
But wait, there’s more! While you can only withdraw the full amount of money in your EPF account after you retire, you also have the right to withdraw part of your EPF account holdings if you have other – specific – financial needs. These include situations of financial need such as your own marriage, or the marriage of your siblings or children, buying a house or land, or paying off a loan. You can also withdraw the full holdings of your EPF account if you find yourself unemployed for over 2 months – after all, the EPF is your safety net!
Along with the diverse range of benefits offered by EPFs, you can also transfer the money you have accumulated in your EPF to a new account if you change jobs. The EPFO gives every employee registered with them – if you have an EPF, you’re already registered – a Universal Account Number or a UAN. While you can change jobs, locations (within the country), and accounts, your UAN remains unchanged through the course of your working lifetime. This is nifty indeed, because it allows you to access your EPF details easily.
Benefits of EPF schemes include:
- Planning for your retirement by saving money over the course of your working life.
- Consistently putting money away in an EPF means you don’t feel the sore sting of making lump sum investments. It might not seem like much on a monthly basis, but those numbers really add up when you account for the span of your career!
- EPF schemes offer a helpful safety net in the face of financial emergencies.
- They are a financial asset that can be drawn from for various special financial needs, from marriage and your children’s education to repaying loans and even buying your dream home.
EPS:
The Employees’ Pension Scheme is also run by the EPFO. While the EPF involves a lump sum payment at the time of retirement, the EPS guarantees employees a pension. More, importantly, however, unlike the EPF, employees themselves do not need to contribute to the EPS – it’s entirely an employer undertaking wherein the employer contributes 8.33% of the total 12% they are supposed to put in EPF schemes to an employee’s EPS account. It’s worth noting, though, that there is a cap on this generosity: Rs. 1,250 is the maximum amount that can be contributed by the employer in an employee’s EPS account per month. This is because the maximum EPS wage for which contributions need to be made is Rs. 15,000.
EPFO’s nifty official website and employees’ UAN can be used to check how much pension they stand to receive through the EPS. Employees are also only eligible to receive pension once they cross the age of 50 and have finished over 10 years of service.
With EPS schemes, both employees and the employer each put 12% of the employee’s salary in these funds. While the full amount of the employee’s contribution goes to their EPF, the employer’s contribution is divided into the EPF and the EPS: 8.33% goes to the EPS, while 3.67% goes to the EPF.
Benefits of the Employee Pension Scheme 1995 include:
- A regular pension once you retire at the age of 58 years, as long as you have provided service for 10 years.
- The ability to fully withdraw the amount of the EPS fund if you are not able to complete 10 years of service before you turn 58.
- An assured pension if you are injured or totally disabled during your service with your employer.
- Financial security for your family in case something happens to you: they become eligible for pension in your stead.
How are EPF wages and EPS wages calculated?
Let’s dive into the number’s now. Let’s say Geetha just got her first job with a salary of Rs. 25,000. She’s thrilled! Her employer also offers EPF contributions, here’s how they will be calculated.
- Geetha’s salary is Rs. 25,000.
- She will contribute 12% of her salary on a monthly basis to her EPF account: Rs. 3,000.
- Her employer will contribute 3.67% of her salary to her EPF: Rs. 918.
- Her employer will contribute 8.33% of her salary to her EPS, up to a limit: 1,250.
- So the total amount of money added to the two different kinds of EPS schemes between Geetha's and her employer comes up to about Rs. 5,168. Neat, right!
The Difference Between EPF vs EPS
So what is EPF wages and EPS wages? What is the difference, exactly? Here’s a handy table for you to make a comparison yourself.
What is the feature of the scheme? | Employees’ Pension Scheme, EPS | |
| How much do employees contribute? | 12% of their monthly salary. | Nothing – employees do not contribute. |
| How much do employers contribute? | 3.67% of the employee’s monthly salary. | 8.33% of the employee’s monthly salary. |
| Is there a deposit limit? | No, but deposits are based on predetermined fixed rates. | Yes, a maximum of Rs. 1,250. |
| Is there an age limit on withdrawal? | No. | Yes. The employee needs to have completed 10 years of service and should be over the age of 50 to be eligible for early pension. They need to be over the age of 58 for regular pension. |
| What are the interest rates applied on the scheme? | The current government rate is around 8% | No interest rate applies. |
| When can I withdraw my funds? | After the employee reaches the age of 58, or if they have been unemployed for sixty days or more. | Pension benefits kick in after the employee reaches the age of 58. |
| Can I withdraw my funds prematurely? | Yes. | Yes, but the amount you can withdraw will depend on your total years of service. |
Word to Remember
12%: This is the percentage of your monthly salary both you and your employer contribute to EPF schemes. When it comes to financial planning, a little can go a long way, and every little bit adds up to substantial amounts over the course of an entire career.
Conclusion
So, what exactly is EPF wages? EPF wages means, simply put, the money set aside by you and your employer to put into planning for your future financially through EPF schemes. EPF schemes are a thoughtful way of ensuring that employees’ interests are looked after once they retire and no longer form active part of the workforce.
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